(THEME MUSIC PLAYS)
(PA SYSTEM CHIMES)
ANNOUNCEMENT: This is an announcement
ANNOUNCEMENT: for all remaining Rex passengers This is an announcement that were originally on ZL68...
for all remaining Rex passengers that were originally on ZL68...
EMILY BAKER: Flying can be frustrating.
EMILY BAKER: In Australia our choices are limited.
So, this is my fourth flight for this story,
So, this is my fourth flight and it's my third delayed flight.
Late last night Qantas cancelled our flight for this morning,
Late last night Qantas cancelled no explanation given.
There's a graveyard of airlines
that have tried and failed to give us more options.
that have tried and failed Rex and Bonza are just the latest.
More competition would mean better prices, better service.
Australia's domestic aviation market
is among the most concentrated in the world.
is among the most concentrated (ENGINES WHINE)
I'll be there. (ENGINES WHINE)
I'll be there. OK.
Who is to blame for Rex's current situation?
This is the inside story of what happened to Rex.
Rex had an impeccable record.
For the first time Rex had an impeccable record.
For the first time we hear from the men in charge.
You have to say that the buck stops somewhere, and it stops at the top,
You have to say that the buck stops and he was at the top.
It's a journey that's taken us
from remote South Australia
to America's wild west.
Did Rex steal four planes from a company in the US?
How do you do that in broad daylight?
From accusations of stolen aircraft
to allegations of money laundering.
It is incredibly bizarre.
Aviation is dominated by big personalities.
JOE ASTON: They war with each other like sky gods.
They use their airlines as proxies for their ambitions of domination.
When their dreams come crashing down,
it's the rest of us who pay the price.
it's the rest of us (ENGINE ZOOMS)
OK.
So, tell me who you are and what we're doing, Ken.
So, tell me who you are My name is Ken Maynard.
I'm the mayor My name is Ken Maynard.
I'm the mayor of the district council of Ceduna.
How would you describe the importance of aviation
in a town like Ceduna?
I consider it to be essential.
(BIRDSONG)
Ceduna, South Australia.
(INDISTINCT CHATTER)
Almost 800km from Adelaide
and a world away from the country's busy east coast.
Melbourne is closer to Adelaide than we are, just as an example.
So, to go to Adelaide, it's a bit of a trip.
In a motor vehicle it's about at least nine hours,
whereas a plane, it's about an hour and 20 minutes.
Mayor Ken Maynard describes it as the tyranny of distance.
We are fortunate we do have a range of specialists that come to town,
but a lot of people have to go to Adelaide for medical reasons.
Obviously we've got some treatments here, but not everything.
Ceduna's airport has been a lifeline for many who live in the region.
Knock, knock! Hello!
Knock, knock! Hi. Who have we got here?
Come in. Hi. Who have we got here?
Come in. Oh, thank you. (CHUCKLES) Thanks.
RENEE ELLIOTT: When I was going away for treatment,
I'd be back on a Friday night just in time to watch Kaden play footy.
You must have been pretty buggered, though.
Yes, that's why it was always pizza night
'cause I wasn't coming home and cooking.
Are you ready to go?
My name's Renee Elliott.
I live in sunny old Streaky Bay.
Come on, guys!
Hold on!
Been home here over 20 years now.
So, eight and a half, nine hours from Adelaide.
So, very remote when it comes to having medical attention.
Renee Elliott has flown far more than she'd ever anticipated.
She's been diagnosed with breast cancer twice.
She's been diagnosed Ceduna is the closest airport.
I've actually flown 38 times since January,
so, having my fortnightly treatment I've actually flown 38 times since January,
so, having my fortnightly treatment
and then back for radio.
and then my weekly and then back for radio.
What flavour milkshake are you having today?
Strawberry, please. Strawberry? And what else?
At the end of the day it's about being home
and try to get through as much as I could
with the support of my kids and my family.
So, yeah, not having Rex flying out of Ceduna
would be very detrimental in that respect.
It's a growing anxiety.
Rex is the only airline servicing Ceduna,
Rex is the only airline and its future is under a cloud.
(RADIO NEWS THEME MUSIC PLAYS)
NEWSREADER: Rex Airlines has entered voluntary administration
NEWSREADER: Rex Airlines amid serious financial troubles
with questions amid serious financial troubles
with questions about its future viability.
NEWSREADER: The regional carrier has been losing $1 million a week.
