Bonza Airline Discussion

[Saab34]

Can the finance experts advise what happens to all the forward revenue if it collapses into Voluntary Administration?

Does that revenue essentially just go to the creditors, namely 777 Partners, who hold all the loans they have taken out? I assume they might hold 50-100m of forward revenue.

 

[jakeseven7]

Sounds like it’s getting terminal…. Somethings going on.

Ozjet (blip really), Tiger, Virgin, now Bonza potentially going to the revered wall of failed domestic airlines?

 

[HS-TQE]

Sounds like it’s getting terminal…. Somethings going on.

Ozjet (blip really), Tiger, Virgin, now Bonza potentially going to the revered wall of failed domestic airlines?

Compass, Impulse (AOC used to form JQ-d), Ansett 1.0 (and regional subsidiaries which is now REX), Ansett 2.0, OzJet (blip), Strategic/Air Australia (blip), Virgin 1.0 (including Tiger) in that order IIRC

 

[serfty]

Compass, Impulse (AOC used to form JQ-d), Ansett 1.0 (and regional subsidiaries which is now REX), Ansett 2.0, OzJet (blip), Strategic/Air Australia (blip), Virgin 1.0 (including Tiger) in that order IIRC

Not sure Impulse actually 'failed'. They made an agreement with Qantas in April 2001 to wet lease their services with Qantas having an option to buy them out - which QF did in November that year.

 

[elanshin]

Can the finance experts advise what happens to all the forward revenue if it collapses into Voluntary Administration?

Does that revenue essentially just go to the creditors, namely 777 Partners, who hold all the loans they have taken out? I assume they might hold 50-100m of forward revenue.

Every creditor gets in line and after all assets (cash included) gets worked out and divided up. Customers are also a creditor as are employees with outstanding wages.

So not necessarily 777 would get everything. In practical terms of how much that is would depend on how much they still actually have.

Also you have to remember, just because they forward booked flights and got the cash now. it doesn't mean that cash is sitting in their coffers. In fact it'd be shocking if they did.

Most likely Bonza will have very little cash in the bank even if they had decent amount of forward bookings. Think of it like a loan the customers gave to the company for service to be performed in the future, but once that cash hits your bank account, you can do whatever you want with it today.

 

[oz_mark]

Not sure Impulse actually 'failed'. They made an agreement with Qantas in April 2001 to wet lease their services with Qantas having an option to buy them out - which they did in November that year.

Correct - Impulse was acquired by Qantas, initially operated as QantasLink, but become the basis of the Jetstar,

 

[cambriamarsh]

Every creditor gets in line and after all assets (cash included) gets worked out and divided up. Customers are also a creditor as are employees with outstanding wages.

So not necessarily 777 would get everything. In practical terms of how much that is would depend on how much they still actually have.

Also you have to remember, just because they forward booked flights and got the cash now. it doesn't mean that cash is sitting in their coffers. In fact it'd be shocking if they did.

Most likely Bonza will have very little cash in the bank even if they had decent amount of forward bookings. Think of it like a loan the customers gave to the company for service to be performed in the future, but once that cash hits your bank account, you can do whatever you want with it today.

Secured and preferential creditors are ahead of ordinary trade creditors in NZ. I understand Australia is broadly the same.

 

[UP4014]

Can the finance experts advise what happens to all the forward revenue if it collapses into Voluntary Administration?

Does that revenue essentially just go to the creditors, namely 777 Partners, who hold all the loans they have taken out? I assume they might hold 50-100m of forward revenue.

Tax office gets first go at what ever money is available.

 

[cambriamarsh]

Tax office gets first go at what ever money is available.

For PAYG, super and GST but not income tax?

 

[TedE]

Secured and preferential creditors are ahead of ordinary trade creditors in NZ. I understand Australia is broadly the same.

Litigation/insolvency lawyer here. Can confirm that's correct.

Tax office gets first go at what ever money is available.

No, the ATO is an unsecured creditor and stands at the back of the queue ranking equally with all other unsecured creditors, including customer refunds. Priority creditors first (including liquidators costs and employee entitlements), then secured creditors then unsecured creditors).

