9/21/1992: Employee-Owned Kiwi International Takes Off From Newark

DALLAS — Today, in 1992, Kiwi International Air Lines flew its first commercial flight. It left Newark International Airport (EWR) at 6 a.m. for Chicago, with 33 passengers aboard a Boeing 727-200 that could seat 150.

Most of Kiwi's employees and owners had been laid off by bankrupt airlines. The company was founded by pilots and other airline workers who lost their jobs when Pan Am and Eastern failed: Eastern had filed for Chapter 11 in 1989, and Pan Am flew its last flight in December 1991. The employees paid for the new airline themselves. According to the International Directory of Company Histories, which traces the airline's employee-ownership model, pilots put in $50,000 each and other staff $5,000, and the founders named the company after New Zealand's flightless bird, for crews who had lost their wings. Robert Iverson, a former Eastern pilot, was the first chief executive.

Highs and Lows

Kiwi started with two 727-200s. Its launch schedule had two daily round trips from Newark to Chicago Midway, two to Atlanta (ATL) and one to Orlando (MCO), with every fare $99 one way for the first 30 days. On launch day, Iverson said he expected the airline to make a $3 million net profit in 1992. The directory records a $6 million loss for the first year of operations.

The pitch was low fares without the usual restrictions, plus the service other airlines had stopped offering. Kiwi spent about $6 on each meal, twice the industry average, and put flowers in the lavatories. Its costs, around 6 cents a mile against an industry average of 9.5 cents, meant it could make money on flights that were half empty, which mattered, because Kiwi always struggled to fill its aircraft. In November 1994, Condé Nast Traveler rated Kiwi the best domestic airline, and in June 1995 Consumer Reports ranked it third in the United States.

The finances were heading the other way. The directory puts Kiwi's 1994 loss at $25 million on revenue of $114.3 million. Late that year the airline halted service for a short time after the FAA questioned its documentation of pilot training. Iverson lost his job in February 1995, and in August the airline signed a marketing agreement with Air South, a discount carrier based in Columbia, South Carolina.

The FAA returned in mid-1996. A two-week inspection found that 30 of Kiwi's 277 pilots were not properly certificated, because the airline had used unapproved programs to check them. Four of its 15 727s were grounded and its flights were cut by a quarter. The inspection followed the May 1996 ValuJet crash, and the directory records that worry about discount airlines' safety after that crash made Kiwi's investors more cautious.

Bankruptcy

Kiwi filed for Chapter 11 on September 30, 1996, and halted scheduled flights two weeks later, on October 15, though it kept flying charters. Before the filing it had run 15 jets and 65 daily flights, with Orlando, Tampa, Las Vegas and Bermuda among its destinations.

The rescue came from Edwards-Wasatch Enterprises, a group led by Baltimore surgeon Charles Edwards, with a $5 million loan on November 27. Kiwi resumed scheduled service on January 20, 1997, with seven jets and 26 daily flights linking Newark, Chicago, Atlanta and West Palm Beach, and about 500 recalled workers. Edwards later bought the airline for $16.5 million, taking majority ownership away from the employees.

It lasted two more years. On March 23, 1999, hours after the US Department of Transportation threatened to shut Kiwi down within three weeks unless it came up with a better management plan, the airline filed for Chapter 11 again. The next day, the FAA grounded Kiwi and ordered it to surrender its operating certificate, saying its aircraft were in "unairworthy condition" and that it could no longer operate safely without constant FAA monitoring. At its peak Kiwi had employed 1,200 people. By the end it had about 500, and flew out of Newark, Orlando, Miami, Palm Beach, San Juan and Aguadilla.

Featured image: A Kiwi International Boeing 727-200 Advanced, photographed on June 19, 1994.