Interview: Bonza CEO Tim Jordan

The startup is the right opportunity in the market, according to Bonza CEO Tim Jordan

Tim Jordan is CEO of startup airline Bonza.

Why start a new airline now?

The timing is actually great. Our investment partner 777 (an American company which also owns Flair Airlines) has managed to secure 737 MAX 8 aircraft at fantastic prices. So we've got brand-new aircraft and all of the efficiencies that come with that, which is quite unusual in its own right for a startup. 

And the world is recovering. Australia is finding its own way out of everything we've gone through in the last two years. In terms of our team, unfortunately around the world there are thousands of highly skilled aviation professionals who are still looking for roles. We've had several thousand approach us since we announced, and if you wind the clock back two years that wouldn't have been the case. 

And it’s the right opportunity in the market, which has been there for quite some time but has been getting bigger and bigger.

What exactly is this market opportunity?

We’re 100% focused on leisure. There are some wonderful airlines already in Australia and they execute incredibly well in the business market segment, but in the leisure segment it's a bit limited in terms of destination choice and route maturity. 

Between 2010 and 2019 the rest of the world has added hundreds upon hundreds of brand-new routes, but here in Australia there were a few chairs that moved around but net growth was zero.

So there has there hasn't been an independent low-cost operator in the country since 2013, which is when Tiger was acquired by Virgin Australia. Obviously, low-cost operators as part of a larger, full-service carrier group act very differently to independent low-cost operators. 

I think that, to a large degree, has meant that the market hasn't seen the same growth as in the rest of the world. And that opportunity has just been getting more significant year after year, especially when you look at GDP growth. 

Typically, domestic aviation markets will grow at 1.5 to two times GDP growth, and here in Australia that should mean annual growth in the domestic market of about 4-4.5%, but that hasn't happened. It's been more like 1.5%. 

This opportunity has been getting larger, hence the requirement for Bonza to come in. This is about unserved markets, which will be the majority of what we fly, and underserved markets. 

So you will be able to focus on lower operating costs to price-stimulate the market?

Absolutely, the 737 MAX 8 aircraft will allow us to drive seat costs down very significantly. We are going to be flying low frequency, we're not going to be flying markets daily. The proposition is two/three/four times a week, and that's not so attractive if you're a hub carrier, it really doesn't add much to their network dynamics. 

We can introduce new price points to the market. The enemy is the car or the sofa.

Where are the markets ready to be stimulated?

Half the population of Australia doesn't live in Sydney, Melbourne and Brisbane, and half of the country does. If you're sitting in Sydney, Melbourne and Brisbane the world may seem pretty good but even from those locations there's still a lot of markets which are unserved, or it suits existing operators to fly you over another hub. 

People don't want to do that, especially if they're going for a three-or-four-day leisure trip. You don't want to lose one day there and one day back, and pay $500, if you've got an alternative of flying 1-2 hr. That’s the LCC sweet spot, and having that cost is going to grow the market. 

This isn't about the business travelers suddenly selecting us, that's not going to happen. People who want to be there for that 9 a.m. meeting are still going to catch the incumbent operators for sure. Especially when you throw in lounges, frequent flyer points and all those things that we won't offer. 

Sometimes you hear the commentary that Australia is a two-airline market, always has and always will be. And I find myself smiling at that one because the population of Australia over the last 50 years is up 75%. 

Even when you look back to 21 years ago, when Virgin Blue (now Virgin Australia) started operation, the population has actually grown by a further third. The demographics of Australia have changed quite considerably. Naturally, most of that growth appears in the state capitals, but the second-fastest- growing areas are large regional centers. 

There are a growing number of those large regional centers with 100,000+ catchments that have really limited service currently. You might be able to fly to your state capital 6/8/10 times on a business-focused carrier, but you can't really fly anywhere else in the country without going via that state capital. 

So the route maturity here is nothing like the development that has happened in North America or in Europe.

How much traffic do you expect from non-Australians on multistop vacations?

The assumption is zero. We have to be rational and think that if people are coming in on long-haul carriers, they're generally going to want their bags checked through, etc., unless they're independent travelers. 

If we get some upside from that up, that's fantastic. We don't mind who sits in our seats as long as the seats are occupied.

Will you work with these larger carriers by providing feed?

There's not an intention at this point and there's no numbers we're relying on in our business plan that say that's going to happen. But in the future if there's a smart and clever way of using the technology out there which is painless, we’d probably look at it at some point.

What do you need from airports?

We approached about 45 airports on the day of our launch that we believe are capable of 737 MAX 8  operations. If airports would like to make a proposal, we'd absolutely welcome that, but don't give us a short-term arrangement

Honeymoon periods are great for the honeymoon. All that happens though is fares go up, markets that once grew get smaller, and we end up canning a route. That's not the intention. So come to us with a longer-term proposition for brand-new markets, understanding this is traffic that today doesn't flow to your airport or your region. It's brand new, so $1 is better than no dollar. 

Those airports that embrace us, we're certainly going to put our arms around them and hopefully grow their networks from one or two destinations to five/six/seven/eight, that's the scale of this. And if you're in some of these centers, that should be quite an attractive proposition in terms of volumes, but also the breadth of destinations that could suddenly be offered from some of these locations.

We believe there are many, many markets out there in terms of new opportunities. In Australia there's new infrastructure that is being built; it just gives new options. Some of those are new regional airports, and some of them are obviously new airports in very significant centers. 

We've got the new Western Sydney Airport, for example, and the new runway in Brisbane. Suddenly some of those limits that have been there, that constrained growth for several years, have been taken away. 

Timing-wise that’s very fortuitous, as far as we're concerned.

All images photo credit: Bonza