Case Studies
KIWI International Airlines
Background
In many ways, KIWI International Airlines was a success story for pilots and flight attendants laid off after the demise of Eastern Air Lines and Pan American. Within a short period, the Newark, NJ based start-up airline was ranked among the top three domestic airlines in Condé Nast Travelers prestigious Readers' Choice Awards, including "Best Domestic Airline" for 1994. Zagat's "Bang for the Buck" placed KIWI sixth in the world, behind only Singapore Airlines, Midway Express, Swiss Air, Virgin Atlantic, and Cathy Pacific.
In quick succession, the airline added routes, grew to an annualized $200 million in revenue, and became a Wall Street "darling" capable of raising equity capital, even though KIWI had not shown that it could fly profitably. In search of better deals, and afraid of having to relinquish control, KIWI's owners did not accept Wall Street's offers.
The Issue
Despite their success in launching an airline with a great deal of "sweat equity" and limited cash, the KIWI owners eventually realized that the airline could not continue to finance its growth through existing sources. Rather than accepting reasonable financing offers, Kiwi's owners continued to shop their story through a variety of intermediaries and brokers assuming if they told the story often enough someone would provide money more cheaply. Within a year KIWI's story was over-shopped and no institutional investors we willing to make an investment.
The Solution
When the airline realized that its internal capital raising effort had done more harm than good, the owners consulted with the partners of Conexus Capital and made us their exclusive advisors. We immediately advised KIWI to (i) terminate contact with "brokers" and centralized all contacts with financial firms in order to stem the downward spiral, (ii) bring in new management to turn the airline around financially, and (iii) re-market the capital raising project using a highly targeted professional effort.
Despite a near hopeless situation, the efforts of the Conexus partners allowed KIWI to secure a $10 million equity financing (as part of a $20 million financing package) from an institutional private equity fund within six months. Following the financing, KIWI was able to revitalize its reputation, and its owners still had control. While the financing package was helpful, KIWI was ultimately unable to continue operations due to a decline in low-cost passenger traffic following the ValueJet accident in the Florida Everglades.