In the customer ticket, I saw "liveimg --url=ftp://ipaddr/pub/rhvh/LiveOS/squashfs.img" was specified in the ks file, squashfs.img under LiveOS was used as the installation image, which is incorrect. Users should follow section "5.2.2.1" in https://access.redhat.com/documentation/en-us/red_hat_virtualization/4.2/html/installation_guide/advanced_rhvh_install to extract the squashfs.img from RHVH ISO:
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6. Extract the squashfs.img hypervisor image file from the RHVH ISO:
# mount -o loop /path/to/RHVH-ISO /mnt/rhvh
# cp /mnt/rhvh/Packages/redhat-virtualization-host-image-update* /tmp
# cd /tmp
# rpm2cpio redhat-virtualization-host-image-update* | cpio -idmv
This squashfs.img file, located in the /tmp/usr/share/redhat-virtualization-host/image/ directory, is called redhat-virtualization-host-version_number_version.squashfs.img. It contains the hypervisor image for installation on the physical machine. It should not be confused with the /LiveOS/squashfs.img file, which is used by the Anaconda inst.stage2 option.
"
BTW, I tried to install RHVH using LiveOS/squashfs.img in RHVH-4.2-20190219.0-RHVH-x86_64-dvd1.iso, the installation failed with the same error "OSError: [Errno 2] No such file or directory: 'new-kernel-pkg'". While using redhat-virtualization-host-4.2-20190219.0.el7_6.squashfs.img extracted from RHVH-4.2-20190219.0-RHVH-x86_64-dvd1.iso, installation succeeded.