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 The Brancatelli File

joe ON A WING AND A SALE

BY JOE BRANCATELLI

November, 1993 -- On a dog of an August day somewhere in a forest of corporate headquarters in Northern New Jersey, a salesman's little red Honda pulls off the superhighway and into the parking lot of a low-rise office building. Today's prospect is a small travel agency on the second floor.

That's when the sales call starts getting...well...weird.

Out of the little red hatchback pops a compact man wearing an honest-to-goodness pilot's uniform. There are gold braids on the sleeve of his jacket and pilot's wings on his black cap. His boxy pilot's bag is stuffed with collateral for Kiwi International, a year-old airline that has no international routes and no affiliation with New Zealand or shoe polish.

Why is a salesman for a small-time airline playing dress up in the parking lot of a New Jersey office building? Well, that's the weird part. The guy is really a pilot masquerading as a salesman. Weirder still, he doesn't work for Kiwi, isn't one of its reps, and won't make a dime on this or any of a hundred other calls he's made. In fact, he is unemployed and living off his savings.

"I guess I should be out making a living," allows the pilot, Fran McBride, a 43-year-old veteran of two defunct airlines. "But I have the sense that I'll be able to control my own destiny if Kiwi makes it. Basically, I devote every waking minute to selling for Kiwi."

That's the weirdest thing of all about Kiwi. Everybody sells. Not just the sales department of seven people. Not just all of the airline's 490 pilots, mechanics, flight attendants, reservations agents and corporate executives. But also guys like McBride, who's waiting to be hired as a Kiwi pilot, and Rudy Borusso, a retiree who has made 552 sales calls without a dime in compensation or a penny of expenses.

"We tell everyone associated with Kiwi that they have to sell," explains Beth Mack, the airline's vice president of sales and marketing. "Everyone has their job responsibilities--and then they have their sales responsibilities. Selling is considered a point of honor here."

Against all the odds, the Kiwi cult of selling--an unlikely army of untrained volunteers, worker wannabes, and off-duty employees--actually may be making an impact in the brutally competitive and notorious unprofitable world of passenger airlines.

With a fleet of just seven jets, service to only six Eastern and Southern cities, and fewer than 50 flights a day, employee-funded Kiwi has turned a small operating profit in at least three of its first twelve months in the air. The competition--nationally known behemoths like United and Delta and American Airlines--haven't been nearly so lucky: as an industry, the nation's major carriers have lost an estimated $8 billion in the last three years.

A staff of workers-turned-peddlers doing the spade work for a virtually unknown airline is hardly ideal, admits Paul G. Clements, Kiwi's regional sales manager. "But, hey, it's working. The bottom line is that we're ahead of any other new-entrant carrier. Besides, I'm not so sure I could do better even if I hired experienced salesmen off the street."

If ever there was an enterprise that crystallized the history of its industry, Kiwi International is it. Everything about the operation--its workers, its name, its brand of service, its funding, and most certainly the Kiwi cult of selling--has evolved from what has gone before in the $50 billion commercial aviation business.

Federally regulated since the earliest days of barnstorming pilots, the airline industry was once a textbook example of an industrial oligarchy. Government bureaucrats set fares, regulated routes and services, discouraged competition, and made it impossible for new airlines to be formed. Unionized employees grew incredibly prosperous and notoriously unproductive. Sloppy, somnambulant airline executives were all but guaranteed profits on a cost-plus basis.

But deregulation of the airlines in 1978 changed everything. Existing carriers not only were forced to compete with each other, but also defend their flabby selves against more than 200 new airlines. By 1991, after more than a decade of bloody fare wars, wholesale bankruptcies, and sophomoric sales and marketing strategies, the Persian Gulf War scared off just enough passengers to bring the industry to its metaphorical knees. The surviving carriers not only were racking up losses higher than the aggregate profit of all U.S. airlines since the beginning of commercial aviation, three of the nation's twelve major players--Pan Am, Eastern and Midway--vanished without a trace.

