RIP Bonza
Just another pro-Bonza Australian Aviation article
AA trying to spin the Bonza line again. They were behind on lease payments before they were issued with a default. Also behind in maintenance reserves which all adds up to big money each month. Could be AU$500-600k per aircraft per month so times 4 is ~$2.0m per month and I understand it was much more than a month plus other commitments like 125 staff payments for April of say $900k. Go figure
Leasing companies are generally let's just say "challenging" to deal with but they are rarely capricious. Lessors just do not go to the lengths of terminating a lease and repossessing aircraft on a whim. Almost all Events of Default have a notification and rectification period, typically ranging from as short as a few days to as long as maybe two weeks (it is rare to see a lengthy grace period). So, the notion that all of this just struck like a bolt from the blue, catching management completely unawares, is rank nonsense. As a minimum they would have received at least one default notice, and almost certainly a notice of intent to repossess. They knew this was coming.
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The latest analysis from the AFR, unpaywalled.
How 777 Partners bad marriage doomed Bonza from the start
Australian Financial Review
Ayesha de Kretser May 3, 2024
Jordan’s business model, sighted by AFR Weekend, was predicated on flying 72-seat planes (twin-engine turboprops), 83 per cent full, between townships left behind by the Qantas and Virgin duopoly. It relied on scaling up its fleet quickly and extracting about $50 per passenger in income from booze, snacks and baggage.
His plan was roundly dismissed by the local aviation market as pure insanity.
But in 2020, as the world shut down and planes stopped flying, Jordan finally found a receptive backer: 777 Partners, a Miami-based private equity firm that had a small interest in a Canadian low-cost carrier.
“Prior to the pandemic, we were able to show that we could grow the Canadian market quite substantially by offering fares that were 40 per cent to 50 per cent lower than the incumbents,” 777 Partners’ co-founder Steve Pasko told AFR Weekend in February 2023.
“That’s what drove us to Australia. We think we can do the same thing”
That wasn’t the whole truth. In fact, 777 Partners, co-founded by convicted cocaine trafficker Joshua Wander, had come into an order book that gave them the right to buy 20 737 Max-8 jets from Boeing.
The Seattle-based plane manufacturer would not hand its aircraft over to an unknown quantity like 777 Partners and demanded that it set up start-up airlines with Boeing planes – meaning 777 saw Bonza as an ideal progression of its aviation experiment.
“The pricing for that order book from Boeing was given on the basis that 777, as a private investment firm, would not act as the lessor but would basically incubate airlines as the world exited the pandemic,” says one well-placed source.
“For example, 777 has a minority interest in Flair, which was 24 per cent until this week. Then they have a majority interest in Bonza and that all fits within the agreement with Boeing as part of the conditions over the order book.”
If Bonza’s plan for 72-seat planes was never going to succeed, it made even less sense with the 180-seat 737 Max-8s.
“It’s like wearing size 12 boots when you’ve got size 3 feet,” says Ellis Taylor from aviation analytics firm Cirium. “There’s too much capacity to soak up the demand that was there, which meant they would have to discount the fares below cost to get enough people flying.”
In the same 2023 interview with AFR Weekend, Pasko claimed: “This is actually money that Josh [Wander] and I, and some of the other senior management have. We don’t have third-party money – we treat it like our own money because it is our own.”
Since February, when 777 Partners’ reinsurance arm 777 Re suffered a credit downgrade to “C minus” – or junk quality in bond market parlance – because of its reliance on illiquid assets, 777 Partners’ real source of financing has become much clearer. Seemingly, a privately held $US11 billion ($16.7 billion) New York-based insurer, ACap, is at the centre of everything.
The credit downgrade was the beginning of the unravelling of a structure that spans airlines and football teams around the world. Bonza is now part of the collateral damage.
Three aviation industry sources confirmed that Bonza stopped paying its bills around February 2024, when ACap – feeling regulatory heat itself – cut the flow of funds to 777 Partners.
It is believed that ACap held ultimate security over 777 Partners’ planes and called them in last month, when a related entity called AIP Capital – the leasing company that repossessed Bonza’s planes on Tuesday – issued a cryptic announcement about funding structures that didn’t name ACap.
AIP Capital’s ownership had changed too: 777 Partners’ 49 per cent stake now belonged to an unnamed US insurer, confirmed by Bonza spokeswoman Tatiana Day to be ACap. ACap held 100 per cent of a newly established vehicle, Phoenix Aviation Capital, which it said now owned an order book of 30 Boeing 737 Max-8 jets.
