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Bonza’s demise. Playing football on the edge of Putin’s business matrix

by Matt Prescott | Jul 25, 2024 | Business, Latest Posts

The collapse of Bonza Aviation was sudden but not unexpected. While most start-up airlines in Australia fail, Bonza’s demise raises questions about why and who was behind it. Matt Prescott with the story.

The collapse of Bonza raises, yet again, the question of how to make the Australian Aviation industry more competitive. Can the cosy duopoly of Qantas and Virgin on major routes ever be challenged without giving more landing slots to international airlines at our capital city airports? Is the regulatory regime fit for purpose? Should we put limitations on who can own an Airline operating in the local market? Are the capital requirements for airline licenses adequate?

Bonza is just the latest in a long list of Australian airlines that have failed over the last three decades, including TigerAir Australia, Air Australia, BackpackersXpress, Impulse, Compass, and Ansett. Apart from Tiger Air and Ansett, the others all failed within two or three years; Compass managed that feat twice. (Virgin, of course, went into administration during the early month of COVID but was later resurrected.)

Apart from Qantas, the only long-time survivor1 in recent times is Rex Airlines, which has managed to carve out its own niche without getting too much in the way of Virgin and Qantas.

Most competitive airline market in the world Alan … sorry, Albo?

The difficulties associated with setting up airlines in Australia have pushed new entrants, such as Bonza, to adopt riskier business models, which skirt domestic regulations and shift financial risks onto customers, employees, and suppliers. As has recently been demonstrated by 57,933 Bonza customers having their flights cancelled, 323 employees being left unpaid, and 120 trade creditors being left millions out-of-pocket by Bonza’s collapse.

It also raises many questions about Bonza’s owner and who its ‘friends’ are.

The Bonza story

Bonza was set up as an Australian low-cost airline with ‘no frills’ such as airport lounges or loyalty schemes. It commenced operation on 31 January 2023 and lasted a mere 15 months. It is now in liquidation.

It prided itself on being the ‘Bogan’ airline, with marketing campaigns sporting branded budgie smugglers to prove it. Its business model was piggy-backed on infrastructure investments made in under-serviced regional airports, including Albury, Mildura, Port Macquarie, Bundaberg, Tamworth and Toowoomba. It also leaned heavily on the desperation of States, regional councils and businesses to attract investment, transport links and tourists.

The owners of Bonza, 777 Partners, have business interests all over the world and spent many months trying to buy Everton football club from Farhad Moshiri, a close business partner of Alisher Usmanov, who is one of Vladimir Putin’s favourite oligarchs and has been sanctioned by the UK, EU and USA for his links to the Kremlin following the invasion of Ukraine.

This is all public knowledge, and no illegal activity by Bonza Aviation has been alleged. However, it is notable that Australia has allowed one of its few airlines to be owned and operated by a business flying close to Vladimir Putin’s orbit.

In addition, Bonza’s business model was unusual and made use of aircraft ‘wet-leased‘ from a sister airline in Canada, Flair Airlines, which is also partially owned by 777 Partners. This meant that aircraft could be more effectively utilised by flying them in Australia during the Canadian winter and in Canada during the Australian winter.

The Australian Civil Aviation Safety Authority (CASA) didn’t welcome the use of wet-leased Boeing aircraft crewed by Canadians, and it took until late 2023 to resolve this by using Australian crews.

According to the industry newsletter Australian Aviation:

“Three 737 MAX 8s and one 737-800 leased to Flair from a trio of Ireland-based lessors were seized last March, which reportedly resulted in 777 Partners sending planes that had been earmarked for Bonza to Flair to make up the shortfall. Up until it entered administration, Bonza was flying its own aircraft from the Gold Coast, with both its planes leased from Flair otherwise occupied. The two wet-leased Flair 737 MAX 8s, C-FLKC and C-FLHI or ‘Matilda’ and ‘Bruce’ respectively, shifted to a dry-lease arrangement, with the intention they would be operated by local crews from the Gold Coast. It’s been reported by The Guardian that the leasing companies Corvus Lights Aviation, MAM Aircraft Leasing 4 and Columba Lights Aviation were seeking $28.5 million (USD) from 777 Partners, but these demands have been ignored.”

