Airline Leader Interview | Bonza

Transcript

Steven Greenway:Good afternoon, everyone. Can everyone hear me?

Tim Jordan:Yes.

Steven Greenway:Fantastic. My name is Steven Greenway. I'm president of Pangiam. I wouldn't expect you to know that company, but I used to work for Qantas and Virgin many years ago and so forth. But also a public declaration. Tim and I know each other very well. We worked together at PricewaterhouseCoopers in the global aviation practice 23 years ago, I think it was.

Tim Jordan:Seems like yesterday.

Steven Greenway:Seems like yesterday. No, it doesn't. So very close acquaintances. But interestingly, the British guy went off and did Virgin Blue, and the Australian guy went off and did Virgin Atlantic. And our paths diverged from there. But we've always kept in contact. So it's great to see you again, Tim. And it's even more interesting to interview you. So first, rapid questions. So I've got 3 rapid questions for you. One, have you got budgie smugglers with you? Number 2, are you wearing them? And number 3, have you got a pair for me?

Tim Jordan:Very happily, I can answer negative for the first 2, but the 3rd one, absolutely. There's a pair for you.

Steven Greenway:Okay. The comms team at Bonza did very well to make sure I had to throw that one in. But I think it's been almost 2 years. You were at CAPA 2 years ago, December, was it not?

Tim Jordan:Yeah. We had the pleasure of being at the Sydney event in December 2021. Yes, indeed.

Steven Greenway:So, so it's— and you launched on February 2nd?

Tim Jordan:January 31st.

Steven Greenway:January 31st, sorry. And it was— was it— it was Sunshine Coast-Prosserpine?

Tim Jordan:Yeah, it was. Our first flight was between the Sunny Coast, our home, and Whitsunday Coast.

Steven Greenway:Yep, yep. So, okay, so it's been— let's talk— it's 2 years, but obviously been up and running since the end of January. Let's talk about what's been happening with Bonza. Having done startups myself in terms of airlines like Scoot, I know you have the highest of highs and the lowest of lows. So Maybe take some time to detail some of those for you. So it's been a long road.

Tim Jordan:It's been a very long road. We were actually just reminiscing before. The road actually runs back to about 2009, version 1 of Bonza. And it wasn't Bonza at that point, but it was something close. But it has been a long road to get to here. And I just have to say, in terms of celebrating the first high-capacity startup airline in Australia with a party popper, probably doesn't do it justice. So in terms of lows, I think that would be one of them.

Steven Greenway:Okay, fair enough.

Tim Jordan:I think I would go and revisit the party popper. Something more appropriate.

Steven Greenway:Yep. Highs.

Tim Jordan:I think probably one of the biggest highs was when I was on the ramp at the Sunny Coast early one morning. There was a gentleman came up to me and he was flying down to Mildura. And he said, Tim, just to let you know, I'm flying down to Mildura to see my mum.

Steven Greenway:Right.

Tim Jordan:Terrific. And I'm only doing it because of Bonza being here. I said, that's terrific. And he goes, What's even better, I'm actually coming home with my mum. I'm bringing her back to meet her grandchildren.

Steven Greenway:Oh, wow.

Tim Jordan:For the first time. 2 kids born during COVID she'd never met them. And we as Bonza, Team Bonza, were making that possible. And I think that I must admit I had a little bit of a moment on the ramp.

Steven Greenway:Sure.

Tim Jordan:As you can imagine, you've been there.

Steven Greenway:Yep.

Tim Jordan:And so from a High Point perspective, that's what we do every single day, hundreds of times a day. Sometimes we forget about that, but that's really why we're here. Those family connections, giving people the opportunity to go out and explore, that is why Bonza is here. That's why Bonza was born. And, you know, that is why we are absolutely— there is a Bonza-sized opportunity in the Australian domestic market, and we're starting to see that.