When asked how 777 Partners, which no longer had any money coming in the door, would pay for the leases, Day said: “777 Partners are committed to supporting Bonza as they have done for the past 2.5 years.”
Questions to Bonza’s voluntary administrator Hall Chadwick went unanswered.
This week, AIP Capital, in which 777 Partners no longer has any interest, is said to have struck a deal with LOT Polish Airlines and is now going through legal proceedings to have Bonza’s planes flown to Europe.
AIP Capital’s move to repossess sent ripples across the world. Canadian tax and ministerial authorities have been raising questions about 777 Partners’ involvement in Flair for years. They have also been chasing 777 Partners for $C67.2 million ($74.7 million) in unpaid GST since last November, and in January started proceedings to seize assets.
On Thursday, Flair said it refinanced 777 Partners’ loan and redistributed 777 Partners’ equity stake and board seats in a bid to quell speculation about its future and operating leases. The identity of its financier is unknown, but industry speculation has landed on AIP Capital.
AIP Capital’s managing partner Mathew Adamo declined to answer AFR Weekend’s questions about his organisation’s role in the restructuring of Flair’s debt, saying only that “AIP is not an affiliate of Flair, we are a lessor to Flair”.
Curiously, a LinkedIn post by Flair CEO Stephen Jones explaining the financial arrangement was reposted by Adamo’s co-founder at AIP Capital, Jared Alistock, on Thursday.
“Flair has always been on the edge when it comes to trying to get away with getting the regulations to bend in their way,” says John Gradek, a McGill University lecturer in supply chain and aviation.
Gradek told Canadian media two weeks ago that he believed Flair would not last until Thanksgiving. On Wednesday, after news of Bonza’s demise broke, he brought forward his prediction.
Bonza strenuously denied The Australian Financial Review’s report on April 18 that it was working with KordaMentha. However, Transport Minister Catherine King told ABC TV on Tuesday “we have been talking to them during the course of the week”. What came of that is unclear.
A spokeswoman for the minister on Friday clarified: “The Minister did not meet with Bonza, representatives of her department engaged with them.”
Late on Thursday night, Hall Chadwick revealed Bonza had received default notices from AIP Capital as far back as April 16. When Bonza met with the minister, the airline was still raising revenue through $99 sale fares in the interceding period until this week.
Travellers have been told they are not entitled to refunds and industry sources describe the ordeal – in particular, Hall Chadwick’s refusal to declare Bonza officially dead – as a blight on Australian aviation.
Bonza staff were told at a town hall on Thursday that they wouldn’t have jobs as the mess of the airline’s financial affairs were being worked through.
Another described talks with Hall Chadwick as “shambolic”, saying the administrator appeared to have “no idea” about planes. A third source said Hall Chadwick had been in talks with lenders of last resort earlier in the week.
“Even they wouldn’t touch it,” he said.
Ayesha de Kretser May 3, 2024
Jordan’s business model, sighted by AFR Weekend, was predicated on flying 72-seat planes (twin-engine turboprops), 83 per cent full, between townships left behind by the Qantas and Virgin duopoly. It relied on scaling up its fleet quickly and extracting about $50 per passenger in income from booze, snacks and baggage.
His plan was roundly dismissed by the local aviation market as pure insanity.
But in 2020, as the world shut down and planes stopped flying, Jordan finally found a receptive backer: 777 Partners, a Miami-based private equity firm that had a small interest in a Canadian low-cost carrier.
“Prior to the pandemic, we were able to show that we could grow the Canadian market quite substantially by offering fares that were 40 per cent to 50 per cent lower than the incumbents,” 777 Partners’ co-founder Steve Pasko told AFR Weekend in February 2023.
“That’s what drove us to Australia. We think we can do the same thing”
That wasn’t the whole truth. In fact, 777 Partners, co-founded by convicted cocaine trafficker Joshua Wander, had come into an order book that gave them the right to buy 20 737 Max-8 jets from Boeing.
The Seattle-based plane manufacturer would not hand its aircraft over to an unknown quantity like 777 Partners and demanded that it set up start-up airlines with Boeing planes – meaning 777 saw Bonza as an ideal progression of its aviation experiment.
“The pricing for that order book from Boeing was given on the basis that 777, as a private investment firm, would not act as the lessor but would basically incubate airlines as the world exited the pandemic,” says one well-placed source.
