Administrators to take control of Australian Bonza companies as customers face flight cancellations
Bonza’s whole image is of an Aussie battler keeping fares down by taking on the big boys of aviation. But its backers are in Miami – and have plenty of problems of their own.
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Failed budget airline Bonza may speak 100 per cent Ocker but its roots are in faraway Miami, where its backers are caught in a web of legal fights involving everything from an angry Russian oligarch to a pair of Persian cats with – allegedly – poor bladder control.
Bonza’s money came from Miami-based financiers 777 Partners, which claims assets of $US10bn ($15bn) and is run by convicted cocaine trafficker Josh Wander.
After a week of confusion in which Bonza denied it or 777 had called in Australian airline finance expert Sebastian Hams, of KordaMentha, to assess the airline, it cancelled all flights on Tuesday “as discussions are currently underway regarding the ongoing viability of the business”.
Administrators from Hall Chadwick were appointed to take control of the two Australian Bonza companies, Bonza Aviation and 777 Oz Holdco, on Tuesday afternoon.
The fate of its planes isn’t clear, with talk swirling among pilots and the finance industry that at least one has been repossessed by the company that leased it to Bonza, New York-based AIP Capital. Bonza and AIP have been contacted for comment.
A failure to rescue the airline from administration would not just end the cheap fares offered by Bonza – the lessening of competition would also allow Australia’s other airlines to jack up their prices.
777, which claims assets of $US10bn ($15bn) has plenty of problems of its own.
A bid to buy top tier English football club Everton, the former home of champion Aussie forward Tim Cahill, has bogged down amid doubts over 777’s capacity to close the deal.
US regulators have put the squeeze on 777, demanding one of its key funders slash its investment in the fund by $US1.8bn ($2.7bn) billion.
Another of 777’s airline investments, Canadian budget carrier Flair, has already had four of its planes repossessed by creditors owned $US30m ($45m).
777 is a lawsuit magnet, with at least 27 cases involving it filed in US state and federal courts over the past five years and another two against Mr Wander. At least 13 of the 29 cases are ongoing.
Last month, Russian oligarch Oleg Boyko, a Swiss resident who is sanctioned by Australia over Russia’s invasion of Ukraine, launched legal action in Miami seeking to freeze any assets in Florida held by 777 or Mr Wander.
Mr Boyko is just one of five investors who have taken 777 to court chasing a total of at least $US115m ($175m).
He claims in court documents that 777 and Mr Wander owe more than euro 9m ($14m) and have been “actively dissipating assets and/or fraudulently transferring assets to avoid paying creditors”, as well as “lying and purposefully concealing material information”.
Mr Boyko told the court it loaned the money to 777 co-founder Steve Pasko, who is closely involved with Bonza, to buy a stake in top flight Spanish football club Sevilla.
777 and Mr Wander allegedly guaranteed repayment by the end of 2022 but they “have acted in a bad faith and deceitful manner with no intention of repaying the significant debt due”, Mr Boyko said in court documents.
In November, 777 told Mr Boyko that to pay back the money it was chasing $US7m that was paid to it by a Russian company but “withheld due to regulatory complications related to both EU and US sanctions laws and anti money laundering regulations”.
777 and Mr Wander told the court the claims were “unsubstantiated” and the case has been sent to private arbitration.
Meanwhile, 777 is itself under investigation by US authorities over potential breaches of anti money laundering laws, website Semafor reported in November.
In April, Mr Wander settled a case brought in Miami by his former landlord, Randy Gelber, the chief financial officer of video game company Epic Games.
Mr Gelber claimed Mr Wander and his wife did more than $US120,000 ($180,000) worth of damage to a luxury condo they rented from him for $US10,000 ($15,000) a month.
The couple’s two Persian cats trashed a wooden floor by urinating on it and scratched designer chairs that came with the condo worth almost $US3000 ($4500) each, Mr Gelber told the court.
Here in Australia, Bonza has a fleet of four planes, named Bazza, Sheila, Shazza and Malc.
Sources say concerns over Bonza’s financial viability were one of the reasons the Civil Aviation Safety Authority was slow to grant the airline permission to fly.
