Kiwi International Air Lines

Kiwi International Air Lines (IATA: KP, ICAO: KIA, Call sign: Kiwi Air) was a Part 121 American airline that operated from September 21, 1992[5] to March 24, 1999.[1] It had its headquarters in the Hemisphere Center in Newark, New Jersey[6] adjacent to Newark Liberty International Airport.

For the New Zealand airline of the same name operating between 1994-1996 on trans-Tasman routes, see Kiwi Travel International Airlines.

Kiwi International Air Lines
IATA ICAO Callsign
KP KIA Kiwi
Commenced operationsSeptember 21, 1992
Ceased operationsMarch 24, 1999[1]
HubsNewark
Secondary hubsHartsfield-Jackson Atlanta
Chicago Midway
Fleet size4 (March 1999)[2]
Destinations6 (March 1999)[2]
HeadquartersHemisphere Center,[3]
Newark, New Jersey
 United States
Key peopleRobert Iverson (President 1992-1995),[4] Jerry Murphy (President 1995-1998), Charles C. Edwards (Owner, 1997-1999)

Kiwi International Air Lines was founded by a group of Eastern Air Lines pilots[7] in a plan to re-employ former Eastern pilots,flight attendants, managers, and other contract and non-contract employees who had lost their jobs when Eastern Air Lines went into bankruptcy in 1989. The former airline pilots originally formed a group and called themselves Kiwis because they were no longer flying, just like the flightless Kiwi birds.[8] In its brief history, the airline flew 8 million passengers without an incident.[2]

History
Promotional button for Kiwi International Airlines, circa 1994. Diameter 54mm.

Originally, the intent of the Kiwi Founders (known as the Kiwi Acquisition Group) was to purchase the Pan Am Shuttle (which flew exclusively between New York LaGuardia, Boston Logan, and Washington National) out of the Pan Am bankruptcy. The group presented a Kelso and Company backed $100 million offer to Pan Am for the Shuttle. Its offer was rejected in favor of a Delta Air Lines offer for Pan Am including its shuttle operation.[9] With advice from the United States Department of Transportation and the Federal Aviation Administration, the Kiwi Acquisition Group then decided to start a new airline from scratch rather than buy a failing carrier. To do this, the Kiwi Acquisition Group raised approximately $2 million from a group of 40 out-of-work primarily Newark-based Eastern Air Lines pilots. Each pilot invested $50,000 with a promise of employment as a Captain in any new airline the Kiwi Acquisition Group was able to certify - preferably based out of Newark International Airport. When it came time to name the new airline, the Kiwi Acquisition Group decided to keep Kiwi in the name of their new air line.

Kiwi flew its first revenue flights on September 21, 1992 using two refurbished Boeing 727-200s from Lufthansa on routes between Newark and Atlanta, Chicago and Orlando.[10] Kiwi offered gourmet meals and expanded legroom of 36 inch pitch in their airplanes.

In his 2005 book Competition Demystified: A Radically Simplified Approach to Business Strategy[11] Columbia Professor Bruce Greenwald described Kiwi's initial winning operating strategy as:

  1. Not to get so big as to directly antagonize established carriers. Kiwi started with 3 routes from Newark International Airport to 3 different hubs with different incumbent competitors. The amount of traffic Kiwi planned was unthreatening enough so that it would cost the airline's incumbents more to eliminate Kiwi than to let Kiwi survive. Kiwi's east-west Newark-to-Chicago route (Kiwi flew into Midway Airport in Chicago and did not challenge United at its O’Hare hub) incurred minimally into United's and also American's business out of O'Hare. Kiwi's Newark to Atlanta route (into Hartsfield) again put minimal pressure on Delta. Kiwi's North-South routes to Florida from Newark were also designed to cherry pick a small portion of the leisure business from Delta and Continental.
  2. Avoid challenging the established carriers on price. Kiwi pegged its ticket prices to the lowest restricted fare the competition was already offering. Where it challenged its competitor was by providing somewhat enhanced service.
  3. Avoid poaching pilots, flight attendants, or other personnel from the established carriers. A large part of its reason for being was to put Eastern employees back to work in an industry they loved and in a company they believed in. So Kiwi did not encroach on its competitors employee base.

The early Kiwi niche strategy was to focus its business on a single main hub (Newark – with access to the large NY-NJ metropolitan flying public), a simple route structure, and an identifiable target business and large leisure markets. Being in the NY-NJ media capitol of the world gave cash poor Kiwi a distinct benefit – tremendous amounts of free national and local TV and radio coverage in its target markets which the airline made good use of.

Early on the airline secured a passenger sharing agreement from Richard Branson to feed between Kiwi and Virgin Atlantic flights.[12] Branson helped out by promoting Kiwi and called it his "favorite" U.S. airline. Kiwi did its share and enjoyed a flawless safety record and near perfect dispatch reliability rate of 99.6%, as it expanded.

