Bonza CEO talks taking on the establishment, 1 year on

Bonza’s CEO, Tim Jordan, has claimed the carrier saved passengers a total of $125 million over the 12 months when its fares are compared to the cost of flying between the same destinations with other airlines. “Bonza is about making air travel affordable for the many and not just the few; and improving accessibility for all Australians, especially those in the regions,” Jordan said in a press release to mark the first “Bonzaversary”. “We’ve got big plans for 2024 and the Aussie public will benefit. We’re predicting we’ll save domestic travellers somewhere in the vicinity of an additional $250 million this coming year. Competition in Australian skies is a great thing for Aussie travellers.”

Yet Bonza’s dream to turn the skies of “Allstralia” purple hasn’t been without its turbulence. Aside from the delayed launch brought on by longer-than-expected CASA approvals processes, the airline has had to cope with rolling out a big network using a small fleet, axing several underperforming routes just months after it launched. Additionally, in a widely-publicised headache for the carrier, it was forced to delay the launch of its third base on the Gold Coast after another hitch with CASA delayed the addition of two wet-leased Flair aircraft to Bonza’s Air Operator Certificate, which caused a run of bad press, angry customers, and a significant hit to its otherwise respectable on-time performance over the busy December holiday period.

Now, a year after that all-important inaugural flight from the Sunshine Coast to Proserpine, Jordan sat down with the Australian Aviation Podcast for a retrospective on how far Bonza has come in its first 12 months – and what the flying public can expect to see in its second.

AA: How has Bonza done over its first 12 months?

TJ:

I think what the team has achieved, along with our partners, is phenomenal. The broadest and fastest ramp-up in terms of network in Australian aviation history. I think that is just staggering in terms of an achievement by not only all of the team in Bonza, but many of our partners as well – our ground handling partners, engineering partners, catering partners, airport partners. And I think that is phenomenal for the Australian aviation industry. Have we missed some steps, learned some lessons along the way? Yeah, of course. You can be a 100-year-old airline, and still be learning lessons – and we’re a one-year-old airline. So yes, certainly we’ve missed some steps, we’ve got some things wrong, but I can say very positively what we look to do is learn quickly, and then take those learnings and move forward.

AA: Where would you say the airline is at right now?

TJ:

As at today, based on how we went through December and the Gold Coast, there’s an element of being in recovery. Very candidly, that was a significant learning experience, and so we are recovering and rebuilding from that; we’ve got some making up to do with certainly the community on the Gold Coast. What we did do right, is that we did localise a lot of the pain associated with that delay to the Gold Coast. It means we’ve got more making up to do with the Gold Coast, but it means that in terms of our other two bases, Melbourne Tullamarine and of course the Sunshine Coast, the integrity of the operation was pretty much intact – but I would still say that there’s an element of recovery and learning before we reboot and go again.

AA: What are some of the lessons that you’ve learned from the past year?

TJ:

We know with a small fleet, you need spare aircraft capability. We learned that lesson fairly early on last May, June and July. We learned the lesson that a partial spare aircraft is not really viable. There is a significant cost associated with carrying a full spare aircraft effectively in your fleet. More recently, certainly everything in terms of the Gold Coast and ramp up, there’s lessons learned there. What we’re doing overall is hard. We’re trying to break into what is still effectively a duopolistic market, and that is hard enough in its own right.

So, if we then overlay execution of a strategy which involves gaining approvals from, essentially, two regulators, that’s layering a hard execution on top of a hard strategy, and I think that’s probably a learning point for us. There must be some learnings out of that. We have rightly looked at ourselves in the mirror and said, OK, what could we have done differently through that process? Because we know that it hasn’t reflected well on us. What I can say is, since we gained those approvals, the wet lease arrangement has been working very positively, and here we are at the end of January, and we’re going to be pushing, I think, just shy of 80 per cent on-time performance across the network, which, if recent months are anything to go by, puts us pretty close to the top of the pile.

In terms of cancellations, despite cyclones in North Queensland, which will of course impact everybody, I think cancellations for this month will be down probably around 3 per cent. Not where we want it to be – we’re not happy with anything above zero, frankly – but certainly far improved from where it where it was. And as I say, many of those cancellations are squarely driven by the cyclone events in North Queensland.