NEWSREADER: The regional carrier Maybe what we'll do is...
The airline is still flying in the regions
while its administrators hunt for a new owner.
For people like Renee, it's an unsettling time.
People that live in the cities have got the alternative
that they can either public-transport it to somewhere
that they can either or train it, for instance,
or they've got a vast array of flights that they can take.
Yeah, we have no choice. We have Rex.
(ENGINE BUZZES)
Rex, short for 'Regional Express',
was built from the collapse of Ansett in 2002.
It combined two smaller carriers - Kendell and Hazelton -
It combined two smaller carriers - to pick up Ansett's regional routes.
PHOTOGRAPHER: Alright, guys, to pick up Ansett's regional routes.
PHOTOGRAPHER: Alright, guys, here we go! Big smiles!
It's a bit hard looking at the sun, isn't it?
It's a bit hard looking at the sun, It is.
Rex was launched by the then-federal transport minister...
(ENGINE WHINES)
..while the airline's inaugural boss kept everyone on schedule.
..while the airline's inaugural boss Linda? Linda!
Linda! We've gotta go.
We've got to go, mate.
(INDISTINCT CHATTER)
The company's motto places its loyalties in regional Australia.
VOICEOVER: Australia's friendliest and most reliable airline
now brings you to Sydney VOICEOVER: Australia's friendliest and most reliable airline
now brings you to Sydney
three times a day.
Rex. Our heart is in the country. three times a day.
Rex. Our heart is in the country.
But that's not the experience of every community.
As the only carrier on many regional routes,
As the only carrier the airline has built a fiefdom.
Some will attest its leadership can display the behaviour to match.
How would you describe Rex to deal with as a business?
Um...
Can we stop there for a second?
How much bargaining power does the council have
How much bargaining power when it comes to dealing with Rex?
Uh... I would say,
in reality, very little. Uh... I would say,
in reality, very little.
We have to remember that, in my view,
we need Rex more than they need us.
Councils run many of the nation's vital regional airports.
They charge fees to airlines for services like security screening.
I'll just get you to introduce yourself,
your name and your title for the tape.
Sure. Murray Wood, Chief Executive Officer, Dubbo Regional Council.
When it comes to negotiations, Rex has a reputation for playing tough.
Councils are used to vigorous conversations,
but that can be done respectfully and professionally. Councils are used to vigorous conversations,
but that can be done respectfully and professionally.
Um... To be honest, I haven't had...
From what I can see,
the relationship with Rex is unique.
In 2019
Dubbo announced a fee increase to help fund airport upgrades.
Rex sent Dubbo residents a letter signed by the airline's chairman,
describing the council as either "very corrupt or very incompetent,"
"self-serving" and "bigoted".
It threatened to stop flying to the regional city.
How much extra was Rex being asked to pay the council?
How much extra was Rex It was $1.99 per passenger.
The airline decided to wear the cost and stay in Dubbo.
But this is not the only council to face the wrath of Rex.
Ready to go? We're ready.
My name is Phill Stone and I'm the mayor of the City of Whyalla.
For almost a decade
this steel town flanked by desert and sea
this steel town had two airlines -
Rex and QantasLink.
When the council resolved to introduce security screening
When the council resolved at a cost to both carriers,
a service only required for at a cost to both carriers,
a service only required for the type of planes flown by Qantas,
a service only required for Rex's reaction was fierce.
Mayor, I have two press releases here that Rex put out.
I'll just get you to read the words that we've highlighted.
(READS) "Devious and underhanded.
"Ungrateful.
"Council has been deliberately deceptive.
"Rex believes that Whyalla Council has lost all of its credibility."
I've never read anything so... dare I say spiteful, so aggressive?
Because at no stage
was the council and those negotiating with Rex at the time
devious and underhanded.
Whyalla is now a one-airline town
reliant on QantasLink.
Regional monopolies can cost residents.
Regional monopolies In Ceduna
Rex can charge up to $600 one way for the 90-minute flight to Adelaide.
KEN MAYNARD: They are hard business people.
We haven't increased our fees, for example, in the last eight years, KEN MAYNARD: They are hard business people.
We haven't increased our fees, for example, in the last eight years,
with an aim to try and keep fares as low as possible.
But they are in the business of business and that's the way it is.
They do have the upper hand,
but that's just the cards we're dealt with.
but that's just the cards We have to be realistic. Yep.
We can't afford to lose them.