Steven Greenway:OK, cool. So you've got 4 aircraft at the moment. You have 2 coming in on wet lease to operate out of the Goldie to kick off that base and so forth. What's the fleet plan look like in the medium to long term? Where do you— because I think a lot of people were on the back foot in terms of why wet lease. So maybe we want to address that in the answer. But thinking organic growth, and then you've sort of not roped in, but you've leveraged the help of Flair in Canada to assist you to grow.

Tim Jordan:Yeah.

Steven Greenway:So can you give us sort of some background to that as to why that was the case?

Tim Jordan:Yeah.

Steven Greenway:And I'm sure the Canadians love the fact they're coming down to the Gold Coast to set up a base, but there we go.

Tim Jordan:Yeah. As you say, we have Shazza, Baza, Sheila, and Mauk, the 4 aircraft at the moment. One of those is essentially a dedicated spare aircraft, which you all know. That's a very worthwhile but an expensive You know, assets to actually have. In terms of aircraft 5 and 6, clearly peak summer, December and January, we didn't want to miss that opportunity in terms of route growth, in terms of the opportunity for the Gold Coast. So the— our ability to do that coincided with the Canadian winter. You know the Canadian winter better than most.

Steven Greenway:Yep.

Tim Jordan:And the seasonality there is quite extreme. So there was an opportunity within the— being our sister airline, obviously with joint ownership, partial ownership with 777 Partners. We are wet leasing 2 aircraft to come to us, which will subsequently then be returned to Canada and then be backfilled by aircraft coming into us with our own crews. So that process allows us to get to increased scale quicker. Very importantly, it also allows us to see the benefits of an Australian summer and the super peak period, which is obviously very important to us from a financial perspective.

Steven Greenway:Yeah, you're not expecting any issues from a regulatory perspective? I remember a couple of years ago when we had firefighting equipment come down crews and hardware. We ran into a couple of hurdles to try to get them online. You anticipate any concerns?

Tim Jordan:Clearly we've been, as we have done for the last couple of years, we've been working through and we continue to work through with the regulator, both from a Canadian perspective but obviously from a CASA perspective here. So as long as we have that You know, the process is robust, thorough, and it's very open in terms of communication. We're not seeing— foreseeing any issues. It's a case of working through the process. We have sufficient time to work through that process, so we're not seeing— foreseeing any hurdles.

Steven Greenway:Okay, so, so 4 plus 2, 2 disappear, replaced by 2, so it's 6. That sort of gets us into 2024. Beyond that, any insight?

Tim Jordan:Yeah, it's, it's no secret that 777 partners have significant commitments with Boeing for direct delivery aircraft in 2024 and 2025 and beyond. That's fantastic for us. What we then need to do is obviously make our case to 777 partners. that we deserve those aircraft because the Bonza-sized opportunity is sufficiently large to warrant those aircraft to come to us. Clearly, they have a number of other opportunities that they can fulfill with those aircraft. So it will be a case of us basically justifying the need and the necessary profitability for those aircraft to come to us. But early signs are encouraging in that regard.

Steven Greenway:Okay. So I probably want to clear up then some of the stuff that I think people have read over the past 6 to 12 months. There was some reports around aircraft not being delivered to Bonza but being delivered to Flair. I'm sorry if I get this out of sequence or completely wrong, but there was aircraft going to Enter Air in Europe and now I think Eastarjet in Korea, which 777 has a 7 to 10% shareholding in now, I believe, or something like that. But not talking about the shareholding per se, it was more that what was believed to be allocated aircraft to Bonza went off to other pastures.

Tim Jordan:Right.

Steven Greenway:A, what happened, and B, how do you mitigate that? Because how do you, how do you plan where I was going to get 2 or 3 aircraft or what have you, and then that wasn't the case anymore, I suppose?

Tim Jordan:Sure.

Steven Greenway:Can you give us some insight?

Tim Jordan:Yeah, absolutely. We were initially expecting to have a 5th aircraft. What became clear through the May and June period and into July was it was taking longer for us to clear pilots to So we would have had little to no capability to actually utilise that aircraft in terms of pilots if it had been delivered to us.

Steven Greenway:Right.