A huge portion of the aviation industry--perhaps 30,000 employees or more--was idled in the carnage. Pilots who had been earning $100,000 a year or more in 1990 learned they were excess baggage in 1991; top-notch flight attendants with decades of experience suddenly were begging for minimum-wage jobs at fast-food restaurants.

"I couldn't get another job when Eastern folded because the [surviving airlines] only wanted younger, cheaper guys," says 47-year-old Cliff W. Crittenden, a Kiwi pilot who spent 23 years at Eastern. "I was living off my investments, but a lot of others didn't make it. At least 100 Eastern employees have committed suicide since the airline folded."

Thirty-year-old Gary Fruchter was younger and cheaper than a lot of other pilots grounded in 1991, but no luckier than Crittenden. He had once earned $68,000 a year as a first officer. But before Kiwi hired him as a pilot-in-waiting and gave him $9-an-hour job as a sales assistant, he was collecting unemployment and living rent-free in a house owned by his brother.

"People's lives were destroyed," Fruchter says. "The beach houses, the stocks, the bonds, everything went down the drain. A whole lifestyle disappeared for tens of thousands of people who were once part of an incredibly affluent, educated and secure workforce."

From that despair came the notion of Kiwi International. Bob Iverson, a former Eastern and Pan Am pilot with a degree in marketing, had spent several years unsuccessfully trying to purchase an existing carrier. In 1992, he and a small group of other pilots decided to start their own airline. After all, they figured, the industry now had a surfeit of airplanes that could be leased for a fraction of their former value, there was a deep pool of experienced employees desperate for a chance to return to the skies, and an opportunity to fly routes that were under-served after the collapse of Pan Am, Eastern and Midway.

But traditional funding sources had absolutely no interest in backing a start-up airline while the existing carriers were hemorrhaging cash. So Iverson looked inward. He and his partners approached a hand-picked collection of former airline employees with a remarkably simple proposition: invest your own money to help launch Kiwi, then work for about half your former salaries--or face the fact that none of us may ever fly again.

With more than 100 pilots kicking in $50,000 each and other employees ponying up $5,000 each, Kiwi raised a $10 million war chest and launched service in September of 1992. The airline was christened Kiwi for sentimental reasons: the small, flightless kiwi bird reminded the new owner-operators that they too were once unable to fly.

The name may be hokey, but very little else about the Kiwi service concept is. In a modest way, the tiny airline successfully addresses many of the basic complaints about flying in the deregulated era.

Kiwi's leased 727 jets offer only one class of service: a roomy coach cabin configured with several inches of additional legroom for each passenger. Peanuts--honey-roasted or otherwise--are never served; every passenger on every flight receives a fresh, tasty meal. Kiwi's lowest fares carry very few restrictions; its unrestricted tickets cost only about half what the other carriers charge. And unlike the ill-trained neophytes staffing other start-ups, Kiwi's flight crews can legitimately claim to be the cream of the crop of some of the nation's most famous, albeit defunct, airlines.

"The time is right for Kiwi," says Mack, the 40-year-old vice president of marketing and sales. "We believe we can give good service, charge low fares, and make a profit. We know low-fare/low-service airlines like PeoplExpress don't work. We know the high-fare/high-service traditional carriers aren't making money. So it stands to reason that only low-fare/high-service airlines like Kiwi can work."

It fell to Mack, a former flight attendant and a 12-year veteran of the sales department of American Airlines, to figure out how to sell Kiwi to the traveling public, and, more importantly, to the travel agents who write about 80 percent of the nation's airline tickets. Ten million dollars may have been sufficient to launch an airline on a wing and a prayer, but it wasn't nearly enough to fund a traditional sales campaign.

Mack found the answer in her own past. "Someone at American once told me I would never be able to sell because I had been trained as a flight attendant," she recalls. "I never agreed with that philosophy." So she drafted Kiwi's employee-investors into the airline industry's first all-amateur sales force.

