Barely a year after Bonza airlines started flying regional routes not serviced by Qantas, Virgin or Rex, the startup carrier now appears to be grounded indefinitely – if not for good.
Bonza fell into voluntary administration in late April after the leases on its aircraft were cancelled by the US investment firm that had funded the venture.
Tens of thousands of customers, many in mid-trip, were left with no flights and no refunds in sight. It was an especially hard landing for customers who were led to believe refunds were on the way.
On 30 April, shortly after it became clear that Bonza was on the brink of collapse, affected customers received text messages from the airline saying they'd get their money back within 21 days. All they had to do was fill out an online form within 24 hours.
Tens of thousands of customers, many in mid-trip, were left with no flights and no refunds in sight
That hurried promise was quickly revoked. Administrator firm Hall Chadwick announced the next day that processing refunds for customers was not on the cards at the moment – and it may never be.
On 7 May, Hall Chadwick said the lessors of Bonza's aircraft, 777 Partners, will likely move the fleet to another airline.
Customers considered 'unsecured creditors'
Airline customers would be considered unsecured creditors by administrators trying to figure out how to salvage what's left of the business. They would generally be the last in line to get their money back. Secured creditors such as banks, on the other hand, get priority treatment.
In the case of Bonza, the hierarchy of compensation is complicated given the number of creditors apparently owed money, which would include airports and ground staff, refueling services and, of course, Bonza employees, who are in a particularly tight spot. Of 323 employees, 302 were stood down in early May and told their April wages would not be paid. In total, Bonza owes money to about 58,000 creditors, including customers.
Secured creditors such as banks get priority treatment
One standard remedy for customers who have paid for services that were not delivered is a credit card chargeback, but it's an iffy prospect in the case of Bonza. Chargebacks depend on the card issuer getting the money back from the bank associated with the failed business. Given the extent of its debts, that could be a very tall order in the case of Bonza.
Travel insurance is another option, but also probably a long shot. In our most recent review of travel insurance policies, relatively few insurers offered cover for insolvency of a travel provider.
In a general response to customer enquiries, Hall Chadwick says, "The administrators confirm that the processing of refunds cannot occur at this time. Customers who have had flights cancelled should contact their financial institution or insurance providers to discuss the available options."
On 3 May, Hall Chadwick announced they "are still working with a number of key stakeholders to provide funding in order to resume flight operations and will continue to do so over the weekend".
The administrators confirm that the processing of refunds cannot occur at this time
Bonza's administrators, Hall Chadwick
An initial meeting between the administrator and creditors has been scheduled for 10 May. Somewhere between four and six weeks after that, a second meeting will be held where creditors will vote on whether to execute something called a 'deed of company arrangement', which generally results in a better return to unsecured creditors than a liquidation. Alternatively, the creditors can vote to end, or liquidate, Bonza airlines for good.
If refunds for customers are not forthcoming, millions of dollars in flight payments will go to Bonza's other creditors – an outcome that would be especially galling in the midst of a cost-of-living crisis.
If refunds for customers are not forthcoming, millions of dollars in flight payments will go to Bonza’s other creditors.
Key info for Bonza customers
- Bonza's fleet is currently grounded, and the lessors of its aircraft have indicated they'll likely move the fleet to another airline.
- The status of flights from 29 May onwards is unknown.
- Stranded passengers have been instructed to contact Qantas on 13 13 13, Virgin Australia on 13 67 89 and Jetstar on 13 15 38 to make alternative bookings.
Need for a compensation scheme
In our view, paying for a travel service and ending up with nothing is not an equitable outcome. In a 2021 CHOICE report on the travel industry that we submitted to the federal government, we recommended looking at the establishment of an industry-funded last-resort compensation fund. The pool of money would cover customers when a travel provider goes bust.
Paying for a travel service and ending up with nothing is not an equitable outcome
A previous Australian travel compensation scheme was retired, in part, because it was determined that travellers could be reimbursed through credit card chargebacks and travel insurance. In our view, this is an ineffective remedy.
How to get in touch about refunds
- Administrator Hall Chadwick has set up a hotline for Bonza customers that it says is available from 7am to 10pm – (03) 8678 1600. However, when CHOICE called the phone rang out.
- Customers can also email Hall Chadwick at [email protected]
- Administrators should make a 'proof of debt' form available to customers seeking refunds, but the Bonza case hadn't reached that point at the time of publication.
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