Tim Jordan:That also coincided with that wonderful Northern Hemisphere summer and the peak of all peaks. So it made logical sense from a group perspective for that number 5 aircraft to make its way up to the Northern Hemisphere for our Up into Flair. What we now have is those— we have those 4 aircraft. As I say, 3 are in the schedule. One is an operational spare, which gives us the operational integrity that we as an organization must deliver on. But obviously, from a crew perspective, and very importantly for our customers, our customers deserve and want. So I'm pleased to say that we're Since we put in a revised schedule from the 1st of August, our on-time performance numbers ran high 70s last month in August. And I'm pleased to say that based on the first 13 days of this month, we've got an 8 at the front, which in this market at the moment is at the front end of the market.

Steven Greenway:Top.

Tim Jordan:Which is encouraging. We do believe there's an opportunity to take to improve that still. Things like front and rear boarding, which we haven't had to this point, will be going into place later this month and next month. So that will allow us to even improve those numbers still further.

Steven Greenway:Right. So just a quick segue into operations. Crew, particularly pilots, is that a bottleneck for you? And you mentioned about sim access. Is that a bottleneck for you? Obviously you need MaxSim to get checked out as a pilot. pilot for you guys. So how do you sort of get around that at this moment in time?

Tim Jordan:In terms of generally recruiting pilots, cabin crew, they— we are based on the Sunshine Coast. We have another base which will open on the Gold Coast.

Steven Greenway:It's attractive.

Tim Jordan:Yeah, it's got a certain amount of appeal to to it. I was getting a sneaky sausage roll one lunchtime down at Majimba at the bakery, and the pilot came running past me on the grass. And he said, hey, how you doing, Tim? And I said, I'm good. You're flying me to Rockhampton in 4 hours. And he said, yeah, I'm just going to have a quick surf. You can't generally do that if you're in Well, you remember our Virgin days.

Steven Greenway:I mean, I think half the pilots who were based in Brisbane actually lived on the Gold Coast at the time. I don't know what it's like now, but I just remember the stories. I don't remember much about the Virgin days. Too long ago.

Tim Jordan:Yeah, yeah. But yeah, so in terms of getting crew, as a recruitment process, there's a certain degree of, you know, we're finding Bonza is very appealing. Our crew generally There aren't any overnights. So people get home at night to their own beds. Back to base. So there is an appeal. Is it harder in locations like Melbourne? Yes, it is harder.

Steven Greenway:Sure.

Tim Jordan:We're a small fish in a much bigger pond. On the Sunshine Coast and Gold Coast, we're a much bigger fish in a much smaller pond. So there's a degree of attractiveness there. Where it was an issue and where we've learned, and this is constantly about learning, where we've learned and continue to learn is clearing the crew to line. So they have to actually, before they're cleared to line, they have to operate 30 or 40 sectors depending on their experience. That took quite a long time, especially when that was exacerbated by things like wildlife strikes.

Steven Greenway:Your irons.

Tim Jordan:That we saw a very high number of. Which meant the clearing-to-line process took longer than what it should have done.

Steven Greenway:Constantino effect.

Tim Jordan:So this steamrolled through, which did cause us some angst, as I say. The good news is from August 1st, we've seen radical improvement. And in terms of some of the changes that we put through in terms of network, Those network changes, although some people sort of thought it was the sky was falling in, it represented 7% of our available seat kilometres.

Steven Greenway:Mm.

Tim Jordan:Business as usual. In other parts of the world, it actually demonstrated to me that really the Australian domestic market is a relatively immature low-cost carrier market. If you pull out 5 services in other parts of the world, It doesn't even make the news. Here it was the news in certain areas. That, as I say, was just business as usual. Like in anything you're doing in any business, you take from the bottom and you actually put the capacity to the top. And that's all that was. So what we're seeing very, very positively is As a consequence of that, we're seeing much better operational performance, but we're also seeing maturity in terms of the— we're operating 22 routes today. 20 of those routes are unique to us, not operated by any other airline, which is pretty astounding. The domestic market has essentially been stagnant for a decade plus. As we've had cited, a cozy, relatively cozy, very cozy—

Steven Greenway:Too lovely.

