It has been more than 30 years since the first Australian low-cost carrier (LCC) entered the local airline market.
In the early 1990s, when the government of Australia permitted private competition across domestic carriers, giving the green light for the privatization of existing airlines, several new budget start-up carriers entered the market to take advantage of its deregulation.
Unfortunately, only a handful of these carriers managed to maintain business continuity throughout the years.
Now, three decades after one of the most significant reforms to ever take place in the Australian aviation industry, newcomer Bonza is gearing up for the upcoming launch of its operations scheduled to take place in October 2022.
But what do we know about Australia’s latest start-up LCC?
The rise of the Australian LCC market
Research suggests that Australia’s LCC market began to form in 1990, following the government’s decision to terminate the so-called Two Airlines Agreement. Under the policy, which was in force from the late 1940s, only two airlines, the government-owned Trans Australia Airlines and the privately-owned Ansett Airlines, were allowed to operate regular flights between state capital cities and between capitals and other major Australian cities.
The policy acted as a legal barrier ensuring that new privately owned airlines were unable to enter the competition for local market share. Instead, domestic services were restricted to Trans Australia Airlines and Ansett Airlines. The anti-competitive policy ensured that airlines carried the same number of passengers, operated a similar sized fleet and charged the same fare for services.
When the government eventually formed more suitable conditions for new airlines to compete with existing operators and began to ease aircraft capacity controls, several new companies, such as Compass Airlines, Impulse Airlines, Jetstar, Tiger Airways Australia, and Virgin Australia, gradually entered Australia’s domestic market. During the next few decades, these new carriers began to form the basis of the country’s LCC sector.
While some airlines, such as Compass Airlines, Impulse, and Tiger Airways Australia, ceased operations due to unresolved financial obligations, other predecessors, including Jetstar and Virgin Australia, managed to operate profitably and continued to offer services across the country.
Currently, among the four major domestic Australian operators – flag carrier Qantas Airways, the former low-cost carrier Virgin Australia, regional carrier Rex Airlines and Jetstar Airways – only Jetstar is considered a LCC company and does not have any serious rivals in the local market.
However, this could all change after the announcement of a potential new rival to the LLC market. Introducing Bonza, Australia’s newest low-cost carrier.
Bonza bets on under-utilized routes to beat competitors
Bonza is preparing to launch operations in October 2022. With a goal to encourage leisure air travel, Bonza will attempt to compete with the larger and more dominant Australian carriers by offering ultra-low fares for direct services across a number of destinations in the country. The focus will be on point-to-point travel, rather than flying with a stop in major Australian cities, a business model favored by other Australian airlines.
Bonza was founded in 2021 by Tim Jordan, the former administrator of Virgin Australia’s low-cost ancestor, Virgin Blue. The company, which is presently focused on gaining the necessary regulatory approvals so it can begin operations in the upcoming autumn, intends to cut costs by removing features such as airport lounges and frequent-flyer programs that are broadly used by the airline’s existing competitors. With plans to establish its headquarters at Sunshine Coast Airport (MCY), around 90 kilometers (56 miles) away from Brisbane, the carrier aims to hire airline staff furloughed by other airlines during the global COVID-19 pandemic.
As the Australian Competition and Consumer Commission (ACCC) noted in its latest report, Bonza’s business plan is based on the avoidance of leisure destinations already served by the airline’s competitors.
Instead of offering air connectivity between major Australian cities such as Sydney (SYD), Melbourne (MEL), or Brisbane (BNE), Bonza aims to fly to under-utilized regions in Australia. The airline is expected to serve 27 routes across 17 destinations in New South Wales, Queensland, and Victoria. Bonza will target airports where it will have a greater opportunity to win the most commercially favorable charges, as secondary airports tend to offer significant direct and indirect cost advantages compared to their busier counterparts.
What aircraft will be operated by Bonza?
Backed by Miami-based private investment company 777 Partners, Bonza is set to become the only independent LCC company in Australia’s domestic market. Bonza’s main low-cost competitor, Melbourne-based Jetstar Airways, which has been serving Aussies since 2003, is a wholly owned subsidiary of the country’s largest airline, Qantas Airways.
Bonza’s initial fleet is expected to consist of up to three Boeing 737 MAX 8 jets, capable of flying 186 passengers on board. However, 777 Partners is currently considering expanding the newcomer’s fleet with additional leased Boeing MAX family planes as soon as the carrier is well established in the sector.
In early December 2021, Boeing confirmed that 777 Partners ordered an additional 30 737 MAX jets, bringing its commercial aircraft portfolio to a total of 68 aircraft of the type.
Valued at $3.7 billion at list prices, the order will enable 777 Partners to expand 737 MAX operations across the fleet of its affiliated global low-cost carriers. These include Canada’s first ultra-low-cost carrier Flair Airlines, and, of course, Bonza.
Will Bonza delay its launch?
The launch of Bonza is one of the most highly anticipated events to take place int the domestic Australian aviation market. However, there is a chance that Bonza’s inauguration could be delayed.
Talks of a delay were sparked by local media reports that Bonza’s co-founder, Peter McNally, had unexpectedly resigned from his position as a chief operating officer (COO) in March 2022.
According to the Australian Financial Review (AFR), the former COO left the carrier just five months after he was assigned to take a senior executive role and was tasked with overseeing day-to-day administrative and operational functions at Bonza.
The news sparked speculation that McNally’s resignation could possibly put the airline’s planned launch in jeopardy. However, while confirming McNally’s departure, a Bonza spokesperson denied claims that the COO’s exit would cause a deviation from the airline’s original plan.
“He leaves behind a very capable team who have been, and will continue to be, leading our regulatory application process,” the spokesperson told the AFR on March 6, 2022.
Owing to the continuing uncertainty surrounding the COVID-19 pandemic along with rising global fuel prices, it is not clear if Bonza will be able to achieve its goals.
However, if successful, Bonza will become the first new Australian start-up airline since Tiger Airways Australia, a former subsidiary of Virgin Australia Holdings, ceased operations in March 2020 as a result of the COVID-19 pandemic.