Rex's motto is 'our heart is in the country'.
Do you think they've been displaying that?
We would say not.
The route between Melbourne and Sydney
is one of the busiest in the world
and the most lucrative in Australia.
In 2020 Rex declared it wanted a slice of the spoils.
JOHN SHARP: We're now going to do a ribbon-cutting
in a few moments' time in the archway.
(CHEERING, APPLAUSE)
Using COVID grants to support its regional routes,
it then secured private equity to lease jets.
Its plan was to take on a pandemic-weakened Virgin
Its plan was to take on by flying between capital cities.
Rex is really taking on the big guys. We are the underdog.
They were good small-town operators, Rex is really taking on the big guys. We are the underdog.
They were good small-town operators,
and they should have stuck They were good small-town operators,
and they should have stuck to their bread and butter
and they should have stuck and consolidated in that way.
They were just... It was a bit like The Beverly Hillbillies.
One, two, three. Here's to Compass. (CAMERA SHUTTERS CLICK)
The so-called 'Golden Triangle' -
the route between Sydney, Melbourne and Brisbane -
is littered with the carcases of those who have gone before.
Compass launched as Australia's first low-cost carrier in 1990.
Compass launched as Australia's It failed twice.
I don't believe that.
Next came Impulse.
It was eventually absorbed by Qantas.
Tigerair tried to stake its claim in 2009.
It was bought by Virgin and shut down in 2020.
Australia once had legislation
protecting the two incumbent airlines from new entrants.
protecting the two incumbent It's no longer law,
and those carriers are long gone,
but the duopoly remains our reality.
Research tells us airfares fall when there's more competition.
But today,
9-out-of-10 domestic passengers fly with Qantas or Virgin.
It's this context that makes Rex's entry on the Golden Triangle
especially audacious.
Why would you risk shareholders' money in a venture especially audacious.
Why would you risk shareholders' money in a venture
taking on two very established and financially fit competitors now
who'd just gone through...
..Virgin went through who'd just gone through...
..Virgin went through a reorganisation,
..Virgin went through Qantas got the chance to re...
They're as financially fit as they've probably ever been.
And then you jump into their space?
Well, you're going to get a competitor backlash.
Both airlines are fiercely protective of their slice of the sky.
I'm Joe Aston,
I'm a former newspaper columnist at the Australian Financial Review,
and now I'm about to be the author of a book about Qantas
called The Chairman's Lounge.
Qantas is a very aggressive competitor. Hyper-aggressive.
Many of its competitors have found that out the hard way,
Many of its competitors have found that out the fatal way.
Rex is just the latest.
Our investigation has found
that, after Rex entered the lucrative Golden Triangle,
Qantas increased the number of low-cost Jetstar seats
Qantas increased the number available on its city routes
while also entering 10 of Rex's regional routes.
What Qantas does is use its superior scale
to put unbearable pressure on the profits of their competitors.
I mean, that's what big monopolies do.
They have bigger pricing power,
so, they can lower their prices
and still either not lose money or not lose very much money
and still either not lose money but crush the smaller operators.
While Qantas circled with cheap seats,
Virgin often matched Rex's lower pricing.
BRETT GODFREY: Qantas are the dominant player in the market
BRETT GODFREY: Qantas are and, respectfully,
they do whatever it takes, I would argue legally,
they do whatever it takes, to protect that position.
Virgin today to protect that position.
Virgin today is the second carrier in the market,
and they're doing their damnedest to protect that position.
As long as the two don't do that in a coordinated fashion,
As long as the two don't do that I think the market benefits.
It's sort of a sign I think the market benefits.
It's sort of a sign of, if you like, silent,
not illegal, but silent cooperation It's sort of a sign of, if you like, silent,
not illegal, but silent cooperation
between Qantas and Virgin
to drive the third player out of the market.
In a statement Qantas said Jetstar's growth
reflects increased demand for low-cost leisure travel
and was not directed at Rex.
The airline also rejected the suggestion
that it coordinates on pricing or network with Virgin.
Virgin told us it welcomes competition.
The airline giants have also been accused
of blocking competitors' access to Sydney Airport.
In the immediate aftermath of Rex's decline,
partial blame was placed on the system
that determines whose planes get to land and when.
BRIDGET MCKENZIE: We need to make sure
BRIDGET MCKENZIE: that our domestic aviation system
is open to new players to provide that competition, that our domestic aviation system
is open to new players to provide that competition,
and getting access into Sydney Airport is a key component of that.