Tim Jordan:Number of low-cost routes operated in Australia were 58. 58 in 2019. And it had been 58, 59, 60, 58, 59, basically through a decade. Hadn't changed. We have launched, we are operating 20 additional unique routes right now. We have 9 additional routes unique on our Gold Coast base. That's 29 routes unique to us, a 50% increase in low-cost operated routes in Australia in year 1 of our operation as Bonza, which is pretty astounding and shows you how I'm going to say managed the market has been historically and the clear opportunity for Bonza in the market.

Steven Greenway:Okay. So I mean, it's a good segue to talk about network. So we went out, well, Bonza went out with 27 routes as you said. You've scaled back to 22. You've announced the Gold Coast now. That's an additional, what, how many again?

Tim Jordan:It's an additional 12 routes.

Steven Greenway:12 on top of it. So we've gone from 30 to 34 by by peak summer, which is fantastic. I think one of the things that a lot of people would say is, in network planning, is you always fish where the fish are. And so the biggest fish are on the Golden Triangle for the most part. I think you and I both appreciate that. It doesn't mean that you have to mandatorily fly and operate on the Golden Triangle. For those of you who don't know what the Golden Triangle is, Sydney, Brisbane, Melbourne. But that is obviously one big hole Maybe a positive hole, and you want to steer clear of that. But do you want to talk us through the thinking in terms of how that— and that obviously then sort of ticks off in particular with regard to Sydney slot access and so forth as well. They're all intertwined, aren't they? It's quite a detailed topic, but I think we do need to cover that off. I mean, it's great that you're opening up a lot of new routes and so forth, et cetera, et cetera, but I think if you're really going to feed— the theory being if you're really going to feed growth, you need to get into some of the big capital cities at the same time, I would argue.

Tim Jordan:Half of the population of Australia do not live in Sydney, Melbourne, and Brisbane. Most people don't even appreciate that. Half of our population do not live in Sydney, Melbourne, and Brisbane. And many people, the half, feel largely ignored By incumbent airlines. We're quite happy to take that half. Honestly, we really are. Do we want to be the 5th brand on the Golden Triangle? I'm not sure you do. As the 5th operator into a market, how do you position yourself? Are you better off— Yeah. Identifying unique markets which frankly have been overlooked because demographics have changed. The Australian market, when you look at population, I always smile when someone says to me Australia always has been and always will be a duopoly and there's only ever going to be room for 2 airlines. And people cite Compass, people cite Tiger, people cite various references. And I actually look back and go, do you realize that 30 years ago, population of Australia has increased by 50%, 5-0, since 30 years ago? Since Virgin Blue came to the market 20-plus years ago, the population has increased by more than a third.

Steven Greenway:Yeah.

Tim Jordan:Think about how the demographics of That population has actually changed, how regional centres have become self-sustaining. All of those changes have not been reflected in how we as an industry in aviation actually operate. That's the Bonza opportunity. That's very significant.

Steven Greenway:Sydney slots. Talk to us about that.

Tim Jordan:Sydney slots.

Steven Greenway:It's a hot topic.

