Bankrupt Australian carrier Bonza received funding from parent company 777 Partners “sporadically” even as it racked up significant losses in its first year of operations, the firm’s administrators have disclosed.
In a creditor report released on 25 June, administrators Hall & Chadwick found that the funding from 777 Partners was ultimately “not sufficient” to meet Bonza’s accrued debts, forcing the airline to go under.
Bonza began operations in January 2023 but suspended business abruptly just over a year later this April. The low-cost airline operated Boeing 737 Max 8’s and its business model focused on unserved Australian domestic routes.
Hall & Chadwick found that the airline never made a profit in its brief operating life. For the 10-month period leading up to its collapse, the airline posted a loss of over A$80 million ($53 million). This was higher than the loss it reported in the year ended 30 June 2023, where it was A$50.3 million in the red.
The report also suggests that airline directors had engaged in trading while the airline was insolvent – an offence under Australian law – by accepting bookings despite not knowing if the airline was able to continue its operations.
In the over-120-page report, administrators point out that the airline had already encountered difficulties in the lead-up to launch.
In 2022, the airline’s start was hit by a series of delays, including getting new aircraft and securing its air operator certificate. Bonza also encountered simulator access restrictions which further delayed the process.
Bonza suffered from “staffing shortages”, as a result of salaries being lower than at competitors, the report adds.
These issues were compounded by the lack of funding from Miami-based 777 Partners.
“777 Partners did not, to our knowledge, provide to the company a ‘letter of comfort’ or similar, assuring the company that it would – on call – provide tranches of funding sufficient to clear the company’s extant indebtedness,” the administrators state.
Bonza was to have received more than A$77 million in funds from 777 Partners, but the money was “paid sporadically, delayed and was ultimately insufficient for the level of funding required to adequately maintain the company’s operations”.
The airline’s two Australian directors – airline chief Tim Jordan and finance chief Lidia Valenzuela – also laid the blame on 777 Partners. In a statement made to the administrators, the duo said that Bonza was “wholly reliant” on funding from its parent company.
In their view: “With the positive momentum in the business up until that time, coupled with maturing markets and additional fleet growth, Bonza was progressing positively towards being cash positive late in 2024.”
They add: “Unfortunately for our Bonza team, our customers, our partners and the communities we serviced across Australia, that didn’t get an opportunity to come to fruition owing to the under capitalisation of the business and the consequential repossession of our aircraft.”
The administrators have reiterated their recommendation that the airline be wound up, with creditors – comprising over 300 staff members and more than 71,000 passengers – unlikely to recieve payout.