The company that hands out take-off and landing slots
is majority-funded by Qantas and Virgin,
is majority-funded but the person who runs it
disputes that they have any say in her decision-making.
PETRA POPOVAC: The CEO, which is myself, I'm the slot manager,
is responsible for the allocation of slots
and to ensure that we are abiding by the rules provided to us is responsible for the allocation of slots
and to ensure that we are abiding by the rules provided to us
and to ensure that we are abiding by the Australian Government
and by the World Airport Slots board as well.
Petra Popovac says it's not her fault Rex struggled to compete.
It received most of the slots that they applied for
and all of the slots in the peak period
that they were wanting to operate.
They had too many in the peak, so, they handed some back.
They had too many in the peak, The slots are not the problem here.
The government has announced reform to Sydney's slot system
since Rex entered voluntary administration.
But what happened at the airline goes way beyond airport access.
This sort of half-baked venture of taking on Qantas
and being the third major domestic airline
was just such a strategic error, but such an obvious strategic error. and being the third major domestic airline
was just such a strategic error, but such an obvious strategic error.
Um... It sort of
smelled of fantasy
or of, um...of...
Well, it's always ego. (CHUCKLES)
So, A and B. Mark. Well, it's always ego. (CHUCKLES)
So, A and B. Mark. K, rolling?
Good to go? Yes, please.
Good to go? Emily, where will you be sitting?
I'll be there. Over here. OK.
Hi, Emily. Hi, Mr Lim.
Hi, Emily. Thank you so much for joining us.
Yeah. How's it all been going? It's been goodish.
Did you have a good time with Kim Hai?
Coffee? Are you ready to go? Yes, I'm totally ready to go.
Rex was run by the same two men for almost two decades -
Rex was run by the same two men Singaporean businessman Lim Kim Hai
and former federal Transport Minister Singaporean businessman Lim Kim Hai
and former federal Transport Minister John Sharp.
and former federal Transport Minister Why would a Singaporean businessman
get involved in a regional Australian airline?
Very good question.
I have only two words.
I was stupid and I was naive.
This is the first time since Rex entered voluntary administration
that the men have gone public.
They're no longer on speaking terms.
How would you describe Mr Lim now?
Well, it's a difficult thing to describe Mr Lim now without, um... How would you describe Mr Lim now?
Well, it's a difficult thing to describe Mr Lim now without, um...
..expressing views describe Mr Lim now without, um...
..expressing views
that are probably best not said in a public place.
There's one thing that Lim Kim Hai and John Sharp agree on -
that Qantas was a factor in the troubles facing Rex.
Was it a mistake to go into domestic market?
It was a mistake to assume Was it a mistake to go into domestic market?
It was a mistake to assume
that Qantas would behave responsibly.
What they did was to try to cut us off at the roots,
and they went into the regional markets
to make sure that we do not get any profits.
What I don't think we had taken into account
was just the...if you like, the vindictiveness of Qantas,
who decided, "Right, OK, we're going to really teach Rex a lesson.
"We're going to go into these markets,
"undermine their regional business,
"take away the income that they have in that regional business
"which can support their domestic business start-up,
"and that will kill them off."
And they did it ruthlessly.
And they were successful.
Qantas says its move into Rex's regional routes
Qantas says was in response to demand.
The ACCC told Four Corners
it has investigated concerns raised by Rex
and that they did not meet the threshold for further action.
John Sharp admits Rex should have been better prepared.
Was the gamble on intercity operations worth it?
Was the gamble Hindsight would say no.
I think it was the beginning
of what became a very bad chapter
in the history of the company.
Rex was a company with an unusual structure.
Lim Kim Hai was not only the executive chairman
Lim Kim Hai was not only but also the largest shareholder.
He had a hand but also the largest shareholder.
He had a hand in every aspect of the business.
The words that stung regional councils were his.
You've been described in different ways.
A micromanager. A strategist.
Sometimes rude. Successful.
Unhinged.
Also generous.
I tend to agree to all the adjectives
that you have mentioned.
With 'unhinged'?
That depends on your definition of 'unhinged'.
The reason why I managed to be successful
is because some of these so-called unhinged decisions
are decisions that most people wouldn't make.
Rex had an impeccable record
both in terms of its operations
and in terms of its financial capability.
So, obviously I did something right for over 20 years.
As his deputy, John Sharp has long appeared loyal to Lim Kim Hai.
