Six reasons why Bonza failed to properly take off in Australia

Low-cost start-up airline Bonza entered the Australian market with a bang.

To celebrate the first flight to the North Queensland town of Mackay, the airline featured local rugby players wearing purple parakeet smugglers and set up purple-themed cocktails.

The airline offered Australians in the regions the chance to holiday in tourist hotspots or see loved ones in underserved cities and towns at ultra-low prices.

“We are about connecting communities and giving Australians the opportunity to fly directly to their loved ones where previously it was too expensive or took too long,” Bonza chief executive Tim Jordan said at the time.

But less than 18 months after it first took to the skies in January 2023 to take on established giants Qantas and Virgin, Bonza is bankrupt and into administration, while thousands of passengers remain stranded.

Accounting firm Hall Chadwick is now trying to determine whether the budget fighter has any future in the country.

So what went wrong?

These are the main factors underlying the fall.

The app-first approach

For almost its entire run, Bonza did not offer ticket purchases through a traditional website, accessible via a Google search.

Instead, the company promoted its Fly Bonza app, where customers booked flights directly from their phones.

Passengers could book flights, manage their bookings, check-in and order food on board via the app.

The app-first approach may have excluded older Australians, who are generally not as tech-savvy as younger Australians. Aviation guru Dr. Zena Assaad of the Australian National University said the approach posed serious “visibility problems”.

“I don’t know about others but I go to Google Flights to book my tickets because you can see a comparison of all the different ticket prices and then I choose which operator I go for, which is the cheapest,” she said .

‘And Bonza is not concerned with that. If you go to Google Flights, Bonza doesn’t show up like that.

“If you take an app-first approach and you’re not on one of these flight comparison websites, where most people go to get an idea of ​​flight prices, then you’re just off everyone’s radar.”

The golden triangle

Bonza did not compete in the all-important Brisbane-Sydney-Melbourne market or in what the aviation industry calls Australia’s ‘Golden Triangle’.

This meant the company lost the most concentrated pool of money in the market.

“The Golden Triangle is so important because this is where most of the action happens and where the money is made,” Professor Rico Merkert, deputy director of the Institute of Transport and Logistics Studies at the University of Sydney Business School, told NCA NewsWire. .

Australian aviation writer Robyn Ironside discusses Bonza’s collapse into voluntary administration. Budget airline Bonza has canceled all flights across Australia and gone into voluntary administration, leaving Australians stranded across the country.

“I expect it will take quite a financial lifeline for Bonza to emerge from this current mess,” Ms Ironside told Sky News Australia.

‘While the entire fleet is seized by an airline leasing company. “We’re starting to wonder whether the market can support four carriers.”

‘In terms of seats, both Sydney to Melbourne and Sydney to Brisbane are in the top 10 busiest routes worldwide and when measured by revenue generated, Sydney to Melbourne is typically among the top three in the world and was number 1 in 2023 ahead of London to New York.

“More importantly, access to these three hubs will enable domestic and regional feeder networks to be built.”

Bonza opted for regional routes, often flying directly to new tourist hotspots or connecting smaller towns without having to travel through a major hub.

Dr. Assaad said Bonza’s emptiness in Sydney may have been a factor in its demise.

“Sydney is Australia’s largest airport, to the point that Western Sydney Airport is now being added,” she said.

Small and competitive market

The business world is tough. Most businesses fail. And the Australian aviation market is cutthroat.

Even the giants struggle to survive.

Virgin fell into administration in 2020, with US private equity firm Bain Capital rescuing the company.

During the pandemic, Qantas hemorrhaged billions.

Besides the standard problems all airlines face, the Australian domestic market is relatively small.

In the wake of Bonza’s collapse, Transport Minister Catherine King suggested that such a limited market was always going to pose challenges for new entrants.

“I think we have to remember that even though we are great travelers, both domestically and internationally, we are a very small market,” she told ABC.

