As new budget airline Bonza takes to the skies, many aviation experts are questioning how sustainable the low-cost carrier will be.
Key points:
- New budget airline Bonza's unusual business model has attracted scepticism
- The US private equity company that owns the airline says it could take a year to make a profit
- Bonza CEO says the airline was 14 years in the making
Bonza's unique approach involves flying large, 186-seater aircraft from their Sunshine Coast base to mostly regional destinations only a few times a week.
And all while promising super low airfares.
It's a model some commentators have had a hard time understanding.
So who is funding Bonza, what's their approach, and how longwill they keep pouring cash into a loss-making business?
The backers
Bonza is funded by 777 Partners, a multi-billion-dollar US private equity giant that part-owns a similar Canadian budget airline called Flair.
Among their other investments is a 20 per cent stake in Melbourne Victory football club, as well as controlling ownership of major European clubs including Sevilla in Spain and Genoa in Italy.
777 founder Steve Pasko was on Bonza's inaugural flight on Tuesday and said he saw an opportunity in the Australian aviation market, which lacks an independent budget carrier. (Jetstar is owned by Qantas.)
"Canada is one of the most significant countries in terms of average income —it has one of the highest ticket prices of any country in the world and it's dominated by two airlines," he said.
"We found that Australia had a lot of the same demographics and we felt it was a very attractive market for low-cost carriers."
Mr Pasko said 777 wasbudgeting for Bonza to run at a loss for 12 months and hopedit would become profitable in its second year.
He said Bonza neededto consistently fill about 90 per cent of seats and the airline would be "flexible" by experimenting with its destinations and frequency.
"We might adjust frequency or might adjust whether we fly continue to fly that market or not —maybe it's seasonal."
The sceptic
Veteran aviation industry analyst Neil Hansford is among those who question whether Bonza can survive.
He said the airline's combination of low fares, large aircraft and infrequent flights to off-the-grid destinations made no business sense.
"The model just simply doesn't work," Mr Hansford said.
"Those of us in the industry with a lot of experience can't understand how you can use brand new aircraft that are 180 seats on routes that would barely support a 70-seat aircraft.
"The noise that I'm hearing supporting it is all people who have a personal need, but they may fly once or twice a year – the truth will come in the load factor."
His scepticism is further entrenched by Bonza parking its jets on the Sunshine Coast, which he said "doesn't have the same attraction to most people that the Gold Coast has".
"If it was the Gold Coast or Brisbane or Sydney I could maybe understand it … if this airline survives, this business model won't survive to Christmas 2024."
Mr Hansford said he believed 777 Partners wouldrealise the model wasflawed and shift strategies to flying between more capital city markets.
"I sit and shake my head, and I can't understand," he said.
"I'd love to see them pull it off. But Qantas and Virgin will do nothing to try and to match it or combat it.
"Because if the market was there, Qantas would have put Jetstar on it and going back in previous times, Virgin would have put Tiger [Airways] on it."
The dream
The way Bonza chief executive Tim Jordan tells it, the budget airline was dreamed up about 14 years ago while he was gazingup at the sky.
"I stepped onto my verandah at Urunga [near Coffs Harbour] and looked skywards and realised that most people couldn't afford to get on the aircraft I'd just seen fly overhead," he said.
"So 14 years in the making, out the back of the garage, and we're here today. I'm really, really pleased that on behalf of team Bonza that we're able to bring flying within the reach of the many, not the few."
Mr Pasko and 777 Partners are betting that there's an unquenched thirst for people to fly to new routes.
The airline's executives have spruiked how Bonza is "on sale, not having a sale".
The crux will be how many airfares are available at sale prices, and whether the app-only booking strategy —with no call centre for when things go wrong —will satisfy the travelling public.
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