VA's poor first quarter result

[Melburnian1]

VA's first quarter result for 2016-17 released to the stockmarket today was, perhaps unsurprisingly, poor.

It made a loss: extraordinary items bumped up the loss further.

The patience of the various major shareholders (SQ, EY, newest member HNA group, Branson) and the 10 per cent who are minority (mum and dad?) shareholders would vary.

I can't see much light at the end of the tunnel.

Imagine what VA's loss would be if fuel prices were higher.

Australia is an expensive country in which to travel if you're a middle income earner with a family so no wonder lesiure travel is allegedly pretty much stagnant. VA is more exposed to domestic tourism than QF.

 

[bean]

Maybe they should just write everything off in the one year and then look like heros next year like Qantas did

 

[dajop]

Imagine what VA's loss would be if fuel prices were higher.

Isn't part of the problem that VA's fuel prices ARE higher (well compared to its competitors) due to it's hedging strategy.

 

[kamchatsky]

Australia needs a good and healthy VA, otherwise QF would just increase their prices. I do hope that VA will get out of its troubles.

 

[samh004]

Australia needs a good and healthy VA, otherwise QF would just increase their prices. I do hope that VA will get out of its troubles.

This is something I don't disagree with anyone on, but I think they're trying to be two things at the same time... a premium airline and a low cost carrier, and they need to pick a side and stick to it. They probably also need to stop raising the premium bar when their major competitor domestically is Qantas, because it's not needed and I fear is only contributing to their woes.

That said, I just had a look at the report they released today, and they only made a loss after tax of $34.6 million, so it could have been far worse! They better hope fuel prices don't dip any further though if they're hedging into the first half of 2018!! Tigerair seems to have done well.

 

[moa999]

But Virgin now has Tiger - that's its LCC.

I can only see the mix continues to shift - more Tiger flights, less Virgin.

The only question is whether Virgin can hold enough frequency to be attractive to the corporate market

 

[Cool Cat Phil]

Australia needs a good and healthy VA, otherwise QF would just increase their prices. I do hope that VA will get out of its troubles.

Im totally with you!

In my situation I have sat on my VA shares for well over a decade now and they have been nothing but a disappointment. I'm resigned to the fact that a dividend cheque may never make an appearance again.

But needless to say despite my loyalty to QF, it's imperative for VA to remain strong in order for both product and price competition to continue. Australian consumers have benefited enormously from VA's presence, particularly those who travel J on the East > West coast routes, where VA have certainly been widely credited as the industry invigorator.

 

[cove]

It is not an easy business. Flooding the market with Velocity points sign up offers probably has not helped as many families flew for free recently.

 

[RooFlyer]

Maybe they should just write everything off in the one year and then look like heros next year like Qantas did

I think that's usually only available to a new, incoming CEO who takes out their predecessor's 'trash' and therefore shoots past several of their KPIs the next year. Bonus!

 

[trippin_the_rift]

It is not an easy business. Flooding the market with Velocity points sign up offers probably has not helped as many families flew for free recently.

Totally agree I wouldn't like to run an airline. Too many moving parts which are susceptible to multiple variables.

However a flood of points would have the opposite effect if redeemed for flights as the airline generates new revenue on these transactions. In this sense - velocity wants people to redeem their points as it would increase the airlines earnings.

 

[cove]

At work we had multiple sign ups for about 200,000 Velocity points off two credit cards per person. I really doubt that money was made out of the many points flights redemptions. Those deals were incredibly cheap from Amex and NAB.

 

[dajop]

However a flood of points would have the opposite effect if redeemed for flights as the airline generates new revenue on these transactions. In this sense - velocity wants people to redeem their points as it would increase the airlines earnings.

Of course though if they were used to transfer to KF miles, then that could paint a different picture.

 

[Mogul]

Don't FF. points sit on the balance sheet as a liability?

 

[cove]

VA now own less of their loyalty program than a partner.

 

[Boof1]

VA now own less of their loyalty program than a partner.

Not quite, they sold 35% to Affinity Partners in 2014, but hence VA's problem. Apart from the 65% share of Velocity they own less of everything, have significant cash flow issues and now again need to go cap in hand back to the investors. They own 8 of 117 aircraft, are committed to some hefty lease payments, a woeful hedging strategy, and have nothing to leverage to right the ship.

Makes you wonder what really is going on behind the scenes. Whatever it is it's not pretty.

 

[cove]

Boof1 thanks for correcting my percentage error regarding who now owns the loyalty program.

 

[RooFlyer]

Oh-oh. Together with what's been shown on this thread, I think its time to make sure I don't have many Velocity points in the bank. I had my Golden Wings burned once before.

 

[Boof1]

Boof1 thanks for correcting my percentage error regarding who now owns the loyalty program.

No worries Cove!

In fact I made an error in my post as well as VA own quite a few more of the jets (61 of 149). I got the numbers from the Australinea article and website that has since been removed after this: Nocookies | The Australian

(Google it if you can't access directly as it is well worth a read)

Cheers,
Boof

 

[Dannyism]

Totally agree I wouldn't like to run an airline. Too many moving parts which are susceptible to multiple variables.

However a flood of points would have the opposite effect if redeemed for flights as the airline generates new revenue on these transactions. In this sense - velocity wants people to redeem their points as it would increase the airlines earnings.

What are your thoughts on the health and life of VA as a business?

 

[Bodie]

I think virgin australia is in little bit of strife.
They have had loans, sold 35% percent of Velocity, oil is cheap (despite hedging) and still cant make profit.
One of their part owners - Singapore airlines had drop in quarterly profit to 109 million, about15%. Still made profit but shares went below $10 dollars. I dont think they want to spend too much more. Not sure about the rest.
It all now depends on the chinese airline and their plans.
Virgin america has been sold off alaskan.
So i expect depending on foreign ownership laws - a full sale in near future to chinese airline.