AA: Financially speaking, how is Bonza doing? Are you turning a profit?

TJ:

No airline in the world with six aircraft is turning a profit; unless they’re a government-backed sole operator in a country that probably we couldn’t name, there won’t be an airline out there with six aircraft, with one of them a spare, that will be turning a profit. What I can say is that we are trending positively, and the break-even point for us is not so far away. There was an expectation in the market historically that you needed 15 or 20 aircraft to actually get yourself to break-even or better. That is not the case – in terms of how Bonza operates and our financials, it is significantly less than that. So, we are on the path, but it is a journey, and we don’t get everything right. We missed a few steps, we learned some lessons, but very positively we’re on an upward trajectory and we’re on the way.

AA: What’s the progress on acquiring more aircraft for the fleet?

TJ:

That’s an ongoing process. The intention is that our fleet will be maintained at six aircraft for the first half of this year, with the plan to then grow it to nine or 10 aircraft by the end of the year. Now, there’s a few moving parts in there, so I won’t be able to give too much more detail on that, but from a fleet perspective, what we’re looking to do is have the six aircraft bedded in and operating positively after the ramp up of the Gold Coast, and for that to be maintained through until the middle of the year. After that period of, I won’t say standing still, because we’re learning every single day, but bedding those aircraft in, we will then look to grow in the third and fourth quarter with the fleet going up to nine to eight, nine or 10 aircraft, and that will also involve a likely fourth base.

What’s really pleasing is, there are more suitors now to be a Bonza base than what there were this time last year, so I think the point of difference is more readily understood in terms of what we are and what we’re not, and how we’re different, and how we’re growing the market. I don’t think incumbent airlines are seeing any impact from what we’re doing, to be quite honest – we’re growing markets, and I think that’s positive for the whole Australian market.

AA: Can you give us a bit more insight into the wet lease agreement with Flair and how it’s going?

TJ:

The aircraft have been added to our operating certificate, and that’s operating very positively from an on-time performance perspective – the operations into and out of the Gold Coast have been very positive and going very well. The process we went through was thorough, it was appropriate, and as for the delays, we do have lessons to learn there, one of which is just the complexity.

I think the reference point that some people have pointed to is that the last time there was something like this in the Australian aviation market was back in 1989, so the number of reference points for what we’ve been trying to do or what we have done are very few and far between. The learning point for us will be that, when we’re executing and doing something which is already hard, let’s not make it harder for ourselves and our teams.

AA: When Bonza does open a fourth base, can we expect to see a few more aircraft wet-leased from Flair?

TJ:

It’s a short-term arrangement. In theory, now we’ve gone through the process, can it be reciprocal? Can we go through it again? The answer to that one is simply, yes. Do we have immediate plans to do so? Not at this moment in time. It is potentially an option in the future, but are there plans to do so? No.

AA: Have the Canadian crews and aircraft been well-received by the customers?

TJ:

Yeah, absolutely. There’s a huge amount of cultural similarity between Australians and Canadians, I think we’re quite aligned in a lot of different ways. The Canadian crews who are here temporarily have enjoyed their time here, and I think customers on board have enjoyed the service and the point of difference that they brought, albeit on a temporary basis, because we’re in the process of training our Bonza crews at this moment. So, that’s ongoing, and they’re certainly looking forward to taking over the operations at the beginning of March.

AA: What sort of areas are you looking into for a fourth base? Would it be possibly expanding into a different state, heading a bit further west, or perhaps down in NSW?

TJ:

I think all of the above. In terms of options, if we go back to this time last year, there was a question mark about who we were, what we were doing, what was the point of difference – and to be quite honest, there were a lot of people who didn’t understand the difference that we were going to bring to the market. I think that is now more clearly understood in terms of our positioning in the market and the fact that we’re about growing a new market segment, which for many people has been overlooked. Many airports, many large regions, cities, understand the point of difference that we can bring that maybe other airlines and other airline groups won’t, and that’s an opportunity, and it may be a once in a generation type of opportunity.

They are now reaching out to us saying we understand this point of difference, we can see the benefit that you have brought to, for instance, the Sunshine Coast, which is, I believe, by some distance the fastest growing airport in the country last year, largely as a consequence of being home for Bonza. I think that resonates with a lot of potential airport partners and regions who can see the benefits that clearly we can bring, not only to their local community from an outbound perspective, but also from a tourism perspective inbound.