In 1993, the Kiwi Board of Directors decided to place an order for 11 BAC One-Eleven aircraft with five options. The British designed aircraft were to be built in Romania. However, Romaero, Kiwi's Romanian partner, failed to find funding to develop the variant aircraft, which would be equipped with modern Rolls Royce Tay engines. As a result, Kiwi scrapped the plan; but, not before Romaero had invested approximately $1 million into Kiwi and received 1 seat on the Kiwi Board of Directors.[13]

A Kiwi Boeing 727-200 landing at Newark International Airport in 1994

During 1994, the majority of Kiwi's pilot investors organized against Kiwi's Chairman/CEO/President Robert Iverson's continued management of the air line. By February 1995, the Kiwi Board of Directors, which was controlled by an Employee Voting Trust which was itself controlled by the air line's pilot investors, removed Iverson.[4] Inc magazine reported that Kiwi under Iverson's leadership accumulated operating losses of nearly $40 million in less than two and a half years of flying which did not sit well with his pilot majority investors who had invested their life savings in the air line.[14]

Inc reporter, Anne Murphy, explained that Iverson was also criticized for poor business judgment. For example, Iverson selected many of Kiwi's top management from the ranks of his fellow pilot investors who had no practical management experience. Iverson himself had previously been an Eastern Air Lines pilot. As Inc reported: "The CEO (Iverson) himself had never managed so much as a baggage carousel".[15] As a result of his inexperience, during his tenure, Iverson expanded his management team to an unwieldy 11 vice-presidents (the majority of whom were fellow pilots) all reporting directly to him. Iverson candidly admitted later, when interviewed for the INC. article Taking the Fall, "We ran the company like a little pilots' union or a flying club, not like a business."[16]

After his abrupt removal, the Kiwi Board of Directors was reconstituted and attempted to hire more professional (non-pilot) management. Jerry Murphy (formerly of MGM Grand Air and Pan Am) was hired as the President and CEO of Kiwi in June 1995 and served in that capacity until November 1998.[17] At the time Murphy was brought on board, former Kiwi Chairman John Anderson explained: "He (Iverson) never showed himself capable of running this airline profitably.".[15]

In 1996, Kiwi secured a $20 million financing package from Recovery Equity Partners, a California based private equity fund through the efforts of Conexus. However, at the time Kiwi received the first tranche of the financing package, the ValuJet and Trans World Airlines accidents in May and July 1996 occurred. Following these unrelated accidents, the FAA increased its surveillance of the airline industry. But, more specifically. the FAA targeted of the smaller carriers in the industry, like Kiwi. Because of alleged maintenance documentation issues found during period, Kiwi was asked by the FAA to temporarily ground 25% of its fleet.

Subsequently Kiwi, which was once called "one of the best of the recent start-up lines" by Consumer Reports Travel Letter, filed for bankruptcy on September 30, 1996 and after failing to find additional financing, stopped scheduled service on October 15, 1996.[18] After several fits and starts, in July 1997, a Federal bankruptcy judge in Newark agreed to liquidate Kiwi in a $16.5 million deal for Kiwi's assets with Joe Logan (Aviation Holdings) and Dr. Charles C. Edwards (an orthopedic surgeon and entrepreneur from Maryland) who had led 30 plus business enterprises over his 33-year career. The deal included a Huntington Station, New York investment firm called NJS Acquisitions, which invested $3.5 million for its 20% stake.[7] In its first five months under Edwards hands-on leadership, Kiwi ended service from Atlanta to Palm Beach and Orlando, and added service from Newark to Boston and Tampa, from Boston to West Palm Beach, from Chicago to Tampa, from Atlanta to Tampa, and (on a seasonal basis) from Orlando to San Juan, Puerto Rico.[7]

By the end of 1998, the new Kiwi had an operating loss of $19.8 million. By February 19, 1999, Kiwi owed more than $750,000 to the airports it served.[19] Subsequently, on March 23, the United States Department of Transportation (USDOT) announced plans to revoke Kiwi's operating certificate for failing to meet federal fitness standards for air carriers.[1][19] Kiwi was also the subject of two separate USDOT investigations - one concerned the airline's financial and managerial fitness and another concerned its safety. At the time, Kiwi was on the verge of receiving a $3 million bailout from the reconstituted Pan Am (to address the USDOT concerns about its financial and managerial situation). But, the termination of Kiwi's operating certificate for safety reasons meant it would be months before the airline could fly again if ever.[2]

In March 1999, Kiwi tried becoming a simple charter carrier with four leased jets flying to six cities, with 500 employees and 11 months of paid advance reservations for about 80,000 seats.[2] However, by December 1999, the Federal bankruptcy judge in Newark approved the total liquidation of the airline.[20]