If they are as close to breaking even as Tim Jordan says, reasonable chance they may survive after a stint in voluntary administration (as Virgin Australia did).

Can the finance experts advise what happens to all the forward revenue if it collapses into Voluntary Administration?

Does that revenue essentially just go to the creditors, namely 777 Partners, who hold all the loans they have taken out? I assume they might hold 50-100m of forward revenue.

In voluntary administration, the administrators can either trade on (with a view to the company being recapitalised or the business sold under a Deed of Company Arrangement, being a binding agreement approved by a majority of creditors which usually releases debts in exchange for payment which may only be cents on a dollar, but usually likely to be a better outcome than liquidation) or otherwise cease operations. If there is no DOCA proposed at the second creditors' meeting, move on to liquidation.

Forward revenue is just an asset (and corresponding liability) for the administrators to deal with.

Due to be flying Bonza on Tuesday if they haven't gone under before then (with the return leg on the following Tuesday). Do you think it would be poor taste to wear my Ansett baseball cap on the flight?

 

[UP4014]

No, the ATO is an unsecured creditor and stands at the back of the queue ranking equally with all other unsecured creditors, including customer refunds. Priority creditors first (including liquidators costs and employee entitlements), then secured creditors then unsecured creditors).

If they are as close to breaking even as Tim Jordan says, reasonable chance they may survive after a stint in voluntary administration (as Virgin Australia did).

In voluntary administration, the administrators can either trade on (with a view to the company being recapitalised or the business sold under a Deed of Company Arrangement, being a binding agreement approved by a majority of creditors which usually releases debts in exchange for payment which may only be cents on a dollar, but usually likely to be a better outcome than liquidation) or otherwise cease operations. If there is no DOCA proposed at the second creditors' meeting, move on to liquidation.

Forward revenue is just an asset (and corresponding liability) for the administrators to deal with.

Due to be flying Bonza on Tuesday if they haven't gone under before then (with the return leg on the following Tuesday). Do you think it would be poor taste to wear my Ansett baseball cap on the flight?

Except the ATO has some statutory powers, wonder if Bonza are making preferential payments to anyone.......

 

[TedE]

Except the ATO has some statutory powers, wonder if Bonza are making preferential payments to anyone.......

The ATO does have some statutory powers, but none of these give the ATO priority over other unsecured creditors of the company. In this regard, if an unfair preference payment has been made to the ATO, the Court can order the ATO to pay that back to a liquidator just like any other unsecured creditor. The only special treatment the ATO gets is that they have tools they can use to chase the directors in their personal capacity in respect of the unfair preference set aside and as well as particular unpaid tax liabilities through issuing Director Penalty Notices.

If Bonza is making unfair preference payments, that would be a matter for a liquidator to pursue should one be appointed.

If you feel like sitting through a 1 hour lecture on the topic of ATO's position in insolvency, here you go:

 

[Harrison_133]

Frequency cuts for the Gold Coast base have now been extended through the whole bookable schedule until the end of October. Days of operation changing across a number of routes too.

 

[moa999]

Details on the cuts from airliners.net
(Possibly by the above poster)

Bonza have updated their flight schedules through to the end of October for flights to/from the Gold Coast.

OOL-CNS: 5 weekly reduced to 3 weekly
OOL-MKY: 3 weekly reduced to 2 weekly
OOL-TSV: 5 weekly reduced to 3 weekly
OOL-PPP: 3 weekly reduced to 2 weekly
OOL-LST: 3 weekly reduced to 2 weekly
OOL-AVV: 3 weekly reduced to 2 weekly
OOL-MEL: 4 weekly reduced to 1 weekly

OOL-ISA/ROK/ABX/DRW/MQL remain at their existing frequencies. Days of operation change across a number of routes.

Sourced from the Bonza App.

 

[Harrison_133]

OOL-ISA & MQL are also being reduced to 1 weekly. They've now cut the OOL schedule to use just 1 aircraft.

Mon: ROK, MKY, TSV, DRW (red eye)
Tue: CNS, LST
Wed: ROK, MQL, ISA
Thu: CNS, AVV, PPP
Fri: ROK, MKY, TSV, DRW (red eye)
Sat: CNS, LST
Sun: MEL, AVV, PPP

The ABX flight will use a MCY aircraft operating MCY-ABX-OOL v.v.

