Australian ULCC Bonza to fire up the domestic fare war
A new independent low fare airline, backed by Florida-based private investors 777 Partners, plans to launch in Australia in early 2022. The start-up, to be headed by former Virgin Blue executive Tim Jordan, aspires to be the only ULCC in the Australian domestic market.
Named Bonza (old Australian slang for a good thing), the airline will launch service in early 2022 with Boeing MAX-8 aircraft, typically operating at a seat cost and carbon emission level up to 20-30% below those of existing domestic airlines.
The new team argues that of the 15 largest domestic aviation markets in the world, Australia is the only country without an independent low cost airline.
Bonza's entry will certainly fire up an already budding fare war. Former regional specialist Rex Airlines had already entered with 737s on some major routes earlier in 2021, confronting a reconstituted Virgin Australia, under the ownership of Bain Capital and the Qantas/Jetstar combination all eager to get the cash flowing as Australia's state borders open up.
CEO is a former Virgin Blue executive and backers are substantial
Bonza will join one of the most lucrative domestic markets in the world, which Qantas pre-pandemic described as a billion dollar profit market; however, it is also one of the most competitive.
Planned start-up in early 2022 - with Boeing MAX 8 aircraft?
Bonza's sponsors, the investment firm 777 Partners, ordered 24 Boeing 737 MAX 8 aircraft in Mar-2021, together with purchase rights for a further 60 aircraft, announcing that the 737-8s were to be "leased to its affiliated operating ultra-low cost carriers".
At the time 777 said it was planning to apply the aircraft to its "growing portfolio of low cost carrier investments around the world".
The Partners have taken a 25% holding in the Canadian start-up ULCC, Flair Airlines. Flair currently operates eight MAX 8s, along with three 737-800s. All of Flair's aircraft are leased from 777 Partners. The going monthly rate for a MAX 8 is approximately USD340,000 per month.
After a rocky start the 737 MAX has now recovered its equilibrium, and is now licensed for operation in several leading jurisdictions, including the US, UK and the EU; China, perhaps partly on political grounds, has not yet moved to restore the aircraft's authorisation in that country.
Assuming Bonza plans to receive some of the MAX 8s from 777, this would presumably be in similar seat configuration to the Flair aircraft, most of which carry 189 seats. All have inflight WiFi installed. This is a large aircraft to operate leisure services on non-capital city routes in Australia, but its unit costs are very low.
Virgin operates the conventional older 737s, as does Rex, but Virgin also has 25 MAX 10 aircraft on order, which are larger than the MAX 8.
Among Qantas' single aisle fleet of 737s, its 737-800s have an average age of more than 13 years, and the group is expected soon to place a large order to replace these.
Jetstar uses an all-Airbus single aisle fleet domestically, although it has 11 787s that are currently grounded while international operations are suspended.
Jetstar is scheduled to receive 25 A321neoXLRs, with broadly similar unit operating costs but with a possible range of up to 8,700km, some 2,000km more than the 737 MAX 8. The airline plans to use the aircraft on some international leisure routes, such as Bali.
777 Partners foresee great opportunities in the post-pandemic aviation market
In addition to aircraft leasing, 777 Partners is investing strategically in a range of aviation businesses, "from operating carriers to technology-driven solutions. The firm's travel sector strategy is largely focused on innovative solutions for interlining, passenger connectivity, and creating new commerce channels for its airline investments and customers."
According to Mr Wander, "The retrenchment of traditional carriers globally has created an unprecedented market opportunity for more agile and cost-efficient operators. These aircraft will enable our operators to accelerate the recovery in the destinations they serve. We are humbled to call one of America's greatest manufacturers our partner in this endeavor."
Bonza will receive a bonzer welcome from the incumbents
The Australian market has undergone a turbulent period since the coronavirus pandemic began, with the loss of the lowest cost LCC Tigerair, which was closed down by Virgin Australia before it entered administration in 2021, emerging as a Bain Capital wholly owned entity.
Qantas occupied a market share of close to 70% before state borders closed in early 2020, and in preparation for the domestic market reopening has already started sparring verbally with Virgin, which aspires to eat into the Qantas share.
Neither Qantas nor Virgin, along with Rex, will welcome Bonza with open arms and it will be interesting to see how the planned new entrant positions itself in the market.