Qantas Airways Ltd (ASX: QAN) shares gained 1.4% on Tuesday. That was the day news broke that budget airline Bonza was entering voluntary administration.
However, the S&P/ASX 200 Index (ASX: XJO) airline stock gave back those gains yesterday amid the wider market sell-off. That saw the ASX 200 end the day down 1.2% while Qantas shares also fell 1.2% to $5.83.
While Bonza only commanded a small percentage of the Aussie air travel market share, the company's failure could further cement Qantas' dominant position in Australia, with Virgin as its only serious competitor.
Could Bonza's failure offer tailwinds for Qantas shares?
At the time of writing, it remains uncertain whether Bonza intends to continue operating during the course of its voluntary administration.
As The Guardian reports, during its 15 months of operation, the budget airline flew more than 750,000 passengers across Australia.
As of this year, Bonza had roughly a 2% share of the domestic market. While that's not huge, if Qantas can take over the more profitable part of those flight routes it would result in significant extra annual revenue.
Among the issues that hampered Bonza's operations was its lack of access to Sydney airport. Access that's been jealously guarded by Virgin and Qantas.
According to Tony Webber, CEO of Airline Intelligence & Research and a former chief economist at Qantas (quoted by The Guardian):
The incumbent carriers can be very competitive, particularly Qantas, which is hyper competitive. They realise that to preserve profitability they have to get on the front foot with the competitor.
"You've got to have a strong point of difference to the incumbents if you're going to succeed," Webber added. "Just because an overseas market with a similar population can successfully run four or five carriers, it doesn't mean that will succeed here."
Qantas responds
On Tuesday Qantas issued a release relating to the six overlapping routes Bonza shares with either Jetstar or Qantas. (Bonza flew a total of 36 routes.)
While offering generous alternate flights to impacted Bonza passengers, it also looks like Qantas may be hoping to secure a permanent share of those routes.
"For any customers with a cancelled Bonza flight on a route we operate, to make sure you're not further out of pocket, you can fly with us at no cost where we have seats available," the ASX 200 airline stated.
Qantas added:
We extend our thoughts to our aviation industry colleagues and their families – from pilots and cabin crew to flight planners and operations controllers – who will all feel the impact of today's news.
If Bonza employees would like to discuss recruitment opportunities within Jetstar and Qantas, particularly in specialised fields which are unique to aviation, we've set up a dedicated page on the Jetstar careers website.
Qantas shares are up 15% over the past six months.
