VA's latest loss hardly worth popping out the champagne

[Melburnian1]

While the sharemarket is all about future predicted performance and not 'today', I don't share the sentiments of VA that its latest quarterly loss (notwithstanding that fuel hedging may make it difficult to immediately share gains from lower aviation turbine fuel prices) is something to 'celebrate':

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The 'devil is in the detail.' VA's continued reliance on the leisure market that to put it mildly is very subdued will continue to weigh it down.

VA hasn't exactly made a financial success of international flying either.

Warren Buffett shows his financial intelligence by declining to invest in airlines and insurers.

Those who invested in QF in the last year or so may disagree, because the share price has risen substantially. However it remains well below that of several years ago with neither QF or VA paying a dividend, in QF's case not since March 2009 if I recall.

Our political spinners have got nothing on those who work for Australia's airlines. If I was JB, I'd be further rationalising unprofitable routes, especially internationally. MEL - DPS is one obvious candidate, with four airlines offering nonstop flights and competing for a slice.

 

[Spongbob]

About $17 million of the $22 million loss was due to fuel hedging. The revenue for VA domestic was "flat". The VA international and TT data were more encouraging.

 

[Melburnian1]

Irrespective, VA (and QF) have got a long way to go before they recover previous years' losses and on top of that make an acceptable return on shareholders' capital, and pay reasonable dividends.

If airlines were rational businesses, both would have been closed down by their Boards long ago.

 

[yohy?!]

Airlines are Airlines - highly susceptible to market forces. Don't see what else VA could do differently than what they are which is diversifying their revenue and increasing their yields while holding costs down, expansion is on hold - agree they should rationalise loss making routes where it makes sense to do so which I expect Tiger will be used to do.

 

[Warks]

Warren Buffett shows his financial intelligence by declining to invest in airlines and insurers.

I work on the same principle but I'm not doing anywhere near as well as him! My motto - buy high and watch it fall!

 

[Jeffrey O'Neill]

Irrespective, VA (and QF) have got a long way to go before they recover previous years' losses and on top of that make an acceptable return on shareholders' capital, and pay reasonable dividends.

If airlines were rational businesses, both would have been closed down by their Boards long ago.

To be honest there's be plenty of other airlines that should have been shut down years ago but are propped up by Governments. MY and TG should be distant memories. JAL was helped through bankruptcy by the Japanese Govt. NZ was for all intents nationalised after 9/11. Alitalia has been a basket case for a decade or more, Air India has remained on Govt life support for over a decade. The US airlines have all been through bankruptcy protection multiple times. QF has been relatively well run and certainly done better than a lot of airlines that receive far more support from their own Governments. VA made it's own problems and would have collapsed if not for the deep pockets of EY and SQ.

The airline industry as a whole has never made an adequate return on capital, mainly due to the over capacity caused by keeping poorly run airlines alive. The restrictive nature of air rights and access to slots at key airports also constricts new entrants.

 

[Melburnian1]

After initial plaudits, I noticed that by Friday 31 July, some media - notably 'The Australian's' business pages - its aviation page - featured comments by analysts who were not that complimentary about VA's loss for 2014-15 (although that was because of its required quarterly update - its full profit and loss disclosure including revenue and costs per available seat kilometre is released in August.)

The analysts were surprised or dismayed to see VA increasing seat capacity on some routes.

Once again, it's hardly a result to get excited about.

There is usually a lag between fuel prices dropping and airlines reaping the benefit, but one has to ask 'if fuel prices were at higher levels - say close to A$1 a litre wholesale - how poorly would VA (and QF) fare?'

I hope that VA's management is not congratulating itself too much. Its international division may be small but is a perennial loss maker.

 

[NZflygirl]

I work on the same principle but I'm not doing anywhere near as well as him! My motto - buy high and watch it fall!

Shorting stocks?