As his deputy, John Sharp has long But, with the airline in trouble,
the former Nationals MP is now distancing himself
from how the boss did business.
The language that's been used has been used...uh... from how the boss did business.
The language that's been used has been used...uh...
..primarily, it's Kim Hai's way of doing things.
We've had many arguments
as to how those comments and statements should be made.
With respect, it sounds like a bit of a cop-out, doesn't it,
to say that it's all on him -
"He just did his own thing, there's to say that it's all on him -
"He just did his own thing, there's nothing we could do about it"?
"He just did his own thing, there's Well...you can call it a cop-out,
but I would say to you it's an explanation of how it worked.
Maybe we should have done more.
I don't know what we could have done more.
Because at the end of the day, he holds the power within the company.
I've always taken the stand Because at the end of the day, he holds the power within the company.
I've always taken the stand
a public remark about Rex,
that if you make a public remark about Rex,
we will hold you accountable to it.
It became an issue when we started to lose money.
So, it was an issue,
but they grudgingly accepted it
when the airline is doing well.
And Rex, when it was a regional carrier run by Lim Kim Hai,
was profitable.
(ENGINE BUZZES)
But its financials show
that, after entering the city routes,
the passenger service began bleeding cash.
the passenger service John Sharp says
earlier this year the board proposed changes in strategy,
in particular better marketing.
All of those were rejected at the time
by the then-executive chairman.
This was the beginning of the end.
When it became apparent there were problems and he wasn't fixing them,
that's when everybody on the board
decided it was time to do something that we had never done before,
and that is to ask Kim Hai to step down.
There was another thing that increased tensions at the top of Rex.
Did Rex steal four planes from a company in the US?
Did Rex steal four planes I'm aware of this allegation.
In the dry desert of Arizona
just off Route 66
sits a storage facility just off Route 66
sits a storage facility holding planes,
including those Rex needed for spare parts.
The regional carrier paid a deposit on four of these aircraft in 2019.
What happened next is now playing out in court.
What happened next Jet Midwest alleges
Rex arranged to have the aircraft collected, their wings sawn off
and the parts shipped to Australia
without its knowledge.
Lim Kim Hai says Rex didn't steal the planes.
When you accuse somebody of theft,
it must mean that I come without your knowledge
it must mean to take something from you.
How do you do that to take something from you.
How do you do that in broad daylight
How do you do that over several weeks
on an aircraft that is so big?
John Sharp claims the first he heard of the situation
was when the directors received a legal threat in March.
You can imagine - was when the directors received a legal threat in March.
You can imagine -
here we are, you know, the business is not trading well,
there's no plan to turn the business around,
and all of a sudden we get this letter land on our doorstep
saying these aircraft allegedly have been bought by you
saying these aircraft and have now not been paid for.
And you can almost argue that and have now not been paid for.
And you can almost argue that was the straw or one of the straws
And you can almost argue that that broke the camel's back.
We've obtained a shipping receipt
showing parts at the centre of the dispute
were destined for Rex's base in Wagga Wagga.
Lim Kim Hai denies they're in the custody of Rex.
But do you know where the aircraft are?
I've got no idea where the aircraft is now.
I've got no idea We've heard that they're in Wagga.
The aircraft is not in Wagga.
You can go to Wagga yourself
and look and see whether the aircraft is there.
It sounds like you DO know where they are.
I do not know where they are.
Well, you know where they're NOT.
I really do not know where they are not.
Ultimately, there is a contract, I really do not know where they are not.
Ultimately, there is a contract,
we honoured our contract.
And, so, what happened after that?
If we followed the normal contractual process,
we would have gotten it done.
But now they start this allegation,
we will have to let the courts sort it out.
One thing in all of this is indisputable.
The issues at Rex have left almost 670 people without a job.
John Sharp believes this could have been avoided.
The board was negotiating to sell its intercity operations to Virgin.
We put in place a rescue plan,
and we thought that rescue plan
would avoid the need for administration,
it would avoid job losses,
but, unfortunately, that plan was torpedoed.
but, unfortunately, Who torpedoed it?
Well, again, the former chairman.
Virgin and its owner, Bain,
declined to comment on their dealings with Rex.
As the largest shareholder,
Lim Kim Hai had demanded As the largest shareholder,
Lim Kim Hai had demanded a seat at the negotiating table.