 

[Brissy1]

The ATO does have some statutory powers, but none of these give the ATO priority over other unsecured creditors of the company. In this regard, if an unfair preference payment has been made to the ATO, the Court can order the ATO to pay that back to a liquidator just like any other unsecured creditor. The only special treatment the ATO gets is that they have tools they can use to chase the directors in their personal capacity in respect of the unfair preference set aside and as well as particular unpaid tax liabilities through issuing Director Penalty Notices.

If Bonza is making unfair preference payments, that would be a matter for a liquidator to pursue should one be appointed.

If you feel like sitting through a 1 hour lecture on the topic of ATO's position in insolvency, here you go:

So they can use forward ticket payments for ongoing operations? Seems reasonable to me (as long as it's not manipulated aka Qantas credit/refund entitlement scam), although "trading while insolvent" doesn't provide much protection once the money has gone.

I find the democratic voting, by creditors, system interesting. Not weighted by amount claimed so 2 x passengers with a $69 claim each can outvote the ATO. Is that correct?

Never used them but I hope they survive. Good for competition, a good new service for the public, good for employees, good for tourism.
Pass, on that web lecture thanks.

 

[Saab34]

I guess we are now in that ‘period of negotiations’ behind closed doors.

If they do enter Administration, wouldn’t the lessor just take its fleet back pretty quick and re market it for much more? That essentially just sends it directly to liquidation, a fleetless airline.

I reckon they are scouting the globe right now for a buyer. I don’t think 777 would come away that badly from a bankruptcy, assuming they have a bit of forward revenue left. If they don’t, well they have high interest loans to deal with, and they already seem to be having funding issues with these football clubs.

I think this is the case of, in what works for 777 Partners. That isn’t a win win for Bonza in any capacity I think.

 

[Harrison_133]

In a statement provided to Australian Aviation, Bonza seem to be pinning these changes on reacting to market demand rather than their lack of aircraft.

“As we’ve always said, it’s standard practice within aviation, as with most industries, that a route/product needs to reflect the market demand and as such we’re adjusting our current capacity out of the Gold Coast to right size supply with demand from 1 May, 2024,” the spokesperson said.

Source: Bonza pares back Gold Coast services after 5 months

 

[UP4014]

I guess we are now in that ‘period of negotiations’ behind closed doors.

If they do enter Administration, wouldn’t the lessor just take its fleet back pretty quick and re market it for much more? That essentially just sends it directly to liquidation, a fleetless airline.

I reckon they are scouting the globe right now for a buyer. I don’t think 777 would come away that badly from a bankruptcy, assuming they have a bit of forward revenue left. If they don’t, well they have high interest loans to deal with, and they already seem to be having funding issues with these football clubs.

I think this is the case of, in what works for 777 Partners. That isn’t a win win for Bonza in any capacity I think.

777 will likely lose a few months lease payments, they'll recover the aircraft and move on.

One thing I've learnt over the years in transport, you can't cost cut your way into profit. With apologies to Gordon Bethune of Continental Airlines, you can make a pizza so cheap no one wants to eat it. His book From Worst to First is a good read as Continental approached it's 3rd bankruptcy.

Running less flights and hoping they are all full can be a short term stall technique, it reduces some operating costs but the fixed overheads remain the same and staff will start to drift if they are part time or casual and you have entered the vortex that gets steeper and faster as time goes on.

 

[clifford]

With apologies to Gordon Bethune of Continental Airlines, you can make a pizza so cheap no one wants to eat it. His book From Worst to First is a good read as Continental approached it's 3rd bankruptcy.

There were some smart (or possibly dishonest) cookies at CO. Taking over UA was breathtaking and we're all now suffering from that. Turned UA into a semi-LCC, despite what anyone might say. Just fly them and you'll know (I'm a UA 2MM, lifetime Plat).

Getting back to Bonza, I never expected them to be successful, with their rather odd (eccentric) business model. So liquidation it is. Who would want to take on that mess? Some people do like to blow their money trying to run an airline. Few succeed.