BONZA or bust

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  • Rferguson2
    Participant

    Newest Australian Loco BONZA went into voluntary administration yesterday after having their aircraft repossessed by creditors. Unfortunately this has left many people stranded around Australia. QANTAS has said it would carry BONZA ticketed passengers that are stranded for no charge provided they have seats available.

    BONZA launched to try and tap into the secondary-to-secondary-city airport market instead of competing on routes served by Qantas, Virgin, Jetstar and REX. Think routes like Sunshine Coast Maroochydoore Airport to Albury or Port Macquarie. Despite no competition and cheap fares I always had doubts this would work, the markets are tiny, the flights would only operate once or twice a week on each route and BONZA chose brand new (expensive) 737 MAX aircraft to fly them.


    AMcWhirter
    Participant

    Here’s our piece from February 2022 reporting on Bonza’s plans after launch.

    Australian start-up Bonza unveils 25 launch routes

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    Rferguson2
    Participant

    Yes, one of Qantas former CEO’s famous quotes was ‘Australia only has a market big enough for one and a half airlines’.

    Looking at the history of those airlines that have came along to challenge Qantas and take a slice of the pie he may have had a point.

    After deregulation of Australian domestic regulation Compass Airlines appeared on the map went bust the following year, started up again, went bust again.

    Impulse Airlines then launched and was soon snaffled up by Qantas and East West a regional jet airline was taken over by Ansett. Then the unthinkable happened when Ansett itself went bust.

    Tiger Air Australia backed by Singapore Airlines tried and failed.

    Jetstar does well but is part of the Qantas group.

    Virgin Blue which later became Virgin Australia was already in the process of axing their 777/A330 wide body fleet even before COVID and when the pandemic hit went into Voluntary Administration and was brought back to life by an American investment group Bain Capital.

    We then have REX which was predominantly a regional airline formed by an amalgamation of smaller airlines flying turbo props. A couple years ago they decided to take on some 737’s and challenge Qantas and Virgin on the domestic trunk routes however they have publicly admitted that these routes are yet to turn a profit.

    Who knows, maybe there is only room for one and a half airlines?

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    TominScotland
    Participant

    It is an interesting one, Rferguson2.

    Like yourself, I am not surprised by Bonza’s failure, given the rather odd routes they were (infrequently) ploughing. If I were to invest in a low-cost carrier in Australia, I would push for high intensity on very few routes between the capital cities. The one route I might back would be Western Sydney International (Nancy-Bird Walton) Airport (IATA: WSI)(when it is fully operational) to Melbourne Avalon (AVV), maybe every couple of hours in each direction with a Ryanair service model. WSI to Collangatta (OOL) and AVV to OOL might be the others. Beyond that, the routes are far too thin.

    The problem with that, though, is that many Aussies are weaned on high prices and full service and may take some getting used to price bundling.

    2 users thanked author for this post.

    cwoodward
    Participant

    I believe that they were backed by 777 Partners – who if I understand correctly are supposedly buying a Premiership football club!
    Not, I would have thought encouraging news for the football club.

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    LetsFlyNow
    Participant

    @cwoodward
    Indeed the 777 Partners are as sketchy as they come.

    While we might criticise Bonza’s routes or business model, i think the bigger story here is their investor/owner 777 Partners who are embroidered in a bunch of lawsuits. Around July last year the story came up of how they ‘suspiciously’ operate their airline businesses – they also own Canada’s Flair Airlines whose 4 planes were also repossessed in March last year due to failed payments.

    Flair airlines was apparently ‘days’ behind on making a payment of $1Million which is a sum 777 Partners was apparently meant to have paid. One Mile At a Time among others covered the story.

    But surely Bonza must have had a business plan that involved staying in business for more than 15 months. I’m not really convinced that their network & revenue was so bad. Someone needs to take a closer look at 777 Partners.

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    Rferguson2
    Participant

    Yes, 777 partners does have a somewhat shady reputation. They hold a large stake not only in BONZA but also Canadian ULCC ‘Flair’. In turn, 777 partners acquire the aircraft on behalf of the airlines it has a stake in and then sells or leases the aircraft to those carriers.

    To delve a little deeper one needs to look at Flair. Website ‘Josimar Football’ investigated some of the practises of 777 partners and reported the following:

    Former VP of 777 finance Jocelyn Harris claimed that Flair Airlines owed 777 partners US$129m which had an 18% interest rate to the parent company.

    Timothy O’neill who is Flair’s former Chief Commerical Officer (and suing 777 for breach of contract) claims that 777 profits from the airlines it invests in by buying MAX’s at $42m and then selling them on to the airline it owns for $52m pocketing $10m each time.

