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Bonza’s parent company 777 Partners, not the airline itself, was responsible for paying the leases on its aircraft, Australian Aviation understands.
A source with knowledge of the situation said it was never Bonza’s job to pay the leases on its fleet of 737 MAX 8 aircraft, which have sat grounded since Tuesday after being repossessed by the lessor, AIP Capital.
AIP Capital was spun off from 777 Partners earlier this year, with 777’s 49 per cent minority stake believed to have been taken over by New York-based Advantage Capital Holdings (A-Cap), which serves as a lender to 777.
According to the source, 777 Partners was responsible for sourcing all of Bonza’s aircraft, which were leased at above-market rates.
“777 paid leases to AIP from the start, and continued to do so until they didn’t,” the source said.
The confirmation of who was responsible for Bonza’s lease payments comes as a new lawsuit filed in New York by London-based asset management firm Leadenhall Capital has accused 777 Partners of fraud.
777 Partners, which is based in Miami and led by Joshua Wander and Steven Pasko, is alleged to have borrowed funds from Leadenhall secured against around $530 million of assets that it did not own, were promised to other parties, or in some cases, did not exist at all.
“If the borrowers did not actually own the assets pledged as collateral or had already pledged those assets to another lender, the entire facility would effectively become an illegal and unsecured piggy bank that an individual like Wander could use to finance risky private equity investments in aviation, media and sports, including professional football teams while paying lower rates under the pretence of secured financing,” said Leadenhall’s court filing.
“As it turned out, that is exactly what happened here.”
Australian Aviation last week reported that 777 Partners paid the equivalent of $30.9 million to English Premier League club Everton FC hours after Bonza’s fleet was repossessed. 777 Partners has been attempting to buy Everton since at least September, but questions have repeatedly been raised about its ability to close the deal.
The firm earlier this year faced legal action from aircraft lessors over three 737 MAX 8s and one 737-800 from Bonza’s Canadian sister airline, Flair, that were repossessed last March over unpaid fees.
Three 737 MAX 8s and one 737-800 leased to Flair from a trio of Ireland-based lessors were seized last March, which reportedly resulted in 777 Partners sending planes that had been earmarked for Bonza to Flair to make up the shortfall.
Flair has since extricated itself from its arrangement with 777 Partners, with 777’s 24 per cent stake in the airline believed to have been reduced to almost zero.
Bradley Davren, CEO of Bonza’s MRO provider AVCRO, last week told Australian Aviation that the airline was viable and was paying its bills before the planes were seized.
“The airline was trading with absolutely no credit issues. Obviously, we would be one of their largest creditors. They were never on stop credit with us. They never even appeared to be trending in that direction, and in fact, it’s unfair to the employees if this is wound up, to suggest that this is the reason why,” he said.
“Their load factors are fantastic. Their model works brilliantly, the aircraft are not too big. In my personal opinion, I think they should charge more for what they’re doing, but that’s neither here nor there. That’s a commercial decision on their behalf. And ultimately, there’s no reason that they would be insolvent outside of not having aircraft. That’s never happened in Australia, ever.”
According to Davren, Bonza was close to securing a local buyer before its fleet was abruptly seized in a move by AIP which blindsided the airline’s management.
“To the best of my interaction with Bonza, a new investor would have simply shifted liability from 777 Partners to another entity and Bonza would have continued trading with the four MAX 8s still leased by AIP under the fiduciary responsibility and control of local investors,” he said.
“The lead backer, to my understanding, is very well-known and would absolutely do wonders for multiple reasons. Yet to be seen if that eventuates, but had that outcome come to fruition, I suspect you would have seen Bonza kick into overdrive.”
Speaking to Australian Aviation shortly after the airline’s first anniversary of operations, Bonza CEO Tim Jordan said “no airline in the world is turning a profit with six aircraft” but believed the business was close to breaking even and could target a fleet of 10 by the end of the year.
“There was an expectation in the market historically that you needed 15 or 20 aircraft to actually get yourself to break even or better,” he said. “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 yes, we don’t get everything right, we miss a few steps, we learn some lessons, but very positively we’re on an upward trajectory and we’re on the way.”
777 Partners has not responded to Australian Aviation’s request for comment.