What happened is this -
I said that, as a shareholder,
if I'm not involved in it,
I wouldn't accept it.
It sounds like a threat.
It's not a threat.
A shareholder needs It's not a threat.
A shareholder needs to act in his own best interests.
You can't think that Rex is in a good position now.
You can't think that Rex Rex is not in a good position.
But how would we know what would be the position of Rex?
Just because you say that Virgin might or might not step in
doesn't mean that the airline will be in a good position.
doesn't mean that the airline (BLADES WHIRR)
Sometimes people (BLADES WHIRR)
Sometimes people can be the sort of people who think
that, if it's not their idea, it's a bad idea
and will reject it because it's not their idea.
And that's the situation we found ourselves in.
(ENGINES WHINE)
Some of the same people
who today be accusing me of, you know, various bad things
are the same ones that have stuck by me since 2005 and before.
are the same ones that have So, if I'm all that bad,
why did you stick around?
From one troubled airline to another.
Queensland's Sunshine Coast -
home to beaches, bathers and holidaymakers.
This was the home of Bonza.
Bonza pledged to do things differently.
(BIG-BAND MUSIC PLAYS)
Wasn't that a bonza flight?!
(CHEERING, APPLAUSE)
A proudly bogan business flying big jets
A proudly bogan business between regional centres
boasting ultra-cheap fares.
Founder, Tim Jordan, had a dream.
Bonza's DNA is about creating market growth,
giving everybody, no matter where you live, Bonza's DNA is about creating market growth,
giving everybody, no matter where you live,
the same opportunities to connect with friends and family.
BRETT GODFREY: If Qantas or Virgin thought it was a great idea
to fly 180-seat aeroplanes between Maroochy and Cairns,
well, they probably would have done it. to fly 180-seat aeroplanes between Maroochy and Cairns,
well, they probably would have done it.
There just wasn't the market there.
It was just... It was economic suicide from the outset.
It was just... It was Bonza.
Pff. It was doomed from the beginning.
That depends on who you talk to.
(ENGINE RUMBLES)
PAUL MCKEOWN: I was a naysayer as well.
I thought, "Oh, who wants to go to Aubrey?"
But when we saw that it was so popular,
I thought, "Well, why hasn't anyone done that before?"
I thought, "Well, why hasn't anyone (ENGINE ZOOMS)
My name is Paul McKeown.
I'm a commercial pilot
and I live on the Sunshine Coast.
Paul McKeown had a front-row seat to the early Bonza bonanza
and to what he says was its preventable collapse
and to what he says in just over a year.
The start-up of Bonza went tremendously well.
We really generated an airline from nothing,
and we had a great wave of public support
and our loads were really good,
which flew in the face
of some of the negative commentary we got before we started.
of some of the negative commentary (LIVELY MUSIC PLAYS)
Bonza soon announced plans for expansion -
a new base on the glitzy Gold Coast by the end of 2023.
a new base on the glitzy Gold Coast (PLAYS ROCK MUSIC)
(CHEERING, APPLAUSE)
But there was a problem.
The airline barely had enough planes for its existing network.
Management decided to bring in jets and crew from Canada.
Local staff feared Bonza wouldn't get regulatory approvals
Local staff feared Bonza in time for take-off.
I know for a fact that some of the senior pilots
were bringing these points to the attention of the management
were bringing these points in quite strong terms.
Of course, what did happen is we started selling seats
on tickets that we were never, ever going to be able to supply.
Regulators' sign-off came much later than expected.
The delay was catastrophic for the airline.
15,000 passengers' flights cancelled near Christmas.
We saw this Shakespearean tragedy evolving before our eyes.
We saw this Shakespearean tragedy You know, everyone was thrilled
to have a low-cost option for air travel.
And, you know, we would find that energy
at barbecues and in social settings.
People would say, "Oh, you work for Bonzo. Isn't that great?
"Isn't it so good for the Sunshine Coast?"
Well, after the disaster of the Gold Coast base, um...
..that mood totally changed.
Do you have any sense then of why they would push on with this plan
that it sounds like most people were saying may not work?
Yeah, that's a good question.
None of us have any idea.
And we don't know what, um...
..what pressures were being forced on management by our funders.
The answer to that takes us to the other side of the world.
After more than a decade planning his airline dream
Tim Jordan found open minds and pockets in Miami
Tim Jordan in investment firm 777 Partners.
VOICEOVER: We believe that the old way of doing things was broken.