Tim Jordan:There's been enough independent reports out there to say effectively there's slot hoarding that's been going on. The fact that cancellation rates in Sydney are 3 to 4 times the average seen in other markets that also happen to experience weather and other things, it isn't a natural phenomenon. There's something going on. The Harris Review is very, very detailed. It comes up with some very good recommendations. It's about time those recommendations were acted upon. Let me give you an example. This is the type of thing that we can do in Sydney. And we— yeah. In Melbourne, we are offering 9 destinations. We opened up Melbourne, the Melbourne base, Melbourne, Melbourne Tullamarine and Melbourne Avalon, they both stepped forward and said, we want Bonza's service. We know you're bringing something different to the market. We're not saying either or. There's both. There's unique markets that want to service fly from your local airport. We all have our favourite airport depending where we live. Melbourne Avalon and Tullamarine both stepped forward. Tullamarine with the larger catchment. We actually came up with the base. We operate 9 destinations out of Tullamarine. 7 of those destinations, despite Melbourne being the metropolis that it is, 7 of those destinations were unserviced by other airlines. Things like Melbourne-Tamworth, Melbourne-Port Macquarie, Melbourne-Bundaberg, Melbourne-Toowoomba, all unserved by other airlines. So if you wanted to go from So if you flew from Melbourne to any of those locations, welcome to a connection. Who wants to connect? Really? Honestly? When you look at the fares which were available pre-our entry, the average cost one way for those 7 markets that we're now operating, the average cost was just in excess of $300 one way. And what— sorry, when I say average cost, the lowest available fare, not average, the lowest available public fare in the 3rd quarter of 2022, pre-our entry, it was about $315 on average. On average, we are— our average fares on those markets, 6 months in, $100 and just over $100.

Steven Greenway:$100.

Tim Jordan:$115 to $120. $315, $200 less. That's what we bring to the market. And oh, by the way, you can fly in half the time because we're flying nonstop. You're not going via Brisbane or Sydney. So we're basically more than halving your fare. And halving your journey time. That's pretty, pretty good. Now that's Melbourne. We can do exactly the same in Sydney. We believe there are more than 20, let's call it 20, 20 markets, destinations that we can service very quickly from Sydney. And when I say very quickly, let's fast forward a year from now, probably.

Steven Greenway:2 hours.

Tim Jordan:Late '24, that type of window. If there was political willing to change the status quo and to actually, you know, you've got slots over here which are actually delivering nothing because they get cancelled month in, month out. They get cancelled. So they deliver nothing to the economy, nothing to tourism.

Steven Greenway:Yeah.

Tim Jordan:Nothing to customers. Nothing. Apart from reinforcing the duopoly. Or those slots can be allocated to a carrier, carriers that will utilize those slots, will open up brand new destinations. The 20 destinations, probably 40% of those, of the 20, So about 8 destinations would be currently unserviced from Sydney. So just like the situation in Melbourne, we can service new nonstop markets. And yes, we can halve the fares, more than halve the fares. We can also add low-cost fares to markets where there are none. There's probably another 8 or 9 destinations like that. We can also halve the available fares. Which are currently available. It's shocking some of the markets at the moment, the pricing of the fares because there are no low-cost fares. If we look at those 16 destinations, so 80% of the, of the 20 destinations, that represents about 2 million consumers, 2 million people in the Australian population. That is about, if we back out the Sydney population, that is about 10% of additional traffic that we can offer a nonstop low-cost opportunity into and out of Sydney where there is none today. So that is the equivalent of improving and giving the option for low-cost travel to 10% more of the population to and from Sydney. Now there are people in this room who will be able to tell me what that's worth, a lot more than I will be able to, but increasing tourism into and out of Sydney, into and out of these regional locations by a number of 10%, by utilising something which today produces Nothing, because all— there's nobody uses those slots. That seems like that should be in the national interest. That is a national asset which is not being fully utilized. And if we as an industry can be supportive of most of the recommendations out of the Harris Review, we can make change happen which will deliver very significant economic benefits Not only to Sydney, but very, very critically to many, many points across the country. And I think that is important. OK.

Steven Greenway:Thank you. I mean, they're very comprehensive. I've seen some questions come up which sort of COVID the stuff that I actually wanted to cover. One particular one was— just very quickly, Tim, because of time— Bonza to operate in Western Sydney Airport? Question.

Tim Jordan:Yes. Love to. We just need the right commercial settings. I guess we look at Avalon and Melbourne Tullamarine, unique catchments. We absolutely believe Sydney will have unique catchments as well. So yes and yes.

Steven Greenway:How has the bookings via app only been received? Sorry, I can't speak English today for some reason. Any plans to change or create a Bonza Holidays as an example? So question is, how's it been going just booking via the app? What else are you doing to expand your distribution? And Bonza holidays, question mark. Just a quick answer for that.

