The traditionally difficult winter season could prove especially challenging for troubled US minnow Kiwi International. In August, the Newark-based carrier installed its fourth chief executive in seven months, and its competitive position in the eastern US is under threat from Southwest's planned entry into Florida.
But CEO Jerry Murphy, who takes over from Danny Wright, is more confident. Murphy, who spent 24 years with Pan Am in the marketing department, says that at Kiwi 'people want direction. They are looking for somebody to put a structure into place and to make people accountable. [I have] the ability to manage the process.'
However, critics say Murphy lacks a background in finance. And if there was a time for such expertise it would probably be now. The carrier has lost a total of $40 million in the three years since start up. Though Kiwi reported a $1.7 million second quarter net profit this year, its six month net of $151,000 illustrates the volatility that exists quarter to quarter for Kiwi.
In a July filing with the Securities and Exchange Commission, the employee-owned airline reported the findings of an independent audit by Arthur Andersen which confirmed what many had suspected: there was 'substantial doubt' about Kiwi's viability because of its high debt, recurring losses and lack of capital. But on the plus side, suppliers have agreed to defer demands for $1.4 million in outstanding debt and the airline claims it is now current on the lease obligations for its fleet of 16 727s. But cash reserves are low, with Kiwi holding only $2.5 million at the end of June, and the airline continues to pursue new investors to take up equity worth some $15 million.
'Kiwi is fixable, or I wouldn't be here,' says Murphy, minimising the challenges facing him. He considers management organising and marketing his strongest skills, and says Kiwi had been severely lacking both. In his first week on the job, he reorganised the carrier's management structure by creating five divisions reporting directly to him.
He also has full authority to fire managers, a power that co-founder and first CEO Robert Iverson says he never had. 'If there was a structure here before, it made no sense,' Murphy points out, noting that at one time the airline had no less than 14 vice presidents.
On the marketing side, Murphy has quickly allied itself with Air South, the startup carrier based in South Carolina. The two carriers will trade passengers in Atlanta, each one offering destinations served by the other. Though some question the benefits of the alliance to Kiwi, Murphy is sure of the additional revenue benefits the cooperation will produce. Other marketing efforts will include more focused attempts to generate travel agency bookings, as well as harder selling to small corporate clients.
The initial goal is to increase load factors by as much 10 points from the 50 per cent level, while keeping costs low. But Murphy will have to meet these challenges at a time when money is tight and Southwest is planning to enter Kiwi's Florida markets in January. The saving grace may be that Southwest does not appear to have any interest in flying further north from Florida than Baltimore, which would keep Kiwi's home market of New York safe.
Source: Airline Business