We had a vision of a better way.
777 affected an air of money and celebrity.
Its investments were varied,
from personal-injury payouts
to aviation and financially-stricken football clubs.
Investigative journalist Paul Brown knows more than most about 777.
PAUL BROWN: This seemed to be a company
with serious ambitions to change the Australian airline market.
However, um...
..for anyone who accepted this deal at Bonza,
I think there are questions to be asked
because from the beginning there were a series of red flags.
Bonza relied on 777 for money and aircraft,
Bonza relied on 777 but its administrators
have been unable but its administrators
have been unable to find a formal funding agreement
setting out how much cash they'd be given and when.
We've been told there were also no contracts
that specified how many planes they'd receive.
VOICEOVER: It's our people, our brands, our culture.
VOICEOVER: It's our people, Bonza's funding came in bursts,
sometimes late, Bonza's funding came in bursts,
sometimes late,
but management maintained their faith in 777 founders,
Josh Wander and Steven Pasko.
Josh Wander has a chequered history.
He was the subject of drugs-trafficking charges,
to which he pleaded no contest in college.
That resulted in him being put on probation
for a period of more than 10 years.
777's founders claimed they were personally bankrolling
777's founders claimed the firm's investments.
It has since emerged
a large insurance firm sat above the company,
but its other sources of funding remain unclear.
There are a series of Russian oligarchs, for instance,
There are a series who invested money with 777.
777 is now embroiled in multiple court cases,
including one alleging $500 million worth of fraud.
We've confirmed the firm's investment in Bonza
forms part of a US Department of Justice investigation
forms part of a US Department into money laundering.
777 and its founders did not respond to our requests for comment.
777 and its founders did not respond This is who Bonza did business with.
Any responsible director obviously has duties.
They have a duty of care both to the business and to its customers
to make sure that the money you're accepting
comes from a reputable source.
And I think that is where the failing occurred
And I think on the part of Bonza's directors.
Bonza collapsed in April.
NEWSREADER: The financial woes
come after the company that owns its aircraft lessor
tried to repossess its planes.
And I can't get onto a support line because everybody else is calling.
With the company now in voluntary administration,
it will have a hard time living up to its name.
ASIC is now examining whether Bonza was trading insolvent.
The airline's founder and chief executive, Tim Jordan,
declined an interview with Four Corners.
He instead referred to a statement given in June
that said the airline's progression was stymied by under-capitalisation
that said the airline's progression and the repossession of its aircraft.
(INSECTS CHIRP)
Bonza's liquidation left more than 300 people out of a job.
Paul McKeown believes the airline could have worked.
PAUL MCKEOWN: If another airline was going to try the same model,
and I hope they do because the Bonza model was a winner,
I just hope, one, that they've got good backing,
but also that they listen to the voice of experience in the company.
You had to be there, you had to be there
and be involved with the company to realise that, "You know what?
"No, it didn't need to fail. It shouldn't have failed.
"It was a fantastic airline, a great product."
And it's just such a shame that it went the way it did.
There is one Australian who can lay claim to getting it right.
Brett, I'll get you to introduce yourself.
Sure.
Brett Godfrey, former important Sure.
Brett Godfrey, former important person in aviation. No longer.
How about that? (LAUGHS)
Brett Godfrey co-founded Virgin Blue,
the airline launched Brett Godfrey co-founded Virgin Blue,
the airline launched with great fanfare in 2000.
Funded by British billionaire Richard Branson,
its origin story is more bar than boardroom.
It was literally a few too many pints in a London pub,
and there was a dozen beer coasters where it just got knocked up.
and there was a dozen beer coasters The vision was quite simple.
We knew coming into the market
that one of the incumbents, being Qantas or Ansett,
were susceptible to failure.
They had uncontested markets,
and they'd got to a point
where they were both and they'd got to a point
where they were both financially a bit strained.
Brett Godfrey was sure his airline had a competitive edge.
(BELL DONGS) (CHEERING, APPLAUSE)
We just knew that we could sell every seat on our aeroplane
for about $79 and make money,
and we knew if they matched us
they'd be losing about $1 million to $2 million a day.
they'd be losing about And that was unsustainable.
(INDISTINCT CHATTER)
After more than 65 years in the sky,
Ansett was the one to fail.
PASSENGER: Are any of the flights Ansett was the one to fail.
PASSENGER: Are any of the flights still flying at all?
Nothing? REPORTER: All grounded.
