Stricken airline Bonza’s owner paid $31 million to a British football club hours after the low cost carrier’s planes were impounded across Australia stranding passengers who are unlikely to get their money back.
It’s the latest twist in the tailspin that led Bonza to place itself into voluntary administration stranding passengers.
Bonza’s backers included a cocaine trafficker and the company running it has been caught up with jittery investors, nervous regulators, court action over unpaid bills and major sports teams.
Major “red flags” were in abundance, said one expert.
“Suffice to say we are fighting this,” Bonza chief operating officer Michael Young told the airlines’ 300 staff this week after its four Boeing 737s were repossessed.
“We have an air operator’s certificate which is valuable, we are safe and we have a product and network that people like and want.”
Fighting words. And it’s true that Bonza may not officially yet be a goner – but it’s not looking good. The airline seems set to join that long list of Aussie aviation failures alongside Tigerair, Compass and Impulse.
Undoubtedly, starting an airline in Australia – a vast country with a relatively small population already served by two industry goliaths – was never going to be a sure fire success.
Bonza’s Australia based team did their best.
But despite the true blue name, Bonza was about as Australian as rye whiskey and Disneyland. Indeed, its parent company private investment firm 777 Partners, was based in the Gold Coast of the US – Miami.
Only founded in 2015 it has stakes in scores of companies in the aviation, insurance and sports fields.
It owns football teams across Europe, including Italian Serie A Club Genoa CFC, Spanish team Seville and in October 2022 bought a minority stake in A League side Melbourne Victory with a view to taking on 70 per cent of the club within five years.
It’s in the process of trying to take over top flight English soccer team Everton in a $574 million deal – but the Bonza balls up may have grounded that plan.
Cocaine bust
777 was founded by long term financier Steven Pasko and a 43-year-old dentist’s son called Josh Wander. The pair worked together in a previous finance firm.
Mr Wander has an eventful past. In 2003, when he was 21 and a student, he was arrested in Florida on drugs charges.
Investigators opened a package destined for Mr Wander with 31 grams of cocaine inside, worth about $9500.
They attached a transmission device and when he opened the packet, police pounced, reported the New York Times.
A mugshot from the time shows Mr Wander as he was facing potentially 26 years in prison.
Mr Wander admitted the drugs were for him, avoiding the lengthy prison term and instead was handed a 15-year parole.
There’s no record he reoffended and 777 has said there was no conviction, it was a “small incident” and “ancient history”.
Turbulence has long swirl around 777 – which is also the name of a successful Boeing long haul jet.
777 Partners has stakes in two airlines. Bonza and a similar Canadian carrier called Flair.
Battling huge competitors like Qantas and Air Canada, both have struggled.
Analysts were immediately sceptical of Bonza’s business plan to connect up smaller destinations – Sunshine Coast to Albury for instance. Questions were asked as to whether the demand was there and eyebrows were raised further when Bonza put Boeing 737s, more common on busy capital city pairs, on these thinner routes.
Nonetheless, industry veteran and CEO Tim Jordan said the plan could work if he was able to get 10 aircraft. He never received more than six and Bonza was down to four when it was grounded.
Lessors claim $42m owed
In 2023, it emerged that 777 Partners was being pursued by the lessors of four Flair 737s.
The lessors claimed that Flair was behind on payments and that meant 777 Partners had to stump up. It said 777 had ignored its bills and now owed $42 million.
According to industry publication FlightGlobal, the companies said it was a “last resort” and that 777 Partners “cannot just ignore its financial and contractual obligations”.
The four jets were repossessed in March 2023.
For its part, Flair took the lessors to court in Canada saying the lease terminations were “unlawful and destructive”.
But Flair is still in the air. That’s because 777 Partners itself had a stake in an aircraft leasing arm called AIP Capital.
To plug the gap from the four Flair 737s, it diverted planes that had been destined for Bonza.
That led Bonza to cancel several routes as it didn’t have the planes it needed to fly them.
Overcharging claims
Then accusations swirled around 777’s leasing arm that it was overcharging Flair and Bonza for the planes it leased to them.
