Bonza: New low-cost Australian airline tipped to struggle in untested regional markets, according to aviation expert

A leading aviation expert has some serious concerns over low-cost airline Bonza’s plan to run planes on 25 new routes across Australia this year – but the CEO believes it is reaching an untapped market.

The viability of new low-cost airline Bonza has been questioned by one of Australia’s leading aviation experts, who argued nearly half of its proposed routes will struggle.

But the company’s CEO has backed the rollout of 25 new flight routes, saying its ultra-low cost base will stimulate demand for leisure travel across Queensland, New South Wales and Victoria. (read Bonza’s response below).

Expert aviation consultant, academic and former Qantas chief executive Dr Tony Webber has become one of the first people to publicly raise concerns about Bonza’s proposal, which has created controversy within the industry.

A list of the destinations being travelled by Bonza.

The jump-start airline, which is financially backed by USA-based 777 Partners, revealed in 2021 it would run 27 routes using planes based in the Sunshine Coast and Melbourne.

Destinations will include major regional centres like Toowoomba, Townsville, Newcastle, and Mackay as well as previously-unserviced routes for locations like Coffs Harbour, Gladstone, the Whitsundays and Mildura.

Bonza has promised to run fares as cheap as $50 per flight hour.

Sydney aviation consultant Tony Webber. Picture: Justin Lloyd

While he hoped the operator would succeed, Dr Webber raised serious issues over whether most or even many of the routes would not only capture the existing need for travel but also create demand for trips where there was none.

“I think it’s going to struggle – it’s admirable, it’s great they’re taking an interest in regional tourism,” he said.

“Some routes will work, but the majority won’t have the demand for what they’re offering.

“If the routes they were picking were successful, you would’ve thought the bigger airlines would’ve scrutinised them.

“A lot of these routes are experimental, so there’s a lot of risk associated with demand.”

Research by Dr Webber commissioned for News Corp also backed up these assertions, with an analysis of the 27 routes finding 13 of them potentially unviable unless Bonza was able to create new demand.

Crew on the new Bonza airline.

This was developed by comparing pre-pandemic travel data for each location against the total number of yearly seats that would be offered by the airline.

He concluded just five new routes — Melbourne to Toowoomba, Bundaberg, Gladstone and Mackay, and Mackay to Cairns — had a reasonable likelihood of success.

Dr Webber also questioned Bonza’s decision to use an entire fleet of Boeing 737 Max jets, which will have a capacity of 186 seats, instead of the more modest Airbus A-220s (100-120 seats).

He said the current high price of jet fuel would further complicate matters for an airline underpinning its business model on the price-sensitive leisure market.

“Because demand is a significant unknown, they’ve started with an aircraft with a very high seat count,” Dr Webber said.

“I don’t know what the thinking is, the seat count should be lower.

“When they were putting together the business case, I don’t think they would’ve assumed the jet fuel price would have been as high as it is now (thanks to Russia’s invasion of Ukraine).

“A lot of that plays a lot of uncertainty as to how that airline will perform.

“Over the past 10 to 15 years, there is a minus-95 per cent correlation between airline earnings and jet fuel prices.

“A lot of business cases for routes hinge on the price of fuel (and) it’s probably more important to Bonza than any other airline, because their focus is on leisure travel.”

Dr Webber also pointed out the most successful new routes would soon be jumped upon by Bonza’s rivals like Qantas, Virgin and Jetstar.

“They have to consider their competitors’ reaction, and it will be aggressive,” he said.

Tim Jordan, CEO, Bonza

CEO BACKS LOW PRICES TO CREATE DEMAND

Bonza’s CEO Tim Jordan, who has been busy spruiking the airline for the past 18 months, said worldwide trends gave a clear indication the company would succeed.

He also argued plenty of Australians would make the decision to travel for the right price, something he was confident Bonza could achieve.

“Australia is one of the largest domestic aviation markets, and Australia is the only market of the top 15 without an independent low-cost carrier,” he said.

“The previous low-cost carrier experience, where low-cost fares have been experienced in Australia, were well-received.

“Based on the rest of the world’s experience of price-stimulated travel, we have absolute confidence in what we have announced.

“Are we naive to think everything will work? Absolutely not, no airline gets 100 per cent right and we won’t be different.

“But we’ll learn quickly and change quickly (as the market dictates).”

Mr Jordan also backed the company’s choice of plane, describing its 737 Max 8s as newer and more fuel-efficient than any other fleet in Australia.

He also called commercial plane seats as the “ultimate perishable item”, arguing Bonza wanted to fill every single seat on all its flights.

“An airline seat is the ultimate perishable item — we look at an empty seat that is a point of failure,” Mr Jordan said.

“We want to run high load flights and if we have to run very low fares to fill those, that’s good, we’re not fixated by a particular number.

“We do have, thanks to the wonderful announcements from CASA, the youngest jet fleet of any airline by some margin.

“The other very important thing to mention is we burn 15 to 20 per cent less fuel than other 737s currently in use.

“The number of seats (on the 737 Maxes) allow us to drive the costs down, at levels not seen before.”

Mr Jordan said the airline was hoping to launch flights from its Sunshine Coast base by the end of January, before turning its attention to Melbourne.

“Over the coming days, we would expect the Sunshine Coast base to go on sale, with first flights to be between Sunshine Coast and Whitsunday Coast and flights to go on sale in late January,” he said.

Sara Hales, aviation consultant.

BONZA BUSINESS MODEL A FIRST FOR AUSTRALIA

Toowoomba-based aviation and airport business expert Sara Hales said she held plenty of optimism for Bonza’s success, with the caveat that it was trying something that had not been done in Australia before.

“Bonza’s operating model is different from other airlines we have had operating at Toowoomba, or even, in Australia,” she said.

“They are a true low cost carrier, yes, but also they are operating between secondary airports rather than competing for market share on a hub-and-spoke model (through the major airports).

“The model is unlike any tried in Australia before now and draws debate from across the aviation industry as to its sustainability.

“I’m an optimist — I’d like to think they’ve figured out how to make it work.”

Spoke-and-hub distribution, which is used by most major airlines, is a transport model that connects all outlying destinations to a central hub.