Powered by MOMENTUM MEDIA
australian aviation logo

Virgin boss sceptical of Bonza’s business model

written by Hannah Dowling | March 7, 2022

Virgin Australia CEO Jayne Hrdlicka has shared her concerns about upcoming start-up carrier Bonza’s business strategy, arguing that the low-cost, low-frequency leisure travel model that functions overseas may not translate into Australia.

Bonza, which is gearing up for launch in mid-2022, has long claimed to embrace a “point to point” model for leisure travellers, servicing routes ignored by incumbent rivals at low frequency, in a business model similar to other low-cost carriers across the US and Europe.

“If you’re connecting two cities that have never seen a connection before, if you’re flying it twice a week, it’s very hard to build an underlying presence in that marketplace,” Hrdlicka told The Australian.

“The way that’s done in Europe and in the US and Canada, it’s a huge market with millions and millions of people and you can approach that with group tours and things like that which don’t really exist in the same way in Australia,” she said.

Ultimately, Hrdlicka called Bonza’s strategy an “interesting idea” and “a different approach”.

“We’ll just see how it plays out,” she said.

Advertisement
Advertisement

It comes after Bonza last month finally broke cover to reveal it will initially fly 25 routes to 16 destinations, including Cairns, Mildura, Newcastle and Whitsunday Coast.

The airline claims 80 per cent of its routes are currently completely unserved, while 96 per cent currently are not serviced by a low-cost carrier.

Hrdlicka is far from the first Australian aviation boss to criticise Bonza’s strategy, particularly the start-up’s assertion that it will be focusing on segments of the market currently unserved by any major domestic airlines.

PROMOTED CONTENT

In November, Rex Airlines deputy chairman John Sharp questioned which routes Bonza could introduce that would both be presently unserved by Qantas, Rex or Virgin, and have adequate demand to sustain a new market entrant.

“That’s a mystery to us … what are those markets? If they are worth servicing, Qantas, Virgin or Rex would be in there doing it,” Sharp said.

Later, in December, Qantas CEO Alan Joyce warned that the airline will “defend our turf” against new entrant Bonza, and similarly cast doubt on whether there are any remaining domestic or regional leisure routes that remain untouched by Qantas.

“We’ve started nearly 50 new domestic routes [since 2020]. So, I would have thought we have most of them covered, but maybe we don’t.

“So that’s great if they find a unique value proposition that they can make money on. Fantastic, fill your boots up on it, and shame on us if we’ve missed it.”

Despite criticisms, Bonza CEO Tim Jordan has remained confident that Bonza will deliver on its promise to connect direct regional and leisure destinations for far cheaper than its competitors.

“The rest of the world gives us that confidence,” Jordan told Australian Aviation.

“We’re not trying to do anything particularly smart and clever, or unique. We’re actually just trying to replicate [a model that] has already been successfully executed elsewhere in the world.

“So that gives us that confidence.”

Speaking of the public criticisms from soon-to-be competitors, Jordan said, “The most wonderful thing is that we live in a free market economy, whereby we can all have our own individual opinions which is fantastic.”

“In terms of Bonza, our major investment partner is 777 Partners, which is a private investment firm based in Miami, and they have assets under management of just under US$6 billion.

“777 Partners are not private equity – they invest for the long term … So, I think that puts us on a very firm footing in terms of what we’re executing in the market.

“I think as people pull back the layers in terms of what we are about, in terms of our strategy, in terms of our owners, and in terms of our management team, I think people will have a better understanding of how positive this can and will be across Australia,” Jordan concluded.

Comments (7)

  • John Doe

    says:

    To many airlines are diluting the Australian market, it’s hard enough for 2 airlines to make money. Qantas will be the sole surviver.

    • John – Australia’s domestic market is the 7th largest in the world. And the average travel kms by air in Aus per year is up there with the US. Why would only 2 airlines be the right number to service that market? Canada has a similar sized market and geography and multiple airlines servicing it.

  • AgentGerko

    says:

    I have no doubt that if Bonza can find a route that is profitable with one or two B737 flights a week, such as Mackay – Newcastle, then QF will reciprocate with double daily A380 flights selling from $19 claiming they’re doing it to stimulate competition. Of course, once Bonza pulls out, QF will change the double daily A380 to a twice weekly Dash 8, and then after a few weeks will quietly drop the route claiming it was no longer viable.

  • Rod Pickin

    says:

    The claim that 777 Partners is not a private equity firm but a private investment firm does not compute. Whatever the claim, 777 Partners has a heap of funds under management clearly intended for profit which under normal circumstances is understandable and acceptable but in the case in question, that of “Bonza”, at best, a misguided venture which with respect does not reflect positively upon the preoperational studies/feasibilities/research and the abilities of the execs promoting the enterprise. I am happy to be corrected but I don’t think that will happen.

  • Wayne

    says:

    Australia cannot sustain 4 x airlines now how’s it going to sustain 5 x airlines ?.

  • Steve M

    says:

    I would use Melb-Gladstone. Be great to relax & go fishing up north a few times a year. Don’t have to change planes in Brisbane & faster flight time. Will also go to Mackay, Bundaberg & Rockhampton. Melbourne has a large population & direct flights to sunny Queensland will appeal to many like me.

  • Pete from Port

    says:

    How can Bonza operate an 81 tonne B737 Max8 in and out of Port Macquarie’s soft 1800 metre runway?
    The book states a sea level MTOW take off run as 2500 metres. Take twelve or thirteen tonnes out of it and how do they hope to be profitable?
    Not the only short runway on their list either.
    I understand 777 Partners has only a 25% or so stake in Flair and they only have half a dozen aircraft.
    Have I missed something in all the hype here?

Leave a Comment to AgentGerko Cancel

Your email address will not be published. Required fields are marked *

Each day, our subscribers are more informed with the right information.

SIGN UP to the Australian Aviation magazine for high-quality news and features for just $99.95 per year

You don't have credit card details available. You will be redirected to update payment method page. Click OK to continue.