Tim Jordan:We've challenged quite a few norms, one of them being the app-first strategy. More than 95% of bookings come through the app. We do work with travel agents. We have more than 1,000 travel agents signed up with us who work with us. But the app strategy is absolutely working. As I say, it's north— well north of 95% of bookings coming through the app. In terms of things like holidays and other opportunities, we're going through the process of cargo, getting cargo added to our AOC. And in terms of things like holidays, watch this space.

Steven Greenway:Right. It's a shame we didn't have some more time because I mean I had questions about the federal green paper and so forth. But I just wanted to loop around. I mean, look, Tim, I've known you for years. You're a good operator. You're also very good at marketing. Where are you financially? I mean, where are you versus your business plan? I'm not expecting you to divulge numbers. Of course, I mean, you're a privately— you're a private company. But all the stuff is great, but at the end of the day, if we don't make a dollar, we're not around for much longer. So where is Bonza to plan, and where do you see profitability coming over the medium to long term?

Tim Jordan:Sure. We are progressing to plan. There's no airline in the world which operates 4 aircraft and is profitable. So I'm not going to sit here and say, yeah, we're profitable. We have a spare aircraft which is required. So one quarter of our fleet is sitting, waiting, ready to recover customers as needed. That's important to us, but that is a big investment. What I can say is that the, the breakeven for Bonza is surprisingly low in terms of scale. Some people used to cite 15 to 20 aircraft as the required scale. It's nowhere near that. We are quite unique. We operate out of a, you know, out of a Queenslander on the Sunshine Coast Airport. We operate virtually. So our overhead is very, very limited and it will be maintained that way. And that allows us to bring the breakeven point significantly lower than what most people believe, for sure.

Steven Greenway:Cool. I'm just going to throw one question out to the audience and then I'll draw a line under things. Does anyone have a question for Tim and Bonza? Or you're all very shy? Or we've covered a lot of topic already? They're making our life easy. OK. Yes, sir? How are the budgie smugglers selling? How are the budgie smugglers selling? Do you sell them? How much for?

Tim Jordan:I want to say $30, $35.

Steven Greenway:It's a rip-off.

Tim Jordan:Unbelievable.

Steven Greenway:You're meant to be low cost, man. What's wrong with you? Anyway.

Tim Jordan:They're selling, right, several hundred, I think. I don't think it's thousands yet, but there's hundreds sold.

Steven Greenway:Several hundred.

Tim Jordan:But there's still some available.

Steven Greenway:Okay, so I just want to tap your brain for one, so one minute quick question then is where do you see the— I mean, obviously quite tumultuous. I live overseas, I live in the UK, folks. Coming back here and seeing what's going on, I'm like, it's never been like this for a long time. But the Australian market, domestic market in particular, quite tumultuous. For various reasons and so forth. Where do you see the Australian domestic market in the next couple of years? How do you think it's going to play out? More fragmented?

Tim Jordan:Consolidation? Yeah, I think there is an opportunity for competition to be grasped. You know, we do have 4 jet carriers. Operators, 5 if you include all the brands in the market. It's quite unique. It hasn't happened before. If Australia is ever going to break the cosy duopoly, now's the time. And it needs to be encouraged through government. Now is the time to do it. I get very nervous— somebody asked me about the green paper— I get very nervous when people talk about a green paper with a short term, short term being defined as 2030. Our industry worries about minutes and seconds. So when someone defines something as short term as being 2030, that concerns me. So I think there is a unique opportunity in the coming months and year for this industry to shake off the shackles, if you like, of what has been a very— a duopoly, and to encourage that to be very different going forward. And I think consumers and us as an industry will be stronger as a consequence of doing that if we take that opportunity.

Steven Greenway:Well, I think the room wishes you the greatest of success, you and your team and Bonza. Congratulations, Tim Jordan and Bonza. Round of applause, everyone.

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