"A huge predominance airline employees have direct customer contact and that gives you a built-in sales force," she insists. "Good customer service and selling are very closely aligned. Being a good flight attendant is like being a good salesman: you have to know how to say you're sorry, you have to overcome objections, you must create a rapport, and you have to close a sale."

But what about pilots, the notoriously aloof prima donnas of the airline industry? For starters, says Mack, Kiwi pilots can't afford to be prima donnas because "they've dipped into their own pockets. When you're talking money out of your own pocket, you learn to sell." Besides, she adds, "a lot of the selling at Kiwi is simply a matter of proving we're credible. What's better than a pilot in uniform for credibility?"

Having found a sales force, however untrained and untested, Mack began to build a list of prospects. Based on the cities Kiwi has chosen to serve--first Newark, Atlanta, Orlando, and Chicago, then Tampa and San Juan too--Mack estimated there were 7,000 travel agencies and 1,200 small businesses on which to call.

Working in Kiwi's favor was the so-called "electronic selling" favored by the airline's larger competitors. These days, airlines sell predominantly via the computer reservations terminals perched on the desktops of even the smallest travel agencies. To a surprising degree, Kiwi's competitors had long ago abandoned the time-honored practice of pressing the flesh with individual travel agents.

"A lot of stuff airlines do is in the computers," says Maxine Krill, Kiwi's director of sales administration and a 25-year Eastern veteran. "But travel agents, especially the smaller ones, are hungry for personal contact with their suppliers. They hadn't been getting that from the other airlines."

In other words, if Kiwi was going to send untrained pilots and flight attendants out on the road, at least they wouldn't being ambushed by swarming armies of experienced salespeople fielded by the existing competition.

So Krill and Mack decided to launch a barrage of "sales blitzes" in Kiwi's target market. On a block-by-block basis, they marked off the locations of travel agents in a selected city. Then as many as fifteen pair of Kiwi employees--pilots, flight attendants, mechanics, reservations agents, executives, whomever was willing and able--would fly into the target market. For two or three days, the Kiwi teams called on as many of the targeted agents as physically possible.

Finding Kiwi employees to volunteer for the sales blitzes wasn't hard.

"I lived a fairly typical pilot's life at Eastern. I had never done anything but fly," Crittenden recalls. "Over here, it's different. We're family and we've lived through everything together: strikes, bad bosses, failed airlines, going broke. Going on a sales blitz was something you had to do for all those airline people out there who were still unemployed. If we don't sell, maybe Kiwi doesn't make it, and then those folks will never have a shot at getting back up in the air."

The response to the sales blitzes from the travel-agent community was more positive than anyone at Kiwi could have dreamed. "We've gone into agencies that haven't seen an airline salesperson for five years," says Mack. "They were thrilled to see us. It made them feel important." Adds McBride, the unemployed Kiwi pilot-in-waiting: "Travel agents seem to be intrigued with talking to a pilot. I've been part of four sales blitzes and maybe called on a hundred agencies. I've never been treated anything but warmly."

Lately, Mack and Krill and have begun using the tactic to increase Kiwi's market share. In May, for example, Kiwi sent 24 employees--two from the dedicated sales staff and 22 employee volunteers--on a three-day blitz of Chicago. The twelve teams hit 450 travel agents and 30 corporations, and the results have astounded even Mack.

"The weekend after the blitz, our load factor [the average percentage of seats filled on a flight] in Chicago improved by 5 points and hasn't gone back down," she says. "There must be some other factor involved," she adds sheepishly, "but we can't find any."

The success of the sales blitzes helped create the Kiwi cult of selling. Convinced they were in on the ground floor of the next great airline success story, employees volunteered for any kind of extra-curricular sales work Krill, Mack and Clements could invent. Besides a new Adopt an Agency program, off-duty employees regularly wander into the airline's Newark headquarters to stuff envelopes, work the phones, assemble leave behinds, or pass leads along to the sales staff. Pilots and flight attendants volunteer to visit local school career days, Lions Clubs and Rotary meeting.

