K2000 Airlines - The Y2K Airline

Y2K was the shorthand term for "the year 2000" commonly used to refer to a widespread computer programming shortcut that was expected to cause extensive havoc as the year changed from 1999 to 2000. Instead of allowing four digits for the year, many computer programs only allowed two digits (e.g., 99 instead of 1999).

New Zealand had its own Y2K airline in the form of K2000 Airlines. It latest for five weeks and caused havoc for the people who were left in the lurch following its collapse.

In late July 1999 K2000 Airlines was headed by former Central Pacific Airlines chief Jeff Mathews and was intended to cash in on travellers over the busy millennium season. The budget airline planned to fly from Auckland, Hamilton, Dunedin and Tauranga to Brisbane, Sydney and Rarotonga with a leased Boeing 737-400 with services to start on the 1st of December 1999.

The company's website described K2000 Airlines is a new innovative international air passenger carrier offering an affordable Australasian and South Pacific travel service to the region over the peak summer season operating from 1 December 1999 to 31 March 2000. In order to bring you the most affordable airfares on these routes, K2000 have kept their overhead costs to a minimum without compromising safety by only operating during the peak summer season and not year round.

Cashing in on Kiwi International Airline’s success Jeff Mathews called K2000 his "nuts-and-cola" airline and contracted Kiwi’s Ewan Wilson as a consultant. The airline initially planned to be a summer operation which Jeff Mathews said, was likely to shut down on March 31, but "if we do a good job it may go on.” The airline had been set up to take advantage of heavy demand over summer. K2000 return flights will start at $469 to Brisbane, $399 to Sydney and $999 to Rarotonga.

Meanwhile Ewan Wilson and Jeff Mathews were secretive with the media on some details, including job numbers, names of the financial backers and the source of the aircraft.  Mr Wilson said he had learned from the Kiwi Air venture that other airlines would try to undermine K2000 if they found out those details. "Huge pressure comes to bear from our beloved domestic carrier," he said. However, the men said K2000 was wholly New Zealand-owned, and would have a head office in Auckland and smaller base in Brisbane. They K2000 customers' money will go into a trust fund until tickets have been used, apart from $100 for booking and other expenses.  

While there was an immediate interest from customers there was also an immediate negative reaction to K2000’s Tauranga plans from Bay of Plenty fruit-growers who threatened legal action if the airline was allowed to bring international flights to Tauranga without full biosecurity protection for their industry. K2000 intended to operate a weekly service between Brisbance and Tauranga. Andrew Fenton, the Fruit-growers Federation's Bay of Plenty director, said anything less than 100 per cent surveillance of all baggage and cargo would not be acceptable. "We are certainly not going to accept a 'nuts-and-cola' approach to biosecurity." By the end of August 1999 governmental authorities had ruled out international passenger processing for Tauranga using temporary biosecurity border control facilities. The government authorities had told Tauranga airport authorities there would be no more dispensations to allow provincial airports to enter the international market and that biosecurity right throughout the country will be looked at more closely. Subsequently Tauranga authorities decided against establishing international facilities at Tauranga. Tauranga Mayor and airport business board chairman Noel Pope, said although K2000 had "good initiative", the airport was not ready. He said $2 million had been spent upgrading the runway, which could take the aircraft K2000 would use. But the airport did not want to "rush into any short-term propositions". Passengers who had already booked Tauranga flights were offered the choice of refunds or seats out of Hamilton or Auckland at reduced fares.

The Commerce Commission were also looking at K2000 Airlines to determine it was breaking the Fair Trading Act after a complaint by Air New Zealand. The national carrier said that K2000 was breaching Act by advertising services and selling tickets from centres when it has yet to receive government approvals to operate and has not secured an aircraft. K2000’s Jeff Mathews rejected the accusations sayings the charter airline had the choice of two aircraft from a European airline and a decision on which one it would use would be made by the 1st of October. From there, Mathews expected Civil Aviation Authority and Ministry of Transport approvals to take only a matter of days, because of the European airline's credibility and background. However, the Civil Aviation Authority has said it could take anywhere up to three months for approvals to be granted, and it has yet to hear from K2000. In mid-September the Commerce Commission wrote to K2000 Airlines saying, the commission "will be taking no action against the company at this time." The managing director of K2000, Jeff Mathews, said the complaint had wasted time and thousands of taxpayers' dollars. "The Commerce Commission has found that our passenger fund is fine, our advertising is fine." Mr Mathews said K2000 was considering legal action against Air New Zealand over what he called a "dirty tricks campaign."

In mid-September K2000 Airlines it would lease a Boeing 737-400 aircraft from Turkish charter airline Pegasus Airlines. Jeff Mathews said, the Civil Aviation Authority had been advised the plane would be supplied by Pegasus and K2000 is working well within deadlines supplied by Civil Aviation and has been told not to expect any timing problems". Pegasus was established by Ireland's Aer Lingus 10 years ago and was sold to Turkish Yapi Kredi Bank in 1994.

In the weekend before the K2000 Airlines’ launch the Pegasus Airlines’ Boeing 737-4Q8, TC-AFA, arrived in Brisbane, where it was to be based. K2000 Airlines decals were applied to the aircraft and cabin crew emergency procedure training was carried out. 