Why's that? Everything's grounded.
They've gone into liquidation. No more money.
Its collapse paved the way for Virgin's success.
Virgin came in with a brand, a different model,
a preparedness to take on the big guys
a preparedness and a consumer-facing brand
that was always deemed to be the underdog.
Guess what.
Australians, like nobody else on the planet, love an underdog.
That underdog is now an aviation overlord.
Its founder believes this duopoly works for consumers.
Its founder believes I think the market is different,
but both airlines I think the market is different,
but both airlines need to be very, very cognisant
that, you know, it is a slippery slope.
that, you know, They've got to keep innovating,
they've got to keep lowering their costs
and they've got to keep financially fit
or they will fail.
I mean, all across the world that's happened with airlines.
Even with the threat of fierce competition
Even with the threat and the ghosts of airlines past,
there's at least one new company willing to try its luck.
there's at least one new company Bill, I'd like to ask you something
that I think many Australians Bill, I'd like to ask you something
that I think many Australians will be wondering.
How nuts do you have to be to start a new airline in this environment?
How nuts do you have to be to start You have to be insane.
So, you have to have You have to be insane.
So, you have to have a degree of insanity.
I'm Bill Astling. I'm the CEO of Koala Airlines.
Bill Astling has been in aviation for decades
and he's no stranger to taking on major players.
and he's no stranger In the 1970s
he stared down a court challenge from Ansett
he stared down a court challenge to launch cargo carrier Air Express.
For anybody to launch cargo carrier Air Express.
For anybody to turn around to me and say,
"There's not room for a third airline,"
"There's not room really isn't looking at the figures
or looking at the projections.
This is a growth,
and there are more people coming in from overseas,
and it can't all be done by two airlines.
Exactly where Koala Airlines will fly, when it will launch,
Exactly where Koala Airlines how it will compete and who's paying
isn't clear.
At this stage Bill Astling doesn't isn't clear.
At this stage Bill Astling doesn't want to reveal his business model.
We're just not prepared to give away what our strategy is
and allow competitors to be able to think,
"Right, well, we can work on this or work on that."
We've got a lot of support.
Um...
We've also got a lot of sceptics.
I've had a few people who've said,
"Have you appointed the liquidator yet?"
So, I've had to tell him we're putting him out to tender.
So, I've had to tell him (CHUCKLES)
(ENGINES WHINE)
It's been argued
Australia's landmass is too big and its population too small
to sustain more carriers.
JOE ASTON: This country is big enough for three airlines.
The problem is that one company owns two of them.
I mean, the ultimate solution, if you cared for the consumer,
would be that Jetstar should not be owned by Qantas.
Running Jetstar
allows Qantas to compete Running Jetstar
allows Qantas to compete on both ends of the aviation market.
Professor Allan Fels believes even the threat of forced divestiture
Professor Allan Fels believes even could benefit consumers.
(ENGINES WHINE)
ALLAN FELS: I think it would be highly desirable
for our aviation market to be aware there's such a power.
for our aviation market It would be up to the courts
to determine It would be up to the courts
to determine if there is illegal behaviour.
to determine It's possible in some cases
the best remedy is break up.
And if Qantas and Jetstar were competing with each other
instead of using each other at both ends of the market
instead of using each other to sort of manoeuvre,
um...
..I think we'd have a very, very different set of outcomes.
But, of course, Qantas will be forced to divest Jetstar
on the day that pigs fly over the east-west runway.
A Qantas spokesperson said breaking up Qantas Group
would increase costs and put upward pressure on fares.
The ACCC declined our interview request.
Transport Minister Catherine King also declined to be interviewed,
but in a statement referenced the government's Aviation White Paper,
which she said includes significant reforms to boost competition.
which she said includes significant (ENGINES WHINE)
Australia has a rich aviation history
and a reliance on planes to keep us connected,
but big ambitions undercut by poor judgement and flawed policy
have left us with a market that doesn't always serve consumers.
JOE ASTON: Australians in the small towns,
JOE ASTON: they understand
the competition issues they understand
the competition issues that we're talking about here.
This is a matter of life and death.
The federal government says it wants to enable greater competition,
but, without action to match political words,
we're at the mercy of an industry that's allowed to put us last.
(THEME MUSIC PLAYS)
Captions by Red Bee Media
Copyright Australian Broadcasting Corporation Captions by Red Bee Media
Copyright Australian Broadcasting Corporation