Kiwi International Air Lines Files for Chapter 11 Bankruptcy
Oct. 01, 1996
NEWARK, N.J. (AP) _ Kiwi International Airlines said today it was laying off a third of its work force and was flying only between Newark, Chicago and Atlanta on the day after its bankruptcy filing.
The discount carrier sought protection under Chapter 11 of the federal bankruptcy laws on Monday and said its debt and the fallout from a government-ordered partial shutdown this past summer forced its hand. It also said it was hurt by the May crash of a plane operated by another discount airline, ValuJet.
The filing permits Kiwi to continue operating while it develops a financial reorganization plan.
Kiwi was operating 24 of its 65 scheduled flights today, spokesman Rob Kulat said.
He said Kiwi was trying to arrange flights on other airlines for passengers booked to its canceled destinations: Bermuda, Las Vegas, Orlando, Tampa and West Palm Beach, Fla. Full refunds will be offered to those who cannot be accommodated, Kulat said.
The cancellations immediately affected 333 people booked to destinations no longer served, Kulat said.
The airline hopes to obtain financing to resume service to some of these destinations in November.
Jerry Murphy, president and chief executive, said Kiwi was laying off 400 of its 1,200 employees, and would keep only 8 of its 15 jets in service.
The airline's bankruptcy lawyer, Howard S. Greenberg, said the company has $35 million in assets and $55 million in liabilities.
``This filing is the most fair, sensible and prudent measure for vendors, employees, investors and the traveling public,'' Murphy said in a statement Monday night. He said employees and travel agency commissions will be paid under the plan.
``The sad thing is, we had almost turned the corner this spring,'' he said at a news conference today.
Murphy said the company accumulated debt during its first three years that hobbled it financially despite three straight quarters of profits.
He said the ValuJet crash on May 11 ``started a downward spiral that was dramatically accelerated'' when the Federal Aviation Administration grounded four of Kiwi's jets in June because of questions about pilot training and record-keeping. The airline received permission to fly all its aircraft on Aug. 20.
``Through these events, which also includes ValuJet's grounding and a traditionally slow September, Kiwi has slowly bled to the point where we have to take action,'' Murphy said.
He said today Kiwi is optimistic it will be able to renegotiate leases and get about $10 million in outside financing so it can start returning to some of the canceled routes by November.
After its June grounding, Kiwi reduced the number of daily flights and furloughed 20 workers. Another 75 workers took voluntary leaves of varying lengths in an effort to cut payroll costs by 20 percent.
Kiwi, which began flying in 1992, had its entire fleet grounded for a week in December 1994, also because of FAA concerns about record-keeping. Kiwi management blamed its rapid growth for the problem, and insisted passenger safety was not compromised.
ValuJet Airlines returned to the sky Monday after being grounded since June.
Eds: Passengers can call 800-JET-KIWI for information on refunds.