“For example, 777 has a minority interest in Flair, which was 24 per cent until this week. Then they have a majority interest in Bonza and that all fits within the agreement with Boeing as part of the conditions over the order book.”
If Bonza’s plan for 72-seat planes was never going to succeed, it made even less sense with the 180-seat 737 Max-8s.
“It’s like wearing size 12 boots when you’ve got size 3 feet,” says Ellis Taylor from aviation analytics firm Cirium. “There’s too much capacity to soak up the demand that was there, which meant they would have to discount the fares below cost to get enough people flying.”
Funding questions
There were always question marks over where 777 Partners was getting its funding, some of which are now being answered.In the same 2023 interview with AFR Weekend, Pasko claimed: “This is actually money that Josh [Wander] and I, and some of the other senior management have. We don’t have third-party money – we treat it like our own money because it is our own.”
Since February, when 777 Partners’ reinsurance arm 777 Re suffered a credit downgrade to “C minus” – or junk quality in bond market parlance – because of its reliance on illiquid assets, 777 Partners’ real source of financing has become much clearer. Seemingly, a privately held $US11 billion ($16.7 billion) New York-based insurer, ACap, is at the centre of everything.
The credit downgrade was the beginning of the unravelling of a structure that spans airlines and football teams around the world. Bonza is now part of the collateral damage.
Three aviation industry sources confirmed that Bonza stopped paying its bills around February 2024, when ACap – feeling regulatory heat itself – cut the flow of funds to 777 Partners.
It is believed that ACap held ultimate security over 777 Partners’ planes and called them in last month, when a related entity called AIP Capital – the leasing company that repossessed Bonza’s planes on Tuesday – issued a cryptic announcement about funding structures that didn’t name ACap.
AIP Capital’s ownership had changed too: 777 Partners’ 49 per cent stake now belonged to an unnamed US insurer, confirmed by Bonza spokeswoman Tatiana Day to be ACap. ACap held 100 per cent of a newly established vehicle, Phoenix Aviation Capital, which it said now owned an order book of 30 Boeing 737 Max-8 jets.
When asked how 777 Partners, which no longer had any money coming in the door, would pay for the leases, Day said: “777 Partners are committed to supporting Bonza as they have done for the past 2.5 years.”
Questions to Bonza’s voluntary administrator Hall Chadwick went unanswered.
Plane mystery
In the past 12 months, many planes that were meant to be directed by 777 Partners to Bonza to help grow its fleet from four to 10 and inch closer to profitability never arrived, or were repeatedly redirected to more profitable carriers.This week, AIP Capital, in which 777 Partners no longer has any interest, is said to have struck a deal with LOT Polish Airlines and is now going through legal proceedings to have Bonza’s planes flown to Europe.
AIP Capital’s move to repossess sent ripples across the world. Canadian tax and ministerial authorities have been raising questions about 777 Partners’ involvement in Flair for years. They have also been chasing 777 Partners for $C67.2 million ($74.7 million) in unpaid GST since last November, and in January started proceedings to seize assets.
On Thursday, Flair said it refinanced 777 Partners’ loan and redistributed 777 Partners’ equity stake and board seats in a bid to quell speculation about its future and operating leases. The identity of its financier is unknown, but industry speculation has landed on AIP Capital.
AIP Capital’s managing partner Mathew Adamo declined to answer AFR Weekend’s questions about his organisation’s role in the restructuring of Flair’s debt, saying only that “AIP is not an affiliate of Flair, we are a lessor to Flair”.
Curiously, a LinkedIn post by Flair CEO Stephen Jones explaining the financial arrangement was reposted by Adamo’s co-founder at AIP Capital, Jared Alistock, on Thursday.
“Flair has always been on the edge when it comes to trying to get away with getting the regulations to bend in their way,” says John Gradek, a McGill University lecturer in supply chain and aviation.
Gradek told Canadian media two weeks ago that he believed Flair would not last until Thanksgiving. On Wednesday, after news of Bonza’s demise broke, he brought forward his prediction.
Racked up bills
In Australia, Bonza has been trading since February, leaving behind a trail of unpaid leases and unpaid bills at regional airports across the country.Bonza strenuously denied The Australian Financial Review’s report on April 18 that it was working with KordaMentha. However, Transport Minister Catherine King told ABC TV on Tuesday “we have been talking to them during the course of the week”. What came of that is unclear.
