In 1988 a group of Auckland investors and former Air New Zealand pilots worked together to form an international cargo airline. Southern World Airlines Ltd was subsequently incorporated on the 18th of November 1988. In late January 1989, after
12 months of planning, the Minister of Civil Aviation, Mr Bill Jeffries, granted a licence to the company that became New Zealand's second international air
carrier. The company was granted a New Zealand licence to operate a weekly scheduled air freight service to the United States and operate a worldwide charter service using a leased McDonnell Douglas DC-8-63F.
A month before the
airline had also applied to operate a Category A air transport service domestic air freight service between
Auckland, Wellington and Christchurch, with one McDonnell Douglas DC8-62FH
aircraft but nothing ever came of this plan.
While the international proposal
had gained the support of New Zealand authorities as well as exporters and
freight forwarders it still required American approvals. A NZ Herald article on
the 6th of February 1989 gave a good insight into the airline's plans and its
challenges. Auckland's new freight airline... Southern World Airlines, is not too
concerned at missing this season's export peak. "One gets a licence as
soon as one can and if that means the peak has passed, so be it," said a spokesman,
Mr Michael Oomen. By operating pre-peak, however, the airline was less open to
suggestions it was a fly-by-night operation. "The company is in for the
long haul," Mr Oomen said. Operations were expected to start within
"weeks rather than months" and negotiations were being held with
potential customers including producer groups, freight forwarders and other
airlines. A Los Angeles office has already been established to develop
south-bound business, usually more lucrative than the low value freight out of
New Zealand. While exporters have welcomed the prospect of a second New Zealand
operator offering more capacity and greater competition, some have questioned
whether there is sufficient demand on the American route for another weekly
freighter. The DC-8 can carry up to 45,000 kilograms. Increased passenger
services have seen more cargo space available on Air New Zealand, United
Airlines and Continental flights to and from the United States. A more
noticeable freight bottleneck - at peak periods at least - has affected
exporters to Japan, some of whom were hit last year by Qantas giving preference
to Australian exporters. Southern World would apply for a scheduled service to
Japan as well as charter rights, Mr Oomen said.
But its decision to fly the United States route had followed
considerable analysis and market research after Air New Zealand stopped running
its own DC-8 freighter in 1987. "The opportunity was perceived to be
there," he said. Mr Oomen emphasised that the scheduled American flights were
only a portion of the planned business with charter flights expected to
South-east Asia, the Pacific Basin and elsewhere. The airline would offer a
specialised service for perishable exports and would also carry bloodstock and
livestock. Hazardous goods not acceptable on passenger flights could be carried
by the freighter. This is to be based in Auckland but offer flights from
Wellington and Christchurch. Mr Harvey Misbin, a former American entrepreneur,
involved in setting up Southern World, had been associated with the
establishment of several air charter services in the United States, Mr Oomen
said. A group of former Air New Zealand pilots are involved in the venture and
have been trained to fly the DC-8.
By August 1990 Southern
World was still not airborne. The airline's chairman of directors of the
airline, Mr Louis McElwee, an Auckland lawyer, told the NZ Herald that they
were aiming at the end of September for the first flight. At first Southern World Airlines will offer a weekly service from Los
Angeles to Hawaii, Auckland, Sydney, Melbourne, Auckland, Guam, the East and
back to Los Angeles. Since the airline was formed 18 months ago, it has been
securing the necessary licences and landing rights in various countries, as
well as overseas premises and agencies. "It is quite an immense exercise
if you are going into it with the intention of being successful." By this
stage the airline had leased one DC-8 and had options on another aircraft at
short notice if required. The chief executive of Southern World Airlines was
a former American entrepreneur, Mr Harvey Misbin, who had been associated with the establishment of several air charter services in the United States.
The Gulf War (2 August 1990
– 28 February 1991) that followed Iraq's invasion and annexation of Kuwait, delayed
Southern World Airlines' take-off. The DC-8 aircraft which the airline had intended
to lease had to be made available to the United States military. The company
chairman, Mr Louis McElwee, said in January 1991 that another DC-8 had been
leased and the company hoped to begin operations in March. The change of
aircraft also impacted on crew training.
Operations between North
America and New Zealand and Australia finally began in March 1991. The first service
through Auckland operated on the 18th of March 1991 with Southern Word
McDonnell Douglas DC-8-62 N7043U operating from Melbourne and Christchurch through to the United States. A
typical Southern World flight in this period was their twice weekly SWN021/022,
which operated from Los Angeles to Honolulu, Pago Pago, Auckland and Melbourne
before returning byway of Auckland and Honolulu. Southern World also regularly operated
flights through Christchurch, Sydney and Nadi.