Timothy O’Neil-Dunne, who used to work at both 777 Partners and Flair, alleged in a Delaware court that as well as overcharging Bonza and Flair, 777 also imposed an 18 per cent interest rate.
“The business is highly lucrative,” the affidavit, from July, reads according to industry website CH Aviation.
“(777) order planes at below market rate for a new Boeing 737 paying approximately $US42 ($A64m) and then leases them based on the market value of a new Boeing 737, which is around $US52 million ($A80m).
“Thus, the 777 jet partners are realising a profit of $US8 – 10m ($A12-15m) dollars per plane at the time of delivery.
“777 Partners is expected to accumulate a net asset value of more than $US1 billion ($A1.5bn) by operation of the jet leasing business.”
Effectively, 777 gets richer as the airlines it has stakes in get poorer.
777 has refuted the allegations and said leasing relationships were “arm’s length,” and “fully commercial”.
“The allegations in the lawsuit are frivolous,” it stated.
$31 million to a football club
At the same time, 777 Partners has been trying to buy a 94 per cent stake in UK football club Everton with Mr Wander seen popping up at games.
The company has now loaned the club $382 million to help with running costs and to continue work on a new stadium.
But some of those payments have come to Everton later than expected.
The latest trance of cash was 16 million pounds ($A30.9m) which arrived in Everton’s bank account on Tuesday, hours after Bonza was grounded.
An expert in soccer financing at the University of Liverpool, Kieran Maguire, told theNew York Times: “It’s a red flag to a potentially more significant cashflow issue, or incompetent management”.
The English Premier League has had concerns and has sought multiple reassurances from 7777. Months later, the EPL has yet to sign off on the buy.
777’s UK public relations firm has also stopped working for it, the BBC reported, due to unpaid bills.
Everton has now called in restructuring and insolvency advisers in a sign the club may be losing faith 777 Partners will ever be able to stump up the cash to take control, The Guardian reported.
777 Partners has been approached by news.com.au for comment.
Bonza’s final flight
Battered, Bonza’s prospects began to dim from February when regulators far from its Sunshine Coast home, in Bermuda and the US, began to pay closer scrutiny to 777 Partners.
Financial regulators in the US states of Utah and South Carolina told insurers owned by a firm called A-Cap to reduce their exposure to 777 Partners.
A-Cap had $4.4 billion invested in 777 which the states’ said was about $2.8bn too much.
It was an effort by the two states to ensure vulnerable Americans, who depended on payments from A-Cap, were safeguarded.
The AFRhas reported that A-Cap stopped pouring funds into 777 Partners around February. Shortly after that, Bonza reportedly stopped paying its bills.
In April, AIP Capital, which 777 Partners had a minority stake in and owned Bonza’s planes, transferred the jets to a new company called Phoenix.
Phoenix is 100 per cent owned by A-Cap. A-Cap appeared to be clawing back its investments from 777 Partners.
Then in mid April, 777 Partners appointed restructuring advisory firm KordaMentha to look at options for Bonza.
That was not a good sign but events were moving faster than even 777 could keep up with.
On April 30, AIP Capital, which still had management rights over the four planes now owned by Phoenix, repossessed them. Bonza was grounded.
Administrators Hall Chadwick have been brought in to determine if Bonza has a future.
“The company’s fleet is currently grounded pending discussions with relevant parties and key stakeholders,” the firm said.
“The discussions regarding ongoing trading are occurring over the forthcoming days and the administrators will be in a position to update all stakeholders as the matter progresses.”
‘Don’t think they’re gonna make it’
In Canada, aviation analyst John Gradek, of Montreal’s McGill University, has said Flair is at risk of going the way of Bonza.
“I don’t think they’re gonna make it to Thanksgiving (in October in Canada).
“The financial crisis will catch up to Flair. It is creeping towards a potential showdown with its creditors”.
On Thursday, the Canadian airline said new investors had agreed to buy out 777 Partners’ stake in an apparent effort to shield it from that company’s turbulence.
It remains to be seen if that will be enough for Flair. But at least it’s still flying.
With Bonza grounded, it’s possible it will never fly again.