It is believed that Bonza's parent company, 777 Partners, not the airline itself, was responsible for paying the leases on its aircraft.
According to a source familiar with the situation, it was never Bonza's responsibility to cover the leases on its fleet of 737 MAX 8 aircraft, which have been grounded since Tuesday following repossession by the lessor, AIP Capital.
AIP Capital was separated from 777 Partners earlier this year, with New York-based Advantage Capital Holdings (A-Cap) believed to have acquired 777's 49 per cent minority stake. The source revealed that 777 Partners was responsible for securing all of Bonza's aircraft, which were leased at rates higher than the market average.
“777 paid leases to AIP from the start, and continued to do so until they didn’t,” the source said.
This clarification on lease payments comes amid a new lawsuit filed in New York by London-based asset management firm Leadenhall Capital, accusing 777 Partners of fraudulent activities.
777 Partners, headquartered in Miami and led by Joshua Wander and Steven Pasko, is alleged to have borrowed funds from Leadenhall, secured against approximately $530 million of assets that it did not own, were pledged to other parties, or in some cases, did not exist at all.
“If the borrowers did not actually own the assets pledged as collateral or had already pledged those assets to another lender, the entire facility would effectively become an illegal and unsecured piggy bank that an individual like Wander could use to finance risky private equity investments in aviation, media and sports, including professional football teams while paying lower rates under the pretence of secured financing,” said Leadenhall’s court filing.
“As it turned out, that is exactly what happened here.”
Australian Aviation reported last week that 777 Partners transferred approximately $30.9 million to English Premier League club Everton FC shortly after Bonza's fleet was repossessed. 777 Partners has been attempting to acquire Everton since at least September, but doubts have been raised regarding its ability to finalize the deal.
The firm faced legal action earlier this year from aircraft lessors over three 737 MAX 8s and one 737-800 from Bonza's Canadian sister airline, Flair, repossessed last March due to unpaid fees.
Three 737 MAX 8s and one 737-800 leased to Flair from three Ireland-based lessors were seized last March, prompting 777 Partners to transfer planes earmarked for Bonza to Flair to offset the shortfall. Flair has since severed ties with 777 Partners, reducing 777's 24 per cent stake in the airline to nearly zero.
Bradley Davren, CEO of Bonza's MRO provider AVCRO, stated last week that the airline was financially viable and was meeting its obligations before the planes were repossessed.
“The airline was trading with absolutely no credit issues. Obviously, we would be one of their largest creditors. They were never on stop credit with us. They never even appeared to be trending in that direction, and in fact, it’s unfair to the employees if this is wound up, to suggest that this is the reason why,” he said.
“Their load factors are fantastic. Their model works brilliantly, the aircraft are not too big. In my personal opinion, I think they should charge more for what they’re doing, but that’s neither here nor there. That’s a commercial decision on their behalf. And ultimately, there’s no reason that they would be insolvent outside of not having aircraft. That’s never happened in Australia, ever.”
Davren revealed that Bonza was close to securing a local buyer before its fleet was abruptly repossessed by AIP, catching the airline's management off guard.
“To the best of my interaction with Bonza, a new investor would have simply shifted liability from 777 Partners to another entity and Bonza would have continued trading with the four MAX 8s still leased by AIP under the fiduciary responsibility and control of local investors,” he said.
“The lead backer, to my understanding, is very well-known and would absolutely do wonders for multiple reasons. Yet to be seen if that eventuates, but had that outcome come to fruition, I suspect you would have seen Bonza kick into overdrive.”
Bonza CEO Tim Jordan, speaking shortly after the airline's first anniversary of operations, acknowledged that “no airline in the world is turning a profit with six aircraft” but expressed confidence in the company's trajectory toward breaking even and potentially expanding its fleet to 10 by year's end.
“There was an expectation in the market historically that you needed 15 or 20 aircraft to actually get yourself to break even or better,” he said. “That is not the case in terms of how Bonza operates and our financials. It is significantly less than that.
“So we are on the path, but it is a journey. And yes, we don’t get everything right, we miss a few steps, we learn some lessons, but very positively we’re on an upward trajectory and we’re on the way.”
777 Partners has not responded to Australian Aviation's request for comment.
Original Article - Jake Nelson Australian Aviation
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