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| Southern World Airlines' McDonnell Douglas DC-8-62 N7043U |
Flights were scheduled to
fly where and when there was air cargo offering. Occasionally other DC-8’s were used.
The AHSNZ Aerolog recorded that Kalitta Air’s DC-8-73PF N809CK had operated a
Southern World Honolulu-Auckland-Sydney-Auckland service on the 21st of May
1991 and another Kalitta Air aircraft, McDonnell Douglas DC-8-55F N807CK had
operated a Southern World flight through Pago Pago on the 8th of July 1991.
In early July 1991 the NZ
Herald reported that Southern World was “preparing
to take delivery of its second DC-8 cargo plane”. The director of airline
operations, Grant Annals, told the Herald that
Southern World's arrival has sparked a price war on the United States-Australia
sector of its operations, with long-standing operators offering to cut rates
"to next to nothing" on the days Southern World has services
scheduled out of the United States. Mr Annals says the air-line is aiming for a
realistic schedule of charges and has made a decision not to react to such price
cutting. He says some clients being approached with give-away rates by
competitors are saying "That is fine, but where were you before? Go
away." "Some of our competitors have also commented that anyone can
fill a plane if they are not charging. Well, we would not be in business if we
were not charging," Mr Annals says. He says Southern World is running
slightly ahead of initial financial projections. The company is flying two
routes — to Los Angeles via Honolulu and return twice a week, and to Chicago via
Hong Kong twice a week. It plans to begin a twice weekly direct Auckland to
Japan service in about two months and expects to be operating a wide-bodied
aircraft (such as a Lockheed Tristar) as well by the end of the year. Mr Annals says fulltime staff employed by
the airline have grown from just eight at the time services began to a total of
85 three months on, with 28 pilots on the payroll and offices in Melbourne,
Sydney, Hong Kong, Chicago and Los Angeles, and plans to open one in Japan.
Southern
World Airlines' second aircraft, McDonnell Douglas DC-8-63(F) N863E entered service in July 1991.
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| A couple of postcards of Southern World's McDonnell Douglas DC-8-63(F) N863E |
In the March 2021 issue of Aviation News George Richardson wrote of his time with Southern World. SWA was based in Los Angeles but operated a Los Angeles - Honolulu - Pago Pago - Auckland-Melbourne - Sydney cargo service, primarily carrying General Motors parts for the Holden (GM) cars manufactured in Australia. This old DC-8 was fitted out as a short-haul cargo aircraft. It had no galley, no toilets, no way of washing and nowhere to rest if one was on long haul, such as Honolulu-Auckland. The starboard front door, when closed and the aircraft pressurised, leaked at a colossal rate, and one could stand by the door and see outside through the gaps in the seals. Consequently, the fuel burns were almost off the performance tables.
But in the background clouds were looming. The first was a Television New Zealand 'Frontline' story screened on the 25th of August 1991 that accused Chief Executive and chief shareholder, Harvey Misbin, of running drug flights between South America and the USA, before setting up Southern World. A few days before the screening Misbin relinquished his 70% share of the company’s shareholding and his position as Southern World’s chief executive.
The second cloud was in the form of Air New Zealand. George Richardson continues. The end of SWA came very quickly because of the predatory way Air New Zealand attacked our operation. For example, one night in LAX all of our cargo was in carts about to be loaded when a chap in a suit came up to the aircraft and asked who the consignee of all this cargo was. I pointed to the party who was the consignee and this fellow then introduced himself, followed by: "If you take this cargo away from this carrier, we, Air New Zealand, will take it all to Australia for free." Our consignee said, "Yes you have the job then, but it has to be in Australia by midday tomorrow." The Air NZ chap said he couldn't do that, but he could get it there inside 36 hours.... A week or so later on arrival at Auckland, Customs came along and demanded that every piece of cargo get offloaded while they inspected it. This action took four hours, Every parcel was unwrapped, rewrapped and then reloaded back into the aircraft. This action made us so late that GM and Ford, who owned the cargo, cancelled our contract. This search was instigated by Air NZ who informed NZ Customs that we were carrying drugs as well as car parts. Customs didn't need any further encouragement because in Air NZ's snitching they also said that the SWA major shareholder came from Bogota in South America and he had lots of drug contacts. This was of course totally untrue, but we were cutting across the Air NZ cargo cartel and in their view affecting their ability to keep charging extremely high rates for cargo between the USA and Australia. SWA was out of business in about three days because GM and Ford reallocated their cargo to Singapore Airlines.