AA: Would you be happy, with Bonza’s current fleet size, opening up a fourth base?

TJ:

Once we’re at nine or 10 aircraft, there’s going to be some growth opportunities on some of our existing markets. We will be juggling, there will be markets which don’t make the grade: just like when you go down to your favourite restaurant or takeaway, there’s things that get moved off the menu, we’re going to be no different in the fact that if something’s not working for us, we’re going to be taking it off the menu – and we will juggle that aircraft capacity to where it’s needed. That’s just a rational business going about its business. When we get to nine or 10 aircraft, I suspect some of our existing aircraft bases will grow, but we will likely have the opportunity for a fourth base in there as well.

AA: Sydney has been a particularly tough nut to crack for Bonza – what opportunities are you seeing in the Sydney area, looking ahead particularly at Western Sydney Airport when it opens?

TJ:

Melbourne is fantastic. We service Melbourne Avalon, and Melbourne Tullamarine, and they have their own distinct catchments. That is no different to the rest of the world, having multiple airports servicing large cities with five-million-plus populations. Australia has Melbourne doing that, Sydney will have the capability of doing that, so I love to think of us servicing both airports, and we would dearly love to serve one of them immediately, the other one in 2026. And you know what, why stop there? Why couldn’t there be multiple airports in in Brisbane, Adelaide and Perth?

Airport monopolies are not necessarily good for the aviation industry; strangely enough, if there’s more than one airport in a location, it’s generally good for airlines – and very good for customers as well, we’ll all have our preference for our local airport. So, in terms of Sydney, we would like to think of servicing both Sydney airports in the same way we already today service both Melbourne airports, because they have their own independent catchments.

AA: Airlines like Virgin are using the MAX 8 on short-haul international routes. Could we perhaps see Bonza to Bali, or Bonza across the Tasman?

TJ:

Bonza to Bali’s got a lovely ring about it, hasn’t it? I think there are so many opportunities domestically in the short to medium term, and I don’t think we should get too far ahead of ourselves. However, I think it is one of those things where you say, “never say never”.

AA: What is the biggest challenge ahead for Bonza over the next year or so?

TJ:

Last year was all about us building the frame of the house, putting a wonderful product that our team delivers every single day to customers, to go through the fastest ramp-up in Australian aviation history to 21 destinations. We will do some more of that this year; however, what we’ve really got to do is now turn our attention to making sure that framework is beautiful, in terms of getting it producing. We built the frame of the house, we’ve now got to make the house beautiful. That is our path – we need to be well on our way towards profitability, and that’s what 2024 is all about. So, taking a lot of what we’ve learned, what we’ve already put in place, extending that where we see those opportunities, but ultimately it’s a case of moving our way through the numbers towards profitability.

AA: Roughly speaking, how far ahead do you see the break-even point for Bonza?

TJ:

This year is a big year for us. We want to be well on our way to profitability this year. That’s the challenge that we have. We know that we wouldn’t exist without our investors. They absolutely jumped in. I spent 12 years looking for Australian investors, and we have an investor who can see the opportunity, but ultimately, they want to go on a journey towards a return on their investment, and 2024 is significant in that regard. So we’ve got to go on that journey because it’s important for us to do so.

AA: Why do you think it took overseas investors to finally help get Bonza off the ground?

TJ:

Well, the short version is, many people could see the opportunity – of the 15 largest markets, Australia was the only one which didn’t have an independent low cost operator, so they could see the big-picture strategic imperative for that. However, because of the lack of competition, the duopoly which effectively exists in Australia, many people said, “you will not be allowed to survive, let alone thrive, by incumbents”.

AA: Where do you see Bonza in a year’s time?

TJ:

I’d love for us to be not having conversations regarding something like the Gold Coast again, I think what we can’t do is step into self-inflicted holes like we did last year. So, I’d like us to heed those lessons, and I think we will. I’d like us to be accepted and well regarded in the industry, to be quite honest, and a positive reference point one that we as the Australian aviation community can spruik in other parts of the world with a sense of pride. That may be getting a little bit ahead of ourselves, but it’s a good ambition.