Ramon Lopez/WASHINGTON DC
The future of Kiwi International Airlines remains in doubt and liquidation of the low-fare US airline entrant is a distinct possibility as a rescue effort turns sour.
Kiwi, which filed for Chapter 11 bankruptcy protection on 30 September and suspended its scheduled flight operations on 15 October because of a shortage of cash, thought it had found a white knight in Wasatch International, a Florida-based investment concern.
Wasatch, which owns Palm Beach Cruise Lines and the Viking Princess cruise ship, had stepped forward with a $5 million debtor-in-possession financing agreement in exchange for majority ownership of the Newark-based air carrier. With the cash infusion, Kiwi planned to resume scheduled flights before the end of November. Wasatch deposited an initial $100,000 installment on 4 November, but has failed to provide promised follow-up financing.
Suspicious of the investment firm's intentions, Kiwi officials are talking to two other potential investors which they will not identify. The airline's rebirth is on hold pending receipt of more financing. Kiwi's next appearance in the federal bankruptcy court was set for 15 November, at which it faced the prospect of a forced liquidation.
Kiwi has struggled to survive since its launch in 1992, but weathered two short-term forced shutdowns by the US Federal Aviation Administration over safety issues. It failed to expand its route structure and was unable to increase its passenger loads. To make matters worse, Kiwi suffered several management shake-ups which hurt morale and consumer confidence.
Meanwhile, ValuJet Airlines, which operated for only one day during its financial third quarter, reported a net loss of $21.9 million, and officials predict more red ink for the fourth quarter of 1996 and probably during the first quarter of 1997 as well.
Low-cost operator ValuJet, which was shut down because of safety concerns after a fatal crash in the Florida Everglades in May, resumed flights on 30 September.
Favouring ValuJet is the fact that it remains awash with cash earned before the forced shutdown. "Our balance sheet, including $179 million of cash in the bank, continues to be among the strongest in the entire industry," says Robert Priddy, ValuJet's chairman.
ValuJet has had preliminary discussions with FAA officials about doubling its active fleet to 30 aircraft. ValuJet officials say that this number of aircraft is needed to resume consistent profitability.
Source: Flight International
