BONZA AIRLINES: Have USA owners set it up to fail?

It’s being reported by The Australian newspaper that former 777 Partners principal, Timothy O’Neil-Dunne is taking legal action against his former employer. The case accuses the backers of Bonza Airlines, of 10 counts of misrepresentation, fraud and fiduciary irrisponsibility regarding Canadian low-cost airline Flair, where he was Chief Commercial Officer.

The capital backers of Bonza and Flair, 777 Partners deny the allegations and are seeking to have the charges dismissed. Some of the charges in the suit include:

• Overcharging for aircraft – claiming that the company charged US$52 million for planes that only cost them US$42 million – giving them an instant profit of US$8 to 10 million
• 777 Partners intends to earn US$1 billion dollars from its aircraft leasing operation

BONZA Airlines is involved how?

The new ultra-low-cost Australian airline which specialises in servicing previously unserviced routes with a fleet of Boeing 737 Max aircraft. A concept developed by Tim Jordan and Peter McNally, who both have long histories with the airline industry. They saw an opening after the demise of Tiger Air, when Virgin Australia went into administration during the pandemic.

The airline was announced in October 2021, including the backing of 777 Partners, with a commencement date of mid-2022. That proved to be overly ambitious, given the complex process of gaining regulatory approval.

The founders didn’t stay long, with McNally departing before the first aircraft took flight in January 2023. Rick Howell resigned as Chairman 9 months after the McNally departure. He was later was hired by 777 Partners in a ‘aviation innovation’ capacity.

It has been previously reported that two jets in Bonza livery ended up in another 777 backed carrier operating in Poland, since Bonza didn’t have sufficient flight deck crew to staff them.

What’s going on here?

Well, I’m not sure. Making a profit is what private capital does. Making money out of leasing planes is relatively core business for private equity investing in the airline industry. Even buying football (soccer) enterprises that are losing money, as they have done with loss-making A-League soccer club Melbourne Victory, with the intent of turning them around, seems typical of what private equity does.

What is feeding the rumours?

Reports that aircraft lessor Airborne Capital repossessed 4 jets from Canada’s Flair low cost operation initiated the gossip. Repossessions are highly unusual in the airline industry. The story is that this was prompted by months of missed payments which caused concern about the airlines financial status. Chins started wagging when the interest rate on the US$129 million loan was a usurious 18% was reported.

This might be a bad deal for Flair, but it is what Private Capital does, makes money out of risk.

2PAXfly Takeout

To me, it looks like 777 Capital are fast operators. That is, they see opportunities and exploit them. That is not illegal in itself. Airlines are risky operations at any time. The need to make a good return is always front of mind for industry operators.

The progress of the legal suit – will reveal more information, on which we and others can make more speculation. If you are interested in this issue, then have a read of these posts and articles:

• The Australian
• One Mile At A Time
• and on the football side