Its entry into the market last year slashed fares offered by rival Virgin on the Melbourne-Gold Coast route, Australia’s sixth-busiest, by 54 per cent from post-Covid highs, according to research by the Australian Airports Association.
But even before its fleet was grounded, Bonza said that from Wednesday it would cut flights on the route from four days a week to one.
Former Australian Competition and Consumer Commission chair Allan Fels said history shows that if Bonza disappears, so will low fares.
“Any reduction in numbers of airlines in the Australian market leads to higher prices,” he said.
“There’s strong evidence from episodes in the last 30 years that whenever a new airline enters, prices fall, and they rise when it exits.”
He warned that would-be players need deep pockets to take on Qantas and Virgin.
“They are deeply entrenched and even with a strong competitive play by new entrants it would take years to build a comparable position to Virgin, even.”
Minister for Infrastructure, Transport, Regional Development and Local Government, Catherine King, said she had the CEOs of Qantas and Virgin on Tuesday morning.
“Both airlines stand ready to assist stranded passengers needing to get home. My Department has reached out to Bonza and our expectation is that they keep passengers informed of their options and their consumer rights,” she said.
She added: “My Department is in the process of establishing a hotline for stranded passengers and we will get that number out to media as quickly as we can.”
A Virgin Australia Group spokesperson said when Bonza launched in Australia it welcome the move because “competition makes us all better and benefits consumers”.
“We are saddened to hear of the appointment of administrators to Bonza, and the impacts on its people, customers and partners,” they said in a statement.
Virgin Australia said it had offered to support Bonza passengers who were stranded mid-journey with complimentary seats, where available, on Virgin flights to the airport nearest their final planned Bonza destination.
“Bonza customers mid-journey are asked to approach their nearest VA representative or call Virgin Australia through its Guest Contact Centre on 13 67 89,” the statement read.
THE HIGH FLYERS
Josh Wander
777 Partners co-founder
The 43-year-old co-founded the group with Steve Pasko in late 2015. In his early 20s, he was convicted of conspiracy to traffic at least 28 grams of cocaine. He was given a three-year community control order – a strict form of home detention – plus 13 years probation.
Steve Pasko
777 Partners co-founder
The much older Pasko – he’s 75 – is a long-time investment banker whose career includes a stint working for Drexel Burnham Lambert, the New York firm called home by junk bond king Michael Milken, who served two years for securities fraud in 1990.
COURT ACTION
Some of the lawsuits involving 777 Partners or co-founder Josh Wander in the past five years.
Model v MMA fighter
Mr Wander has been dragged into an ongoing revenge porn case in US Federal Court brought by Nina Agdal, a Danish model who is engaged to influencer Jake Paul, against MMA fighter Dillon Danis. As part of the case, Agdal has subpoenaed Mr Wander to give evidence and alleges that Mr Wander took and shared an explicit photo of her without permission during a previous relationship. He denies the allegation and is not sued in the claim.
High-interest lending
777 is the target of a long-running class action litigation in US Federal Court over an alleged “rent a tribe” scam run by a payday lender it controls which charges interest rates of more than 500 per cent. It is accused of racketeering and evading legal interest rate limits by using a company owned by the Rosebud Sioux Tribe of South Dakota, which has immunity from certain types of laws, to make the loans. In return, the tribe receives a cut of profits.
Amex bill
In a 2023 case in the New York Supreme Court, American Express accused 777 Partners of failing to pay its $US320,000 corporate credit card bill. The case is no longer listed on the New York court system website.
Mediamonks bill
In the LA Superior Court, branding/marketing company Mediamonks claims it did $417,000 worth of work for 777 but wasn’t paid. It’s seeking the money plus interest.
Angry investors
In New York Supreme Court litigation, Obra Capital Management and other investors claim they are owed $US22.4m and allege 777 has fraudulently transferred cash-rich companies to Steve out of their reach to co-founder Steve Pasko. 777 and Mr Pasko deny the allegations.
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Originally published as Administrators to take control of Australian Bonza companies as customers face flight cancellations
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