AN AVIATION expert who was involved in the founding of Jetstar is seeking to raise $200 million to create a new ultra-low-cost carrier in Australia called Zinc.
Peter Kelly is behind the concept, whose resume includes being a former group GM sales & distribution at Qantas, with investment documents showing plans to anchor the domestic airline at Western Sydney Airport and operate flights to Melbourne, Adelaide, Brisbane – before later expanding to the Gold Coast.
Zinc would operate a single fleet model using Airbus A321neos, with the pitch stating it would succeed where many had failed because there is finally an opportunity to access Sydney without the constraints of a “congested, curfewed, slot-constrained” hub in the form of Sydney Kingsford Smith Airport.
Kelly stated on the Zinc website that the likes of Compass, Tiger, Bonza and Rex had all failed because they had “flawed” business models while some had “stepped out of their own lane”.
Kelly is no stranger to airline launches, having been one of the founding architects of the now-defunct Cobalt Air, which was based in Cyprus until it collapsed in 2018.
Zinc said it could be operational in 17 months after receiving the financing needed to acquire the aircraft and fund operations.
Speaking to travelBulletin‘s sister publication Travel Daily, Watson Farley & Williams partner Alan Polivnick said that WSI provided a substantial opportunity for a third domestic player, but warned any new entrant could face fundraising challenges.
“[WSI] is slot- and curfew-free with a sizeable year-round catchment area,” he said.
“New entrants will have the benefit of prime slots and access, but this will not last – Zinc’s ability to build a hub and viable operation at WSI will also depend on the extent to which JQ and VA integrate WSI into their networks and Zinc’s ability to operate to slot constrained airports.”
Polivnick added that it may be difficult to raise the required funds due to the current fuel crisis and the recent fate of both Bonza and Rex.
CVFR Travel Group CEO Ram Chhabra agreed, and suggested it would be “a mammoth task” to raise the funds, but also added, “cost-of-living pressures can work in favour for an airline wanting to replicate the Ryanair model because the ticket prices should be far cheaper than a QF and JQ pricing structure”.
His biggest question was whether a domestic ULCC could “defy history” and survive in the high-cost Australian market.
Despite these concerns, Kelly told TD that he was “very confident” and had a “really good response so far”.
He said he was ideally looking for a cornerstone investor and three others to provide the initial $100 million required, but admitted he was not especially confident that any of the funding would come from local sources.
“Unfortunately, most of the funding will probably come from outside of Australia, which is a bit disappointing, but a domestic carrier can be 100% foreign owned, although I would not like it to be that situation.”
He suggested Zinc’s business plan was different, and was therefore something new for local investors to digest.
“It looks like we might get some [local] investment, but there’s never been investment before in startups of airlines in Australia with Australian money – that’s different for people investing and buying shares in Qantas or VA, which is just share trading.”
Kelly admitted that the fate of Bonza and Rex may have dampened local appetite for investment, but pointed to the success of carriers like Ryanair as to the results that can be achieved with a ULCC.
