NEWARK, N.J. -- Struggling Kiwi International Air Lines, facing shutdown by the federal Department of Transportation, may have found a savior in an airline with its own troubled past.
Kiwi filed for Chapter 11 bankruptcy Tuesday and got $3 million in aid from Pan American Airlines Inc., which eventually plans to buy the Newark-based airline when the U.S. Bankruptcy Court sets a sale date for its assets, company spokesman Rob Kulat said.Pan Am, which is owned by Guilford Transportation Industries Inc., now operates charter flights under ownership of a New Hampshire freight rail company.
Kiwi, which filed for bankruptcy for the second time in three years, also named a president and chief executive officer, which it has gone without since November. Gene Gillespie, a consultant to the company for the last three months, will take over the Kiwi, while Baltimore physician Charles Edwards will remain its chairman.
The $3 million from Pan Am will allow Kiwi to maintain its current, six-city schedule, use Pan Am planes and expand its Puerto Rican schedule in the spring.
"Passengers will actually see more service from Kiwi," Gillespie said Tuesday.
There will be no interruptions of service, the airline said. The airline had struggled to meet its schedule recently with only four planes. Two others are in disrepair, and a British company took possession of two other planes last month.
The bankruptcy filing comes the same day the Transportation Department threatened to shut it down if it didn't come up with a management plan in three weeks. The department said it was no longer confident that Kiwi management could effectively direct the discount carrier's operations.
The Federal Aviation Administration said it has determined the airline can continue to fly safely despite its financial troubles, but said the agency has to devote too many resources to monitor the safety of Kiwi's operations.
Kiwi has struggled since its founding in 1992 by airline employees who had lost their jobs at other carriers, mostly Pan Am and Eastern. The founders chose the name of a flightless bird for their upstart enterprise to symbolize the loss of their wings at their old airlines.
At its peak, the airline had 1,200 employees, 15 leased jets and flew 65 flights a day. It now employs 500 and flies out of Newark, Orlando, Miami and Palm Beach, Fla., and San Juan and Aguadilla, Puerto Rico. The airline recently pulled out of Atlanta, Boston, Chicago and Flint, Mich.
Before those airports were dropped, the airline reported a 26 percent increase in passengers last year, to 58,900.
Kiwi filed for bankruptcy in September 1996, declaring $20 million in debts. It was resurrected a year later by Edwards, who bought the airline for $16.5 million and took majority ownership of the company from the employees.
Kiwi's announcement Tuesday came after the bankruptcy court had closed for the day, and Kulat said he didn't how much debt the airline declared.
The Transportation Department says the airline owed more than $750,000 to airports as of Feb. 19, and last year posted an operating loss of $19.8 million and a net loss of $20.6 million.
Kiwi has been negotiating with Pan Am for three weeks to bail out the airline, Kulat said. Its fleet, based in Portsmouth, N.H., includes seven 727-200 aircraft. Kiwi's headquarters will remain in Newark, Kulat said.
Pan Am World Airways began flying in 1927 and shut down in 1991, following the 1988 terrorist bombing that killed 270 people over Lockerbie, Scotland.
The discount carrier that followed never turned a profit serving 14 cities in Florida, the Northeast, Midwest and Puerto Rico before falling into bankruptcy. Guilford bought the airline in June 1998.