Kevin O'Toole/LONDON

Kiwi International Airlines has filed for Chapter 11 bankruptcy protection, blaming rising debts and the fall-out from the ValuJet crash and the grounding of Kiwi aircraft.

Ironically, the filing took place on 30 September, the day that ValuJet returned to the air and at the same time as Kiwi was planning to resume a full flight schedule after its own safety investigation by the US Federal Aviation Administration.

Kiwi president Jerry Murphy, brought in a year ago as part of a new management team charged with turning around the carrier, cites the ValuJet crash as a key turning point in the carrier's fortunes. He also links the publicity over the safety of low-cost airlines to the FAA's decision to ground four of Kiwi's Boeing 727s after finding irregularities in pilot training.

"The ValuJet crash on 11 May started a downward spiral that was dramatically accelerated when the FAA, under intense public and media pressure, took the unusual step of putting four [Kiwi] aircraft on the ground," says Murphy.

"Kiwi has slowly bled to the point where we have to take action," he says, also citing the debt that he inherited from the first three years of operation at Kiwi.

The airline promises to maintain a full schedule of flights between Newark, Chicago and Atlanta, but will have to offer refunds or alternative carriers for passengers travelling elsewhere.

ValuJet itself is bullish about the prospects for building up its services, planning to grow to 102 departures from its Atlanta base with a fleet of 15 aircraft by the end of October.

The main concern among financial analysts has centred on the restructured ValuJet's ability to bring unit cost levels back to below ó4.5 per available seat kilometre (ASK) (ó7 per mile). President Lewis Jordan admits that initially costs will be higher, but believes that the target is achievable once the airline has reached a stable fleet of perhaps 30 aircraft. Before the grounding ValuJet had operated a fleet of 51.

Other US low-cost start-ups have also suffered in the wake of the ValuJet grounding. Airways, parent of the fast-growing AirTran Airways, has issued a warning that its net loss for the September quarter could be worse than expected, reaching around $4 million as against $282,000 in the June quarter. It blames the "lingering impact of adverse publicity" still surrounding the low-fares sector.

AirTran says that it will press ahead with upgrading its fleet of 10 Boeing 737-200s, but will trim the route systems.

Western Pacific Airlines (Westpac) also warns that losses in the September quarter are likely to approach $1 million, turning around the fledgling airline's modest profit so far this year. Westpac chairman Ed Beauvais says that the fourth quarter may also be "disappointing" but adds that 1997 "looks promising".


Source: Flight International