A spokeswoman for the minister on Friday clarified: “The Minister did not meet with Bonza, representatives of her department engaged with them.”
Late on Thursday night, Hall Chadwick revealed Bonza had received default notices from AIP Capital as far back as April 16. When Bonza met with the minister, the airline was still raising revenue through $99 sale fares in the interceding period until this week.
Travellers have been told they are not entitled to refunds and industry sources describe the ordeal – in particular, Hall Chadwick’s refusal to declare Bonza officially dead – as a blight on Australian aviation.
Bonza staff were told at a town hall on Thursday that they wouldn’t have jobs as the mess of the airline’s financial affairs were being worked through.
Another described talks with Hall Chadwick as “shambolic”, saying the administrator appeared to have “no idea” about planes. A third source said Hall Chadwick had been in talks with lenders of last resort earlier in the week.
“Even they wouldn’t touch it,” he said.
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Err not quite, if your on monthly pay it’s 50% in arrears and 50% in advance, fortnightly it’s all arrears, it’s against the law to pay monthly in arrears afaik, having said that I was on monthly for years and hated it, but reality is there is no greater risk.
I stand corrected - I didn’t realise the half in arrears and half in advance legal requirement…
As a minimum they would have received at least one default notice, and almost certainly a notice of intent to repossess. They knew this was coming.
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If you are trading, such as selling tickets, when you know that you cannot meet a debt, such as a lease payment, when it falls due, you are contravening the insolvent trading provisions of the Corporations Act; a civil offense. If dishonesty is found to be a factor in insolvent trading, a director may also be subject to criminal charges.
It’s a crime in Australia to be trading while insolvent.
Directors will have personal liability issues also if proven….well only if anyone can be bothered dragging the directors through the courts which costs a bomb, unlikely.
It does seem like only bread crumbs remain. If they extend the deadline again next week you can bet egos are at play behind closed doors fighting who gets what 5 bucks remains. Certainly won’t be the employees, suppliers or customers. Anyone who thinks they are genuinely trying to find a buyer needs their head checked.
No doubt the story will change as each day passes. Much more to come yet.
Directors will have personal liability issues also if proven….well only if anyone can be bothered dragging the directors through the courts which costs a bomb, unlikely.
It does seem like only bread crumbs remain. If they extend the deadline again next week you can bet egos are at play behind closed doors fighting who gets what 5 bucks remains. Certainly won’t be the employees, suppliers or customers. Anyone who thinks they are genuinely trying to find a buyer needs their head checked.
No doubt the story will change as each day passes. Much more to come yet.
If you are trading, such as selling tickets, when you know that you cannot meet a debt, such as a lease payment, when it falls due, you are contravening the insolvent trading provisions of the Corporations Act; a civil offense. If dishonesty is found to be a factor in insolvent trading, a director may also be subject to criminal charges.
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Directors often go missing during these processes, shortly you can expect nothing but silence as they sail off into the sunset, while the administrators pick through the smouldering remains.
At best they will be banned for running any companies for xx years.
At best they will be banned for running any companies for xx years.
Here's the summary of ASIC prosecutions for the last half of last calendar year; a few criminal convictions in there. I recall that there were seven or eight criminal proceedings brought by ASIC against directors in the first half of 2023.
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Did anyone actually think this business model was
going to work? There’s a reason the big boys don’t service those routes. Employees will be fine thanks to the FEG (probably the only thing the government is good at), someone useless will end up walking into the sunset with a fistful of cash, I don’t know who, don’t care enough to find out
going to work? There’s a reason the big boys don’t service those routes. Employees will be fine thanks to the FEG (probably the only thing the government is good at), someone useless will end up walking into the sunset with a fistful of cash, I don’t know who, don’t care enough to find out
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The yank big boys don't service the routes that Avelo and Breeze are pioneering either. Kalamazoo to Orlando is not that different from Albury to Gold Coast.
The business model could have worked if things were done differently. (smaller aircraft, access to Sydney, approval of the aussie aviation clique, investors not getting high on their own supply.)
The business model could have worked if things were done differently. (smaller aircraft, access to Sydney, approval of the aussie aviation clique, investors not getting high on their own supply.)
Last edited by antheads; 3rd May 2024 at 22:58.
Most of the factors you've listed in parentheses describe a fundamentally different business model to their regional-regional, low-cost, jet model; you're essentially saying that their business model would have worked if they had had a different one. No one would argue with that.
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