    It is worth pointing out that these are simply accusations by former employees however what Jocelyn did say about 777 tends to make sense when asking WHY would 777 be investing in loss making football teams and airlines unlikely to thrive?
    “All these businesses are losing money. Sport? Losing money. Aviation? Losing money. But who is going to take the loss? The joint venture partners. These guys play a shell-game. They claim to be self financed, to have put their own money into it. But they can’t have as much money as they say they have. It’s just not possible. But they don’t need a lot of money. Because what they really do is shunt money around. It’s a giant shell game. The same money is always out there doing something. And they are running it faster and faster.”

    And then you have Josh Wander, co founder of 777 partners.
    – arrested for trafficking 32g of cocaine in 2003.
    – in 2009 was sued by his previous employer with the company’s president accusing him of ‘misappropriating confidential information and trade secrets’.
    – in 2011 was sued by Bellagio Las Vegas after paying back $5000 of $78,000 credit.
    – in 2013 sued by AMEX for repayment of $245,000.

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    LetsFlyNow
    Participant

    Well, Flair Airlines has had enough of 777 Partners and has outright ditched them.

    According to the Australian Financial Review (Paywall), Aviation week (free, link below) etc Flair Airlines has reduced the 25% Stake 777 Partners owned to ‘almost Zero’. The stake has been acquired by one of Flair’s unnamed senior Canadian Lenders who will provide the airline with a new ‘non-binding debt funding’. Good for Flair Airlines. I’ve honestly only heard nice things about the airline.

    I think 777 Partners is coming more into the limelight now.

    https://aviationweek.com/air-transport/flair-airlines-lender-acquires-stake-777-partners


    cwoodward
    Participant

    Apparently according to the Bonza’s external accountants the airline was paying in full the leases on the aircraft (to another 777 shady subsidiary who held the leases but the funds were not being not being on paid.
    It seems that Bonza had built a decent business and according to reports the management were close to securing a buyer for 777s shareholding.
    The receiver appears reasonably optimistic re finding a buyer for the business.

    The original plan prior to 777 becoming involved was to use smaller Embraer aircraft but 777 offered the large jets for which they were already committed.
    I am something of a sucker for the underdog and hope the airline survives as the basic plan I feel was sound and the loadings there all- be- it using smaller aircraft.

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    Rferguson2
    Participant

    Coincidentally (or not!) it seems things are starting to unravel at 777 partners. The group is being sued by London based asset management company Leadenhall Capital Partners. The lawsuit says 777 partners is “operating a giant shell game at best, and an outright Ponzi scheme at worst.” – reported in New York Times.

    The lawsuit revolves around US$600m of financing provided by Leadenhall to 777 partners. What Leadenhall was not aware of when providing the finance is that US$350m in assets that 777 partners put up as collateral against the loan had already been used as collateral to other lenders.

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    cwoodward
    Participant

    The below from ‘ch-aviation’ paints an entirely different and far more negative scenario than has been previously revealed. It appears that there is no way back for Bonza or likely 777 partners.

    https://www.ch-aviation.com/news/139940-bonzas-insolvency-quagmire-deepens-as-murky-details-surface


    cbroo79
    Participant

    When last at OOL I noticed that the 737 max used by Bonza all had canadian registrations. Seems 777 just made Bonza pay for leasing planes Flair in Canada did not take. Something fishy! I agree that there is room all year round for a Southwest or Ryanair model in Oz for holiday pairs such as WSI/OOL, WSI/Avalon, Avalon/OOL or even in summer season between NZ and OOL.


    cwoodward
    Participant

    It seems that BONZA may live again.
    The administer has it seems applied to the AU government for a 2 month extinction provide the administrators with further time to conduct a sale process as seemingly 777 partners has the intention to refinance the business.

    The airlines AOC is not capable of being transferred to another entity and can only be used by the party granted the certificate and there isa time limit on the process

    In an affidavit, Hall Chadwick partner Brett Kijurina also told the court that Bonza’s owner, Miami-based investment firm 777 Partners, had signalled interest in proposing a deed of company arrangement (DOCA) to restructure Bonza and its Australian holding company, 777 Holdco. 777.

    Many are of the opinion that if the airline had used the smaller aircraft proposed in the original plan it had ever chance of success. The large jet foised on it by 777 were the prime cause of the failure according to many AU pundits.

    I am not convinced.


    LetsFlyNow
    Participant

    @cwoodward I don’t buy it either.

    Earlier this week (or late last week) it was widely reported in the German media that 777 Partners are insolvent. 777 Partners are investors in football club Hertha Berlin and Hertha is looking for a new investor. As much as i’d love for Bonza to live on, it most certainly won’t be under 777 Partners who apparently don’t have a cent to their name.

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