Virgin Australia CEO Jayne Hrdlicka has shared her concerns about upcoming startup carrier Bonza’s business strategy, arguing that the low-cost, low-frequency leisure travel model that functions overseas may not translate in Australia.
Bonza, which is gearing up for launch in mid-2022, has long claimed to embrace a “point to point” model for leisure travellers, servicing routes ignored by incumbent rivals at low frequency, in a business model similar to other low-cost carriers across the US and Europe.
“If you’re connecting two cities that have never seen a connection before, if you’re flying it twice a week, it’s very hard to build an underlying presence in that marketplace,” Hrdlicka told The Australian.
“The way that’s done in Europe and in the US and Canada, it’s a huge market with millions and millions of people and you can approach that with group tours and things like that which don’t really exist in the same way in Australia,” she said.
Ultimately, Hrdlicka called Bonza’s strategy an “interesting idea” and “a different approach”.
“We’ll just see how it plays out,” she said.
It comes after Bonza last month finally broke cover to reveal it will initially fly 25 routes to 16 destinations, including Cairns, Mildura, Newcastle and Whitsunday Coast.
The airline claims 80 per cent of its routes are currently completely unserved, while 96 per cent currently are not serviced by a low-cost carrier.
Hrdlicka is far from the first Australian aviation boss to criticise Bonza’s strategy, particularly the startup’s assertion that it will be focusing on segments of the market currently unserved by any major domestic airlines.
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In November, Rex Airlines deputy chairman John Sharp questioned which routes Bonza could introduce that would both be presently unserved by Qantas, Rex or Virgin, and have adequate demand to sustain a new market entrant.
“That’s a mystery to us … what are those markets? If they are worth servicing, Qantas, Virgin or Rex would be in there doing it,” Sharp said.
Later, in December, Qantas CEO Alan Joyce warned that the airline will “defend our turf” against new entrant Bonza, and similarly cast doubt on whether there are any remaining domestic or regional leisure routes that remain untouched by Qantas.
“We’ve started nearly 50 new domestic routes [since 2020]. So I would have thought we have most of them covered, but maybe we don’t.
“So that’s great if they find a unique value proposition that they can make money on. Fantastic, fill your boots up on it, and shame on us if we’ve missed it.”
Despite criticism, Bonza CEO Tim Jordan has remained confident that Bonza will deliver on its promise to connect direct regional and leisure destinations for far cheaper than its competitors.
“The rest of the world gives us that confidence,” Jordan told Australian Aviation.
“We’re not trying to do anything particularly smart and clever, or unique. We’re actually just trying to replicate [a model that] has already been successfully executed elsewhere in the world.
“So that gives us that confidence.”
Speaking of the public criticism from soon-to-be competitors, Jordan said, “The most wonderful thing is that we live in a free market economy, whereby we can all have our own individual opinions which is fantastic.”
“In terms of Bonza, our major investment partner is 777 Partners, which is a private investment firm based in Miami, and they have assets under management of just under US$6 billion.
“777 Partners are not private equity – they invest for the long term…So I think that puts us on a very firm footing in terms of what we’re executing in the market.”
“I think as people pull back the layers in terms of what we are about, in terms of our strategy, in terms of our owners, and in terms of our management team, I think people will have a better understanding of how positive this can and will be across Australia,” Jordan concluded.
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