Lawsuit accuses Bonza’s US owners of setting airline up to fail

A lawsuit against the owner of Bonza airlines has accused 777 Partners of setting the airline up to fail through costly aircraft lease deals.

A lawsuit filed in the US has accused the Miami-based owner of Australian low-cost carrier Bonza of setting the airline up to fail.

777 Partners’ former principal Timothy O’Neil-Dunne confirmed he was taking legal action against his former employer in the Delaware Court of Chancery.

The case accused 777 Partners of 10 counts of misrepresentation, fraud and lack of fiduciary duty relating to Mr O’Neil-Dunne’s time with the company and its Canadian low-cost airline Flair where he held the position of chief commercial officer.

777 Partners denies the allegations and is seeking to have the case dismissed.

Among the claims in the lawsuit is that 777 Partners sought to make money from its airlines by overcharging for the aircraft it leased to them.

Court documents say 777 Partners bought planes at below market rates of about $US42m during the pandemic, then leased them out at the current market value of $52m.

“Thus the 777 Jet Lessors are realising a profit of $8m-$10m per plane at the time of delivery,” the documents state.

“777 Partners is expected to accumulate a net asset value of more than $1bn by operation of the jet leasing business.”

A statement from 777 Partners said the company “remained steadfast in its commitment to delivering a positive impact to the communities in which it conducts its business”.

Bonza was the brainchild of aviation veterans Tim Jordan and Peter McNally who saw the opportunity for an ultra-low-cost carrier in Australia, following the demise of Tigerair.

With the financial backing of 777 Partners, the airline was announced in October 2021, with plans to begin flying in mid-2022.

However, Bonza only began commercial flights in Australia in late January after the carrier navigated the complex process of obtaining regulatory approval.

Bonza is now operating to 17 destinations in the eastern states using Boeing 737 Max 8s.

Even before the airline took off, Mr McNally departed, with chairman Rick Howell following nine months later.

Mr Howell remained with 777 Partners in an aviation innovation role. He referred inquiries from The Australian to Adam Weiss, 777 Partners’ head of ­aviation and travel.

Mr Weiss said all leasing relationships had been struck at an arm’s length, fully commercial basis with respect to all terms and conditions.

“We vehemently deny any accusations stating we are seeking to disadvantage the airlines as it would simply be illogical and counter to our own interests,” Mr Weiss said.

“We remain steadfast in our support of the airlines we work with.The allegations in the lawsuit are frivolous, and 777 Partners look forward to vigorously defending our case.”

Bonza operates a fleet of four Boeing 737 Max 8s and plans to add four more by the end of the year, providing the airline can recruit and train enough pilots.

Earlier this year a 737 Max intended for Bonza was diverted to Canadian airline Flair, which had four of its aircraft repossessed by lessor Airborne Capital. The repossession, highly unusual in the airline industry, followed months of missed payments by Flair – raising concerns about the carrier’s financial status. Canadian reports said Flair was repaying a $129m loan from 777 Partners at 18 per cent interest.

In April two aircraft painted with Bonza livery were spotted flying in Poland for Enter Air.

It’s understood Bonza was not ready to take the 737-8s due to insufficient pilots, so an alternative home was found for the aircraft.

Bonza CEO Tim Jordan said that with airfares starting from a mere $49 one-way, bookings had been strong on the mostly regional routes operated by the 186-seat 737-8s.

Since May, Bonza has been flying to 17 destinations from its bases on the Sunshine Coast and Melbourne, with most of the 27 routes operating twice a week.

Mr Jordan remains keen to secure slots at Sydney Airport, which are seen as crucial to the airline’s success.

As well as Bonza, 777 Partners has invested millions in loss-making A-League soccer club Melbourne Victory, with the option to increase its stake to 70 per cent at a cost of $30m over the next five years.

Sports media has revealed that some club shareholders are unhappy with the arrangement, which reportedly includes an option for 777 to walk away from the deal and be repaid the $30m at a compounding interest rate of 10 per cent a year.

777 Partners describes itself as an “alternative investment platform” focused on industries including insurance, aviation, sports and media and entertainment. The company is led by Josh Wander and Steve Pasko, whose vision was “to build a self-sufficient company not dependent on banks and third party investors”.

Originally published as Lawsuit accuses Bonza’s US owners of setting airline up to fail