The start-up airline hopeful eyeing off Australia’s market

The mind behind Zinc Airlines, a proposed new domestic airline, says he has received interest from UAE investment groups since revealing plans for the ultra-low cost carrier.

Despite Australian aviation historically being a tough market for new challengers, Zinc Airlines aims to take advantage of the opening of Western Sydney International airport to build out an ultra-low-cost carrier. Its goal is to bring meaningful competition to the market, dominated by Qantas-owned Jetstar and Virgin.

Peter Kelly, a consultant and previous Qantas loyalty boss, said he had been inundated with queries from investors in Australia and overseas in his bid to raise $225 million to launch Zinc, a plan that first emerged publicly last month. The capital-raising effort was “going very well,” he said, though he emphasised it had not received offers of funding.

Parties based in the US, Europe and the Middle East, specifically, from Abu Dhabi in the United Arab Emirates (UAE), have been in touch. They are the “people who are behind the airlines, and people who are involved with the sovereign wealth funds there”, he said.

Kelly, who helped start Qantas’ loyalty program and has consulted to airlines in Asia, Europe and the Middle East, describes himself as a “mainly a commercial person” who would structure Zinc with ultra-low cost carrier “cost discipline” from inception.

The plan for Zinc was first written about The Australian Financial Review.

Asked to describe the size of the investment interest, Kelly said some was on the small side, $10 million being the smallest, and some involved larger figures. He said he had heard from “family offices” and “small financial entities”.

“We’re looking for a cornerstone investor,” said Kelly, who would ideally fund half of the $125 million in equity capital. The airline would require another $100 million as a standby liquidity facility to help it weather “stressed downside scenarios” like fare weakness, adverse fuel and currency movements, and delays in card payment.

“Under-capitalisation is a common reason why new airlines fail in this market.”

Once fully funded, Zinc would aim to offer tickets costing less than current low-cost carriers, flying 15 efficient A321neos between Western Sydney International, Melbourne, Brisbane (airports with no curfew), and the Gold Coast. “Later we add Adelaide,” Kelly said.

Kelly, who is working along with his son, Mark, a payments and loyalty consultant, said there was no timeline for the cap raise but it would be in “months, not weeks”.

“We’ll be out there basically as a disruptor rather than trying to stimulate more demand,” he said.

Zinc, Kelly said, will seek what he described as Ryanair’s strategy to keep the planes in the air and full. Western Sydney, he says, has a catchment of nearly 3 million people to serve. At the same time, Zinc is removing complexity in crew by ensuring the plane returns to its home port by the afternoon, where a fresh crew awaits to fly later into the day.

Kelly helped found Cyprus-based Cobalt Air in 2015, but left the company before its 2018 collapse.

Despite the interest in a new airline, Australia has proven a notoriously difficult market for new domestic entrants.

Rex Airlines moved into serving capital cities before it fell into administration in 2024 and was later purchased by US-based AirT, who have pledged to return the Australian carrier to its core regional business. Bonza flew for just over a year before suspending services in 2024.

The cost and complexity of creating a start-up airline to compete in Australia means Zinc will need a person with operational experience to launch an airline, said aviation consultant Ian Thomas.

“It’s incredibly difficult, and you need a reasonable amount of capital,” said Thomas. “You need, essentially, a fighting fund.

“You’re going to face intense competition, both from Jetstar at one end and also from Virgin, and you have to maintain a product and establish a product in the market where the others are already well established.

“So there are great difficulties in that area, but it’s mainly being able to afford to ride out the inevitable pricing competition you’re going to get from the other operators,” said Thomas.

“There are inherent difficulties in trying to take them on” across their established core market, Thomas said.

Foreign investors have traditionally been a source of backing for local airlines. Singapore-backed Tigerair was taken over by Virgin Australia in 2013, which shrank and then wound down its operations in 2020 as COVID hit.

The prospect of WSI offering a fresh entry for a domestic airline into Australia has reportedly attracted would-be investors, who nonetheless could not attract financial backers.

“Australian banks have nil appetite [for funding airlines],” said aviation consultant Neil Hansford, who said National Australia Bank had long-memories of losses from backing Ansett, which collapsed in 2001.

The fundamentals are that Australian banks can make excessive profits with real estate as security, much of which carries government guarantees and support.

Banks, however, typically “love aircraft leasing as it is asset-backed and easy to foreclose on”.

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