KIWI International Air Lines Inc., seeking to attract outside investors, plans to end majority control of the company by employees.
The Newark, N.J., airline will do away with a stock plan that guaranteed some 1,200 workers the right to elect a majority of KIWI directors, according to a proxy statement filed with the Securities and Exchange Commission.
KIWI has been employee-owned since 1992, when pilots and other workers from the former Eastern Airlines Inc. and Pan Am Corp. put up $2-million to start the airline. Employees received a special class of stock, designated Class A, that they placed in a voting trust to prevent a takeover by rivals such as Continental Airlines Inc.
The employees have always taken pride in their right to run KIWI, said company spokesman Rob Kulat. However, he said employee sentiment toward these ownership rights shifted in 1995.
"As the company evolved, investment opportunities came and went and majority ownership was always an issue," Kulat said Monday. "Employees realized that long-term profitability and the ability to recover some of their investment was more important than just saying "We have majority control.' "
The change coincides with a July 1 agreement that calls for Recovery Equity Investors of San Mateo, Calif., to invest as much as $10-million in KIWI. Recovery Equity has already acquired $4-million of notes that are convertible into preferred stock.
KIWI noted in the SEC filing Friday that its present capital structure, in which Class A shares get to elect a majority of the directors, may have impeded the company's ability to attract outside investors such as Recovery Equity.
To rectify the situation, KIWI will propose at a Sept. 4 shareholders meeting in Newark that each Class A share convert into a single Class C share, effective Jan. 1, 1998. The Class C shareholders would then vote to elect two-thirds of KIWI's board, with the holders of a new class of preferred stock receiving the right to elect the remaining directors.
Kulat noted that the new voting plan would enable KIWI to attract additional investors. That would help the company finance its operations, which have expanded from two planes and eight daily flights in 1992 to 15 planes and 79 daily flights, serving cities such as New York, Chicago, and Atlanta, this year.
The Federal Aviation Administration last month asked KIWI to ground four of its jets after investigators turned up irregularities in the carrier's training and record-keeping. The FAA on Friday told KIWI that it could return two of its planes to service effective immediately.