The Albanese government turned down a plea from budget airline Bonza for financial assistance 10 days before it entered voluntary administration and ultimately collapsed, and new documents have raised questions about what transport department officials knew and when.
Documents obtained by Guardian Australia through freedom of information laws reveal the transport department prepared a brief on Bonza’s financial assistance request for the transport minister, Catherine King, on 20 April. Ten days later the airline’s planes were repossessed and thousands of passengers stranded across the country.
The heavily redacted FoI documents also revealed that after the request for assistance was swiftly declined, department officials prepared a further brief on 21 April for King urgently warning Bonza’s fleet of leased Boeing 737-8 Max aircraft could be repossessed as early as the next day, on 22 April.
That timeline follows comments made by department officials before Senate estimates on 25 June. In that hearing, Stephanie Werner, the first assistant secretary of domestic aviation, was asked why they didn’t warn customers of the airline’s “tenuous position”. She replied: “We were aware that there were difficulties, but we were unaware that the aircraft were going to be repossessed on 30 April.”
“We were checking in on the situation, but our understanding was that the Bonza directors expected to be able to continue to operate. As such, it would have been inappropriate for us to reveal the financial challenges that they were facing,” Werner said.
Marisa Purvis-Smith, the department’s deputy secretary, also rejected the idea at estimates that it should have flagged Bonza was close to collapse, saying: “It is not the department’s or the government’s role to alert the public.”
Preempting Bonza entering voluntary administration, the department drafted talking points on 21 April to prepare King for journalists’ querying why the airline was unlikely to receive government funds despite Labor in 2020 urging the Morrison government to offer a rescue package to Virgin Australia as the aviation industry crumbled during the pandemic.
“We were rightly critical of the then-government hanging Virgin workers out to dry, just as we criticised them denying jobkeeper to essential aviation workers and encouraging air traffic controllers to retire,” one talking point said.
The document showed King was warned to expect the question: “why didn’t the government step in to support Bonza?” It was suggested she respond that “Australia has a market economy, and it is not the role of government to bail out shareholders and investors”.
Further talking points were prepared over following days. One draft from 24 April – six days ahead of voluntary administration – suggested if King was pressed on helping the carrier, she should say: “The government is not considering providing financial support to Bonza.”
“Our understanding is that Bonza is owned by a private equity firm based in the United States. As a general rule, the Australian government does not provide bailouts to offshore private equity holders,” the talking point said.
Given the timeframe of the FoI search, the department’s inquiries related to Bonza’s instability appeared to only begin in the days following a report in the Australian Financial Review that Bonza’s owners had engaged the firm KordaMentha to advise on its financial situation.
Creditors voted to liquidate the airline at the beginning of July, weeks after the administrators appointed to determine the carrier’s future terminated all staff and cancelled all future flights, after a failed search for a buyer.
Bonza’s 323 employees were stood down on 30 April, when the airline entered voluntary administration after its fleet of six Boeing 737 Max-8 aircraft was abruptly repossessed.
Administrators found the airline had recorded losses accumulating to $133m by the end of April when it entered administration, and that it had possibly traded while insolvent.
It later became clear that Bonza’s Australian-based executive team had been blindsided by a relationship breakdown between 777 Partners – the airline’s private equity sole owner – and its financier, the US insurance giant Advantage Capital Holdings, known as A-Cap, which led to a change in the ownership structure of the leased aircraft.
Early on in the administration process, the administrators had been confident of finding a buyer for the airline, but those hopes faded.
The loss of its entire fleet at a time of high demand for leased aircraft in global aviation, due to production issues at Boeing and Airbus, left little value in the business beyond its air operators licence.
Bonza’s employees have been able to claim entitlements owed to them through a federal government scheme.
In response to questions from Guardian Australia regarding the information in the FoI, King did not answer specifics about Bonza’s request for financial help and noted the government has ultimately begun paying Bonza employees entitlements owed to them since liquidation.
“Bonza Aviation going into voluntary administration was disappointing news, particularly for Bonza staff and customers with booked travel,” King said in a statement.
“The Australian government worked swiftly to liaise with airlines to rebook Bonza passengers on other flights, as well as set up a dedicated hotline to provide advice to Bonza passengers affected by the company entering voluntary administration.”
Tim Jordan, the former CEO of Bonza, was contacted for comment.