K2000 Airlines' Boeing 737-400 TC-AFA at Brisbane in December 1999

It made its first K2000 Airlines’ revenue flights on the 1st of December 1999 when it flew from Brisbane to Hamilton service, followed by a return to Sydney and a final Hamilton to Brisbane service. The inaugural flight from Brisbane to Hamilton was marked by the appearance of former Queensland Premier Sir Joh Bjelke-Petersen and his wife Flo. Speeches and champagne flowed as did talk of tapping a market for budget travel. 

The Boeing 737 schedule for the peak period was as follows;

❑ Monday: Brisbane-Auckland-Rarotonga.

❑ Tuesday: Rarotonga-Auckland-Brisbane.
❑ Wednesday: Brisbane-Hamilton-Sydney-Hamilton-Brisbane.

❑ Friday: Brisbane-Auckland-Brisbane-Dunedin-Brisbane.

❑ Saturday: Brisbane-Auckland-Sydney-Auckland-Brisbane.

❑ Sunday: Brisbane-Auckland-Brisbane-Dunedin-Brisbane.

The K2000 Airlines' website was in the primitive days of the internet. Above, a snapshot of the home page and below the timetable

K2000 Airlines' Boeing 737-400 TC-AFA at Hamilton on 29 December 1999

In the first week of January K2000 Airlines announced it would fly its last trans-Tasman flights on the 8th of January 2000, just five weeks into its planned four-month programme. Jeff Mathews, said jobs were safe and the company was continuing to look for new markets. He said the company had decided to get out before January 8 when rivals Qantas and Air New Zealand introduced $399 fares to match the K2000 price. He said the market had not responded to K2000's service and blamed adverse publicity, competition from Qantas and Air New Zealand and a lack of cheap flights travel industry support. He claimed the Civil Aviation Authority was slow to issue K2000 with licences slowing entry into the market. Mr Mathew’s said the move was not a closure and the airline’s  "corporate integrity was intact". It  intended to offer ad hoc services throughout the year whenever there was sufficient demand. He said passengers who flew one way with K2000 before January 9 could either return before the date or have half their fares refunded. Those who had booked but not yet travelled would be fully refunded. 

Freedom Air spokesman Stuart Eastman was reported as saying, "It doesn't take a rocket scientist to realise it's all down to public support." He says Freedom has a good product and is supported by the community it serves. But Jeff Mathews lays the blame for K2000's demise squarely at Freedom's feet. "No matter what fare we came up with, they would just cover us until we ran out of business. They knew they could carry it and sooner or later we had to get realistic." But Mathews is dogmatic about K2000's achievements during its brief time in the market. "It didn't go wrong — it went right and then we got out." The real success, as he sees it, was getting the leased plane into the country and starting the operation and later being smart enough to pull out when the transtasman market proved fruitless. 

Others might suggest success would involve completing all scheduled runs. In punting on a short run over the New Year's period, K2000 over-estimated the business potential of the millennium. The short sharp run was planned to tap into the public's supposed willingness to spend up in honour of the occasion. 

Commenting on the airline's demise Ewan Wilson said the millennium downturn was one of K2000's biggest problems. Bringing Wilson on board as a consultant — complete with his Kiwi Air baggage — cost K2000 a measure of public faith in New Zealand. "The flights out of Australia were very well patronised,” says Wilson. "Out of New Zealand they were bloody near empty." But Wilson says the "incumbents' response" was the biggest factor in the demise of both K2000 and Kiwi. He pegs four elements to the way Air New Zealand and Ansett responded that harmed the little carriers. First, the incumbents hold massive sway over the retail travel sector. "Because Air New Zealand provides something like 70 per cent of international travel from New Zealand, it would take a very brave retail agent to openly push a small competitor." Second, the big players match the cheaper airline's fares, knowing they can carry the loss. "The New Zealand psyche goes to the brand it knows, even though it likes competition. When push comes to shove they go for the safe option." Third, says Wilson, the incumbents put pressure on regulatory bodies to make things difficult for new players. "Not with any intent to stop them getting in. Just to slow them down." Fourth, and gamely, Wilson suggests the big airlines "influence the media to target weaknesses and promote negative stories". 

A few days after the trans-Tasman air service closed it was announced that K2000 had won a contract with the United Nations to carry East Timorese refugees home from Darwin. Jeff Mathews said the company's one-off contract with the UN is to carry 100 passengers and five tonnes of cargo to Dili this week. “After that the aircraft will loiter around Darwin for a few days and we know we're likely to pick up sonic more work." K2000 consultant Ewan Wilson says the airline also used its leased 185-seat Boeing 737-400 on a job for Air Vanuatu. 

The airline then looked to use its leased 737 as a troop carrier in Algeria. Managing director Jeff Mathews said the company had an open contract waiting for it in Algeria to carry troops. He would not say to which forces the troops belonged, or exactly how the aircraft will be used. "It's just a job," he said. "If you ask questions, they don't come back to you any more. We're dealing with some pretty mad guys." 

In June 2000 it was reported that liquidation proceedings had begun against K2000 Airlines.