Ed Perkins, editor of TheTravel Letter, noted that other members of the travel press blamed the Kiwi bankruptcy on chronic undercapitalization, problems with the FAA, and the "media's indiscriminate innuendos about the safety of all low-fare airlines following the Valujet crash". Perkins suggested a fourth problem for Kiwi: the "pervasive power of the giant lines' frequent-flyer programs," noting that Kiwi had deliberately targeted business travelers on some of its routes.[18] Perkins pointed out that Kiwi's major competitors approach was to match Kiwi's fares. But, Kiwi's competitors matched prices only around the times of the more limited Kiwi flight schedules. Basically, Kiwi's competitors bracketed the Kiwi flights with similar competitive pricing. But, for the rest of their schedules, KKiwi competitors returned their prices to levels they could make a profit at. And, more importantly, in its business markets, the major carriers were able to compete with Kiwi by using their frequent-flyer miles (worth about $12–15 per one-way trip) as loss leaders. This resulted in a loss of customers for Kiwi, particularly its business customers, even though it belatedly established its own Frequent Flyer program.[18]

Destinations
[Hub]Hub
[T]Terminated destination
City Country IATA ICAO Airport Refs
Aguadilla United StatesBQNTJBQRafael Hernández International Airport
Aruba NetherlandsAUATNCAQueen Beatrix International Airport
Atlanta United StatesATLKATLHartsfield-Jackson Atlanta International Airport
Bermuda BermudaBDATXKFL.F. Wade International Airport
Boston United StatesBOSKBOSGeneral Edward Lawrence Logan International Airport
Chicago United StatesMDWKMDWChicago Midway International Airport
Las Vegas United StatesLASKLASLas Vegas McCarran International Airport
Miami United StatesMIAKMIAMiami International Airport
Newark United StatesEWRKEWRNewark Liberty International Airport
Orlando United StatesMCOKMCOOrlando International Airport
San Juan United StatesSJUTJSJLuis Muñoz Marín International Airport
St. Maarten Sint MaartenSXMTNCMPrincess Juliana International Airport
Tampa United StatesTPAKTPATampa International Airport
West Palm Beach United StatesPBIKPBIPalm Beach International Airport

According to its spring/summer 1998 route map, the airline also served Niagara Falls, New York via the Niagara Falls International Airport. This same route map depicts nonstop routes flown the Kiwi hub located at Newark Liberty International Airport to Aguadilla, Atlanta, Chicago Midway, Orlando and West Palm Beach.[21]

See also

References
  1. Information for Consumers Regarding the Cessation of Service by Kiwi International Airlines Archived 2006-02-05 at the Wayback Machine from a U.S. Department of Transportation website
  2. In Abrupt Reversal, F.A.A. Grounds Kiwi Airlines New York Times February 7, 1995
  3. Kiwi International Air Lines U.S. Securities and Exchange Commission
  4. Kiwi International's Founder Leaves the Airline New York Times February 7, 1995
  5. "Flightless Bird: The Rise and Fall of Kiwi International Air Lines" Aviation Week & Space Technology 1999
  6. "World Airline Directory." Flight International. March 22–28, 1995. 74.
  7. Surgeon Strives to Resuscitate Kiwi Air Lines New York Times December 16, 1997
  8. "Kiwi Sets Midway Flights". Chicago Tribune. New York Times. August 16, 1992.
  9. "Delta Wins the Bidding to Buy Most of Pan Am : Airlines: Purchaser to get prized Northeast shuttle. Federal bankruptcy court approves $1.39-billion deal". Los Angeles Times. August 13, 1991. Retrieved December 6, 2019.
  10. New Airline Says Its Fares Will Be Lower New York Times August 9, 1992
  11. Greenwald, Bruce C.; Kahn, Judd (August 18, 2005). Competition Demystified: A Radically Simplified Approach to Business Strategy. Penguin. ISBN 978-1-101-21843-3.
  12. "The Lost Airlines Of New York". Airways Magazine. February 21, 2014. Retrieved December 6, 2019.
  13. Ill fated ambitions Flight International September 4, 1997
  14. Murphy, Anne (September 1, 1995). "Taking the Fall". Inc.com. Retrieved December 18, 2019.
  15. Murphy, Anne (September 1, 1995). "Taking the Fall". Inc.com. Retrieved December 24, 2019.
  16. Murphy, Anne (September 1, 1995). "Taking the Fall". Inc.com. Retrieved December 25, 2019.
  17. Press, The Associated (November 25, 1998). "Chief Resigns at Kiwi". The New York Times. ISSN 0362-4331. Retrieved December 10, 2019.
  18. Perkins, Ed (December 1996). "Kiwi's Bankruptcy". Consumer Reports Travel Letter. Yonkers, New York: Consumers Union. 12 (12): 267. ISSN 0887-8439.
  19. DOT Proposes to Revoke Kiwi Certificate Archived 2009-06-25 at the Wayback Machine a March 23, 1999 press release from the United States Department of Transportation website
  20. Metro Business; Liquidation Marks The End of Kiwi Air New York Times December 14, 1999
  21. http://departedflights.com, Spring/Summer 1998 Kiwi International Air Lines route map
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