A person close to the negotiations aptly described why Niagara and Erie counties pulled the plug on a deal to keep Kiwi International Air Lines operating in Niagara Falls. Pun intended, he said, "It turned out we were dealing with a fly-by-night operation."
As much as this area needs a low-cost carrier, officials were absolutely right to walk away from Kiwi.
It was a deal that was worth taking risks for -- at least at the start. Western New York needs to take some chances that other areas don't have to. That doesn't mean, however, that officials should abandon common sense. In the end, officials from both counties acted responsibly. As one put it, "This was a Breckenridge Brew Pub that didn't happen," referring to the Theater District restaurant that closed, leaving a trail of unpaid tax bills and city loans.
Kiwi and the two counties were trying to work out a deal where the airlines would get a $550,000 loan, which Kiwi would have used to buy a smaller plane than the one it was using for its flights between Niagara Falls and Newark, N.J. Kiwi said the 162-passenger Boeing 727 didn't make economic sense. Fair enough.
But Kiwi increasingly proved unreliable for both its customers and its business partners here. It canceled a number of flights, leaving passengers stranded in New Jersey. It never would commit to providing regularly scheduled service.
Even as officials worked to salvage the deal, Kiwi made a number of questionable moves. Kiwi President Jerry Murphy said a major shareholder in the airlines would offer collateral for the loans, but it turned out that the shareholder didn't offer anything of value. Then, Murphy wanted to turn the loan into an outright grant. Moreover, he reportedly wanted a guaranteed minimum to cover expenses. Not exactly the risk-taking entrepreneurship that made this country great.
Finally, Murphy completely backed off the plan to buy a smaller plane, refusing to allow that provision in the closing documents. He claimed that the cost of training his pilots to fly the smaller plane, as required by FAA regulations, would have been too expensive.
Clearly, these negotiations were bound to fail. And that's too bad. The Niagara Frontier needs a low-cost airline. Kiwi's brief run in Niagara Falls showed just how much it's needed; after Kiwi started flying here, Continental Airlines dropped its round-trip price to Newark from $486 to $166.
Officials can take away some lessons from Kiwi as they search for another low-cost airline. They should make sure that the new operator knows the market, and what it will take to be successful here. In addition, perhaps they should question whether an outfit that demands incentives is really serious about setting up business here.
In the meantime, credit officials in Erie and Niagara counties for getting out while the getting was good. This turkey of a deal was never going to fly.