Bonza went into administration on April 29, but it quickly became clear that liquidation was the only option. However, when the full extent of Bonza’s financial woes were laid bare at its first creditors’ meeting in Sydney, it was revealed the airline owed nearly $77m across two loans, almost $16m to trade creditors, and another $10m to landlords.

Other debt included more than $5m in staff wages and annual leave entitlements and $3 million to government authorities such as the Australian Taxation Office. Plane lessors, who sparked a crisis of cancellations at Bonza by terminating agreements and repossessing aircraft, are owed $4.6 million.

777 Partners

Based in Miami, Bonza’s owners own a curious combination of international soccer clubs and airlines. 777 Partners has, directly and indirectly, owned stakes in “soccer teams in Italy, Spain, Belgium, France, Brazil and Germany, as well as a 19.9% stake in Melbourne Victory (with an option to buy 70%). It also owns the London Lions basketball team and the mentioned minority stake in Canada’s Flair Airlines.

Allegedly, 777 Partners’ investment in Spanish club Sevilla FC was partly funded by a loan from Oleg Boyko, a business associate of Roman Abramovich, via EVRAZ Holding. Roman Abramovich was the owner of Chelsea Football Club until 2022 when he was forced to sell.

Earlier in his career, Roman Abramovich was a business partner of Boris Berezovsky via Sibneft (now Gazprom Neft) and Oleg Deripaska via RUSAL. He flourished for many years under the patronage of both Boris Yeltsin and Vladimir Putin but is now subject to international sanctions and has become a citizen of Israel and Portugal.

Oleg Boyko is a Russian businessman who has been sanctioned by several countries for his reported connections to the Russian state. In 2024, Boyko allegedly demanded 777 Partners’ shares in Sevilla FC as collateral for his loan.

As a side note, Rupert Murdoch recently married Elena Zhukova, the mother of Dasha Zhukova, Roman Abramovich’s third wife.

Bonza network diagram

Extract of Bonza and 777 Partners network diagram. (C) Copyright Matt Prescott

The Everton FC mess

In September 2023, 777 Partners agreed to buy Everton Football Club of England’s Premier League by purchasing the 94.1% owned by Farhad Moshiri.

Everton has been struggling with over £400m of debt and tried to raise over £150m from New York-based GDA Luma Capital so that they could repay a £158m loan from MSP Sports Capital and complete construction of their new football ground at Bramley Moore Docks in Liverpool.

777 Partners ran into trouble with Bonza at the same time as they were attempting to close the Everton deal. 777 Partners eventually had to send a payment of £16m to Everton so they could maintain day-to-day operations and this inevitably meant attention and resources were diverted away from solving Bonza’s problems.

Hence, Farhad Moshiri, a British-Iranian businessman based in Monaco, remains the majority owner of Everton FC and a former chairman of USM Holdings, a Russian holding company.4 Earlier in his career, he worked for EY and Deloitte Touche, prior to serving as the chairman of Metalloinvest and subsequently becoming chairman of USM Holdings.4

In April 2024, with the deal with 777 Partners not complete, Everton called upon the services of insolvency advisors Teneo. Amid lawsuits against 777 Partners in other countries, the Everton Shareholders’ Association wrote to Moshiri requesting that he terminate the deal. 777 enlisted B. Riley Financial for advice to complete the deal.

According to 777’s own lawyers, Josh Wander and Steven Pasko resigned as managers of the company on May 6, 2024, but remained as its 100% owners. On June 1, 2024, 777 Partners’ deadline to conclude the takeover of Everton expired. Despite the 777 Partners bid for Everton Football Club falling through, this deal was a serious proposition for a prolonged period of time and is worth considering some of the main protagonists in further detail.

That story – about the hyper-complex, subtle and stealthy commercial activities of Vladimir Putin’s closest oligarchs in the football world – to come.

1. Editors note, July 30, a comment that didn’t age so well…

Is Rex Airlines about to join the long line of Australian airline failures? What’s the scam?

 

Matt Prescott

Dr Matt Prescott is the Director of Research at Lantern Insights, a specialist sustainability thought leadership research agency. He studied the pollination ecology of Australian Acacia for his doctorate at Oxford University and campaigned for the global phasing out and banning of incandescent light bulbs via his Ban The Bulb campaign, which he founded in 2005. In 2017, he investigated the financial and environmental risks within the English water industry and warned that this industry could become the next "too big to fail".

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