Airline Investor Accused Of Shell Game, Ponzi Scheme

Nearly a year ago I wrote about 777 Partners, a Miami-based investment firm that has some suspicious investments in two airlines. Specifically, the company owns Australia’s Bonza Airlines and Canada’s Flair Airlines.

Bonza Airlines ceased operations days ago, after its planes were repossessed. With a lawsuit that has just been filed, one can’t help but wonder if Flair Airlines may soon face a similar fate. Keep in mind that in addition to airline investments, 777 Partners has also been buying sports clubs, which is probably more interesting to the average person (though hopefully not to us). 😉

777 Partners accused of massive fraud scheme

For some background, I’d suggest reading a post I wrote in July 2023, about 777 Partners’ suspicious airline investments. Long story short, the people behind the investment firm faced some serious accusations about their business practices.

According to a lawsuit at the time, 777 Partners was operating a big shell game. A former employee of the company even provided the following insights into how 777 Partners operates:

“All these businesses are losing money. Sport? Losing money. Aviation? Losing money. But who is going to take the loss? The joint venture partners. These guys play a shell-game. They claim to be self financed, to have put their own money into it. But they can’t have as much money as they say they have. It’s just not possible. But they don’t need a lot of money. Because what they really do is shunt money around. It’s a giant shell game. The same money is always out there doing something. And they are running it faster and faster.”

Well, the seriousness of these accusations has just been taken to the next level. As reported by The New York Times, 777 Partners is now being sued by Leadenhall Capital Partners, a London-based asset management company. The lawsuit describes 777 Partners as “operating a giant shell game at best, and an outright Ponzi scheme at worst.”

The asset management company had provided 777 Partners with more than $600 million in financing, but discovered that around $350 million in assets that served as collateral for loans had also been pledged to other lenders. One of the owners of 777 Partners even acknowledged this happened, calling it “an embarrassing mistake.”

Ah yes, definitely an “embarrassing mistake.” Happens to the best of ’em, right? Where there’s smoke there’s fire, and it seems like at this point the owners of 777 Partners may have more than just financial issues on their hands. It’s kind of amazing what people think they can get away with.

Bonza Airlines recently ceased operations

What does this mean for Flair Airlines?

Despite 777 Partners claiming to be so well funded, it’s interesting how the company’s airlines have repeatedly had financial issues, including aircraft repossession due to late lease payments. Of course that all makes sense now, and it’s probably because of the shell game that 777 Partners is reportedly running.

Bonza Airlines has ceased operations, and I imagine this latest update could also impact the viability of Flair Airlines. A few days ago it was revealed that a portion of the shares of Flair were acquired by an affiliate of Flair’s largest senior lender, providing new non-binding debt funding.

Details of this are limited, since the company isn’t publicly traded. However, I can’t imagine any way that Flair could actually be profitable, given all that we know. Canada is a super tough aviation market to begin with, especially for ultra low cost carriers. I mean, keep in mind that another Canadian ultra low cost carrier, Lynx Air, recently ceased operations.

Flair’s former VP of Finance claimed that 777 Partners essentially profited off of its airline investments by setting them up to fail. 777 Partners had reportedly loaned Flair $129 million with an 18% interest rate, and claimed that 777 Partners bought 737 MAXs for $42 million, and then sold them to the airline for $52 million, pocketing a $10 million profit.

If all of these accusations are true, then Flair’s cost structure has to be awful, given its aircraft acquisition costs, financing costs, and more. I can’t imagine many outside investors would want to come in and take over this airline, rather than just starting from scratch.

Will Flair Airlines be able to survive?

Bottom line

While 777 Partners has faced accusations of problematic business practices for quite some time, these accusations recently became even worse. The company is now facing a lawsuit over pledging the same collateral to multiple lenders.

Bonza Airlines in Australia has ceased operations, and now we’ll see what the future holds for Flair Airlines in Canada. The company’s largest lender has taken shares in the company, but we’ll see if that’s enough to keep Flair in business.

What do you make of this 777 Partners situation?

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Jack Zasiewski Guest

What difference real journalists from amateurs is depth of research. What a bunch of nonsense. It is comical to see amount of anti-low cost airlines press in Canada. Journalists instead of doing research get excited about some headlines and repeat them. WestJet started this when they realized their airline is no longer competitive and started Swoop which mission was to drive competition to the ground. Of course low-cost business will never work in Canada that's why Costco , Wal-Mart are struggling and The Bay, Eaton's, Sears are doing better than ever. Customers don't want good deal. Customers want a drone salesman who will push a product on their throat for an inflated price. It's unacceptable that people can buy $250 ticket Toronto Vancouver. That ticket should be $800 because Air Canada says so. Competition makes me angry I would love to see only one large carrier. Choice is confusing, let's nationalize our airlines into one big one. When you read a statement like" I can't imagine company is making money" you not only suspect this is bunch of garbage this is the proof. Well marijuana is legal and some will smoke too much before writing an article. If you want respect then do some research. A lot of research. If you don't want competition, there are newspapers in North Korea and Russia. Apply.

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Exit Row Seat Guest

That's 18 more MAX jets to be repossessed. Is that UA or AA that I hear calling?? "Southwest on line one....."

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Maryland Guest

See ya in court 777 Partners. That is if they can find you.

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CHRIS Guest

Flair will be gone in 2 weeks.

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Daryl Stuart Guest

Terrible carrier with incompotent Leadership that seem to be running the business into the ground. Though interesting that 777 Partners is leasing the planes to the airline knowing full well that it isn't sustainable. Would be interested to see the ownership structure of 777.

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