Even people who don't work for Kiwi have been drawn into the cult of selling. That's what happened to 68-year-old Rudy Borusso, who had retired from Eastern in 1986. "I didn't miss the industry. I was enjoying my retirement before Kiwi came along," says the 40-year Eastern veteran. Yet when an old friend called to brief him about Kiwi, Borusso started climbing into his car three times a week to make sales calls.

For free. Even though he had been in sales at Eastern.

More than 500 calls later, Borusso is still at it. "I was lucky," he says. "I retired before the bad stuff hit. But so many of my friends were hurt and lost their jobs. Lost their lives, I guess. I wanted to help them when they created Kiwi. These are talented people and I want travel agents to know about this airline."

For Fran McBride, the motivation is more tangible. To raise his $50,000 investment in Kiwi, he raided his savings account and remortgaged his home. Then to protect his investment while waiting for Kiwi to hire him, he transformed himself into the airline's star volunteer.

"Fran's amazing," says Mack. "He once visited an agency in Easton [a Pennsylvania town about an hour's drive from Newark] that had only booked a total of $2,000 since we started up last September. In the two months since Fran's call, the agency has booked $22,000!"

"You do see a return," says McBride, a former Eastern and Midway pilot. "Agencies I've called on that were selling $200 a month on Kiwi, now they're selling $1,500, $2,000 a month. You know you're making a difference."

But the Kiwi cult of selling has its limitations. While it is long on the enthusiasm born of desperation and inspiration, it is dangerously short on formal training. "The company," says Mc Bride, "gives you some blank stationary and its trust." In fact, until Clements began conducting two-hour sales seminars for line employees, there was no real training regimen at all.

And as Mack is quick to admit, Kiwi's volunteers aren't so much selling a product as spreading a gospel. "I don't think many of these people could do this if it wasn't for their dedication to what Kiwi represents," she says. "And, frankly, selling airlines to travel agents isn't traditional selling. The volunteers don't have to sell a product to people who don't want to buy. All they have to do ask travel agents to recommend Kiwi to their clients. Then we pay the agent for recommending us."

In fact, as Kiwi marked its first anniversary in the air, the outer limits of its cult of selling were becoming apparent.

Take Kiwi's Newark-Atlanta service, the weakest link in its route network. On weekdays, Kiwi offers just two roundtrips on the route. By comparison, Atlanta-based Delta Air Lines offers 22 daily roundtrips in the market.

Outgunned 11-1, a recent Kiwi sales blitz in Atlanta did little to boost business. "For the first time, I got negative feedback," recalls Fruchter, the pilot in waiting. "Travel agents weren't hostile or unfriendly, but they wanted to know why we have so few [flights]. It was clear our enthusiasm and our dedication to what we do couldn't solve that problem."

Then there was McBride's foray into the deepest, darkest forest of corporate New Jersey on that dog day in August. The prospect, Bert Rosenbluth, president of Magnum Travel, was friendly enough. But he wasn't particularly impressed to meet a pilot in uniform, and he clearly wasn't in a buying mood. And for all his honesty and sincerity, McBride sold like...well...like a pilot masquerading as a salesman.

"Fran thought he had done okay [with Rosenbluth]," Clements says several days after reviewing the 45-minute call with McBride. "But Magnum has sold less than $1,000 on Kiwi in the last six weeks. It was the perfect opportunity to ask for more business. Fran never even went over the numbers with the guy."

Clements, who spent more than 30 years in various sales capacities at TWA before joining Kiwi, pauses for a moment, then smiles. At 56, he's the most experienced salesman at Kiwi, and the glib Svengali of its cult of selling.

"Fran's got a giant heart. He can do it up to a level," Clements says evenly. "But pilots seem to have trouble learning the difference between the smoke and actually getting more business. There's a limit to what I can get from them."

This story appeared in Selling magazine.

Copyright 1993-2007 by Joe Brancatelli. All rights reserved.