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Ups and downs in air travel
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October 1, 1996: 6:15 p.m. ET
Kiwi bankruptcy is latest change in discount airline industry
From Correspondent Rhonda Schaffler
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NEW YORK (CNNfn) - It's getting to where airline passengers in search of a bargain need a scorecard to keep up with which carriers are in the game and which are not.
Over the last few days, ValuJet Airlines and Pan American World Airways returned to the skies and Tuesday marked the launch of Delta Express. At the same time, Kiwi International Airlines late Monday filed for bankruptcy and canceled more than half of its service.
Jerry Murphy, president and chief executive officer of Kiwi International Airlines, said Monday was definitely a strange day in the airline industry.
"I do find it ironic that ValuJet started back up yesterday and unfortunately Kiwi had to go to court and get protection," he said.
Kiwi International has grounded more than half its flights and laid off 400 workers. The trouble started in June when the Federal Aviation Administration grounded four Kiwi jets after questions about record keeping arose.
The grounding came at a bad time for Kiwi since discount carriers were already feeling the fallout of the May 11 crash of ValuJet flight 592 in the Florida Everglades which killed all 110 aboard. Following the crash, Kiwi's bookings started to drop dramatically.
Then, during ValuJet's temporary shutdown in mid-June, discount carriers were again swept into the spotlight as the crash brought intense scrutiny on all small and new carriers.
Some carriers have recovered better than others. When ValuJet resumed operations Monday, its routes included most of Kiwi's canceled ones.
Nearly 20 discount carriers are flying domestically in the United States and together claim a combined 12 percent market share.
But as crowded as the field of competitors is, Southwest Airlines -- the most fierce competitor among low-cost carriers -- has managed to stay out of the headlines.
Many consider Dallas-based Southwest Airlines to be the dominant discount carrier. Samuel Buttrick, airline analyst at PaineWebber, said Southwest has been able to continue its expansion in light of the ValuJet crash. He looks for the carrier to continue adding flights. (198K WAV) or (198K AIFF)
Southwest's decision to move into Florida prompted Delta Air Lines to start Delta Express. Most analysts say that although major airlines have had limited success launching express services, Delta will probably be an exception to that trend. And Kiwi's money troubles will likely serve as a stark warning to potential start-ups.
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