Following
the screening, Southern World Airlines voluntarily grounded itself and suspended
operations on the 20th of September 1991. Attempts were made to restructure the
airline. Creditors were reportedly owed about $4.5 million, however, the
company insisted receivables totalled "about $7 million." The company
were reported as saying creditors became
nervous after the television item was screened and this culminated in a section
218 notice being served. About a week before this an Auckland investment
bank, Case Weston Morgan, had been appointed to try and restructure the
company. It believed it could beat the threatened winding up action.
A New
Zealand Herald article on the 25th of September reported that Southern World's financial problems have been complicated by
a dispute between it and the man who has been acting as its general sales
agent, a Singaporean, Mr Richard Choo. Mr Choo is refusing to release money
Southern World Airlines says it is owed, claiming he is owed about $1.5 million
by the company. Case Weston Morgan's managing director, Mr Colin McKenna, says
"Unaudited" figures suggest Mr Choo owes Southern World Airlines
about $3 million. Mr McKenna says Southern World Airlines is trying to resolve
the issue without taking court action. Mr Misbin's shareholding in Southern
World Airlines is being held by Case Weston Morgan, which has been assigned the
rights to sell it. Mr Misbin will
receive whatever Case Weston Morgan is able to get for it. Mr McKenna says four parties have expressed
interest in buying or injecting capital in the business as a way of securing
control… Mr McKenna says Government
controls mean overseas ownership would be restricted to 24.9 per cent. He
emphasises that a substantial backer, or backers, are required — "the
operation will need $US3 million in working capital." He puts the odds on
resurrecting the company "in excess of 80 per cent."
A month
later the airline was facing a winding-up application lodged against it by
Auckland International Airport Ltd. Nonetheless the airline was confident that
it would be back in the air "in the reasonably near future."
On the
31st of October the High Court ordered that Southern World Airlines Ltd be
liquidated. Case Weston Morgan’s managing director, Mr Colin McKenna, was
reported as saying Southern World
Airlines, which has debts of nearly $9 million, is appealing against the
winding-up order on the grounds that nearly 80 per cent of creditors (by value
of what is owed) indicated they wanted to study the alternative plan which
would have meant the company could be sold rather than broken up. Mr McKenna
says two parties had been negotiating to buy the company. He says a scheme of
arrangement which resulted in the company's being sold is likely to mean the
assets would realise $2.7 million. The break-up and sale of the assets could
result in only about $750,000 being realised. Mr McKenna says the negotiations to sell the company cannot legally be
pursued if the company is in liquidation, "even by the liquidator."
Just
before Christmas the winding-up order was set aside. A judgment delivered by Mr
Justice Hardie Boys said that rather than ordering South World’s liquidation
the High Court should have acceded to the wishes of the majority of creditors. A Case Weston Morgan director said yesterday
that the proposal would be filed as soon as possible, and it was intended to
call a creditors' meeting in the second or third week of February. Two
creditors, Air New Zealand and Auckland International Airport Ltd, with claims
totalling about $786,000, sought immediate winding up in the High Court. But 21
creditors, with claims totalling $4.68 million, opposed. These included a
United States company, Aspac International Airfreight Pte Ltd, which acted as
the company's general sales agent and claims $4.14 million. The Court of Appeal
was told that by early this month, the numerical majority of opponents of
winding up had been swelled with 62 creditors, with claims of about $6.2
million, in that camp. Five creditors, with claims of some $2 million, then
supported the winding up. Accordingly, the airline was granted leave to
present the scheme to creditors.
Case Weston Morgan’s
attempts to stave off winding up proceedings went to the vote on the 2nd of
March 1992. By then another US operator was seeking to have its US landing
rights revoked. Case Weston Morgan had told creditors Southern World's licence to fly will be worth $500,000 to an unnamed
investor, provided creditors come to the party and allow Southern Cross to remain
in business under new ownership. The licence would be worthless if Southern
World were wound up and its assets sold. 91 of
the 97 creditors who voted, supported Case Weston Morgan’s scheme. The votes in favour represented 83.4 per cent of the $8.8
million owed to them. They further agreed to that Southern World's licence
would be sold for $500,000.
In July
1992 the High Court approved the scheme allowing Southern Word’s licence to be
sold to an unidentified New Zealand company, which still did not wish to be identified,
but which was apparently intent on establishing new air cargo services. In response to Air New Zealand's case
against the scheme, Mr Justice Williams
noted its counsel's use of "emotive phrases such as a 'shroud of secrecy'
which it said surrounded the scheme. I am unmoved by such rhetoric," he
said. He said there were "strong grounds for believing that the Air New
Zealand application is driven by a desire to prevent competition as far as
possible." The mystery buyer never materialised and in March 1993 the
company's assets realised far less than book value.
So ended
the story of New Zealand’s second international flag carrier.
