Bonza’s takeoff to create headwinds for Jetstar, Qantas, says RBC Capital Markets

Jetstar will soon start to feel the punch from the entry of Bonza into the Australian market as analysts warn that the Qantas budget offshoot has the most to lose.

Qantas’ budget carrier Jetstar has the most to fear from the entry of Bonza as it “tests the market” on a routes also flown by the airline.

That’s according to RBC Capital Markets analyst Owen Birrell, who told clients the launch would would still impact Jetstar despite Bonza targetting routes that had little or no competition.

Bonza will become Australia’s first new major airline in more than 15 years after it gained approval from the Civil Aviation Safety Authority to operate commercial flights earlier this week.

“In our view Bonza is selling themselves as an operator that sits somewhere between Jetstar and QantasLink/Rex, given they are a discount airline that will service what they see are underserviced and in some cases regional destinations and routes,” Mr Birrell wrote in his note, adding he expected Jetstar would “slowly felt the pinch” from fares as low as $50 for Bonza’s shorter flights.

“Initially Bonza will only be competing directly with Jetstar as the discount operator on isolated routes out of Melbourne (to the Sunshine Coast and Newcastle),” wrote Mr Birrell.

“We believe this initial small step on Jetstar’s routes is deliberate as a means of testing the market and its own operations.”

In the event Bonza is able to make a success of those routes, the airline would likely grow their network and compete on a larger scale with Jetstar, he added. “That will place increased pressure on ticket pricing which Jetstar has been able to benefit from over the last 12 to 18-months.”

RBC Capital has a price target of $7.25 on Qantas shares. On Friday, they rose 1.2 per cent, or 7.5c, to trade at around $6.50.

Bonza is owned by the Miami-based 777 Partners. As well as Bonza, the firm owns Canadian low cost carrier Flair Airlines and also leases planes and supports more than 100 carriers through its technology platforms.

Late Friday, Bonza was yet to put any flights on sale through its mobile phone app despite expectations the airline would begin services within weeks.

The carrier has three aircraft in Australia, all Boeing 737-8s, but plans to expand its fleet to eight jets in its first year of operations.

Originally published as Bonza’s takeoff to create headwinds for Jetstar, Qantas, says RBC Capital Markets