“And it’s a small market in terms of the number of customers available and really in terms of what the market can tolerate in relation to that.

Dr. Assaad also said the market was “extremely competitive.”

“We have three major airlines, Qantas, Virgin and Jetstar (a subsidiary of Qantas),” she said.

“Because it’s such a small market, we’re not the US or Europe, where we have the capacity that they have, or even the airspace that they have and the number of airports that they have.

“It’s a small market and it’s a concentrated market and I think it was incredibly difficult for them (Bonza) to tap into that.”

Bonza’s fleet

Bonza operated with only four aircraft.

Qantas, on the other hand, has more than 100.

With such a limited fleet, there is little room for error and schedules can quickly become messy.

The low-cost airline also leased Boeing 737-8s, large aircraft with 186 seats.

Professor Merkert said there may not have been “enough demand” to keep the fleet afloat.

“The Bonza story was great from a cost perspective, which essentially came down to getting super-cheap aircraft during the pandemic that were not only cheap from a capital cost perspective, but also from an operating cost perspective,” he said.

Aviation expert Geoffrey Thomas discusses the future of budget airline Bonza amid reports that its parent company has hired advisers to audit its finances.

The coalition is calling on Labor to save the airline and says Bonza has revitalized the aviation sector.

Mr Thomas said he does not believe the low-cost airline needs help from the Albanian government. “I don’t think they need the help,” he told Sky News Australia.

‘So I’m not sure where this all comes from – it just doesn’t seem to make sense.’

‘Being brand new they were sure to be popular with customers too, especially at such low fares and on routes that no one else did, which was 84 percent of their routes.

‘And yes, Bonza has optimized the cost structure to the utmost.

‘The problem is that this does not guarantee sustainable profits.

‘Those planes had 186 seats and we want to fill those seats on as many flights as possible.

“I think Bonza did a great job developing these routes, but probably wasn’t quite there in terms of profitability.”

Turbulence from the start

Bonza suffered almost immediate reputational damage as flight delays and cancellations piled up.

The airline started flying passengers in January 2023 and customer complaints were already pouring in via social media by July.

“It doesn’t matter how long they’re going to be there,” John Watt said.

‘The first attempt to fly Bonza(,) canceled the flight to Sunshine Coast four (hours) before boarding with no options and canceled the return flight to Melbourne and rescheduled it for three days later.

“(Their) excuse, staffing issues, won’t be booking any more Bonza flights.”

Darren Boyes wrote: ‘Booked five Bonza flights. And never boarded a single plane. Goodbye Bonza.’

Frustrations also mounted over Bonza’s planning.

“The problem with Bonza is that their primary target group is domestic short-haul travelers, but they don’t accommodate people who want a weekend away,” says customer Sarah Ryan.

“If they changed their flight schedule to a Friday evening departure and a Sunday afternoon return, they would see an increase in bookings.”

Just months after the launch, Bonza commercial director Carly Povey apologized directly to customers and promised to adjust schedules and routes.

“We also know that not everyone has had a good experience with Bonza in recent months and we need to immediately investigate why that is the case, especially when we cancel or delay flights,” she said in late July.

“We will be making a series of changes to our schedule starting August 1, based on what we have learned so far and the feedback you have given us regarding the route question.”

Competitive moat of frequent flyers

Australians love accumulating frequent flyer points and David Boyd, the chief executive of comparison website Credit Card Compare, said Qantas and Virgin’s programs were acting as a “competitive moat” against new entrants to the aviation market.

“It’s a moat, it’s a defense,” he said.

“If Bonza had been more successful, they might have gotten to the point where they could have created their own frequent flyer program.

‘If you’re at a few hundred thousand points, or 50,000 points, and you need to take a trip near one of those destinations that Bonza flew to, chances are they (Qantas or Virgin) have more planes and you you can redeem your points.

‘This way I can redeem my points or take a risk at Bonza.

‘You keep falling into the arms of Qantas and Virgin.

“The frequent flyer program is a huge moat.”