Virgin back in the black, ‘as profitable as QF’

[Saab34]

Sure is one heck of a turnaround. Still has a long way to go I think, many things to cleanup and fix, however when was the last time they actually made real money? 10-15 years ago?

Virgin Australia could make IPO as early as next year: Jayne Hrdlicka says​

Virgin Australia chief executive Jayne Hrdlicka says the airline has returned to profitability and is considering listing on the ASX as early as next year.​

Tansy Harcourt

Jayne Hrdlicka talks to ground staff airside at Brisbane Airport on Thursday. ‘We’re punching above our weight.’ Picture: Lyndon Mechielsen

Virgin Australia chief executive Jayne Hrdlicka says the airline has returned to profitability and is considering listing on the ASX as early as next year.

...

https://www.heraldsun.com.au/business/virgin-australia-could-make-ipo-as-early-as-next-year-jayne-hrdlicka-says/news-story/221bb6021a25c08f3afdef3b8423e649?amp&nk=1d8582c25d202e8c71cb972739b86264-1654777152#

Hrdlicka says Virgin doing ‘at least as well’ as Qantas

In an interview with The Australian, the CEO hailed the business’ “extraordinary” recovery and hinted it could be relisted on the ASX as soon as next year.

australianaviation.com.au

 

[HS-TQE]

Since the last financial year of Virgin Blue (2009-2010), IIRC. Prior to that VB was largely making millions in profit year in year out for most of their tenure.

Since mid 2010, VB's successor VA 1.0 had only made a profit once, and that was in the year of the QF strike where AJ shut everything down. Other than that, VA 1.0's other years were losses.

Although Virgin Blue by that point moved away from a all-737 carrier with their first expansion in Regional Services through Brett Godfrey's Embraer 170/190s acquisitions in 2007. V Australia was also in the process of setting in the following year (2008) after the Embraer acquisitions.

 

[ozstamps]

Well as Jayney (and other brass) will doubtless get a few million freebie shares in any float, the earlier, the better for her, one imagines.

 

[Anna]

'As profitable as QF' doesn't exactly fill me with confidence ....

 

[ozstamps]

'As profitable as QF' doesn't exactly fill me with confidence ....

The same thought crossed my mind!

I do not follow profit reports closely, but do recall reading Qantas were technically bankrupt a year or so back? Gazillion $$$s bail out package of taxpayers money notwithstanding.

I feel sure The Qantas MD has assured everyone within earshot that they are rolling in profit, but he also says the Qantas phone answer system has been working like a charm all year.

NOTHING that idiot ever says I'd believe. How he still kept a job post 2018 still amazes me.

 

[AustraliaPoochie]

Guess that JH must hold a very tight fist.
And also, it was not all her good deeds, PS in a way, maybe not to our liking, did VA a good thing by putting it into VA when covid struct, otherwise, what could have been the outcome now, SQ and the rest letting VA1 die, as NZ did to AN all those years ago.
Maybe an all 737 fleet is a good thing, also, not to our liking, but it does reduce costs.
No long haul international flights of their own, also probably saved VA money, now relying on paying partners to get bum on seats of partners, rather than VA themselves having to fly the planes.
I can see why JH can claim VA will be in the black, as with QF, financially speaking, but its mainly due to cost reductions, rather then increasing revenue.
Just looking at VA J fares, $399 to fly at some times of the day ADL - MEL, where as QF is asking in the range of $6xx.
What happens when ZL starts their FF system, or if.
What happens when and if Bonza does start flying, or if, (don't know what IATA code Bonza will get).

 

[Saab34]

I think it’s in the best interest for the bottom line to have United run the long haul stuff, as much as I love VA widebody ops, and I will miss it, if it means a more stable company with it then I’m all for it. Is considerable cost and future headwinds avoided also.

 

[antycbr]

I think it’s in the best interest for the bottom line to have United run the long haul stuff, as much as I love VA widebody ops, and I will miss it, if it means a more stable company with it then I’m all for it. Is considerable cost and future headwinds avoided also.

Back in the VA1 days my understanding was that the Domestic 737 operation and VARA Skywest was profitable, US was break even and everything else (Tasman, VA SE Asia, North Asia and Regional) lost money.

The 777 was the wrong model - the 300 had too many Y seats, plus the freight limitations from poor choice of customer options.

The A330s were too much aircraft and the price of the leases was prohibitive.

 

[HS-TQE]

Back in the VA1 days my understanding was that the Domestic 737 operation and VARA Skywest was profitable, US was break even and everything else (Tasman, VA SE Asia, North Asia and Regional) lost money.

The 777 was the wrong model - the 300 had too many Y seats, plus the freight limitations from poor choice of customer options.

The A330s were too much aircraft and the price of the leases was prohibitive.

The mainline domestic operation had a profit downturn in the last VA 1.0 reporting period prior to Voluntary Administration. Though saying that, the mainline 737 operation did make revenue even if it meant routes had to carry the loss making ones (eg. Golden Triangle carrying domestic mainline and LAX carrying the now defunct loss-making Long Haul Int'l operation)

The only unit of VA 1.0 consistently making revenue year in year out was the separate VFF subsidiary from memory.

The VARA revenue stream was mainly through FIFO ops, and that's only starting to get going again with the A320 expansion and the F100 replacements with the 73Gs.

Both the 77W and A330 under 2 CEOs had poor decisions. Mixing the 77W Cargo Door configuration (3 with small doors and 2 with large doors) was not a great Godfrey decision, limiting freight potential and let's not get started with Borghetti's A330 leases.

 

[Saab34]

At least when fuel goes through up periods, United is wearing that vs Virgin then chewing away at its domestic earnings trying to cover it.

 

[andrewpf]

I mean, they stripped off all the dead wood as part of the administration process; and are focusing on the most profitable routes at a time when domestic travel has really rebounded.

I don't think Rex can really compete with QF/VA on the golden triangle - they just don't have the fleet to match the frequency that both QF and VA can muster (and VA being slower to expand back to its former network has kept aircraft available on routes that need them most).

E.g. Sydney - Melbourne ... Virgin is flying every hour, and then every half hour in peak periods; Qantas is flying every 15 minutes (although my experience is they seem to cancel a number of these in-between flights); while Rex seems to only be flying 4 times a day. Plus Jetstar is interspersed throughout for leisure travelers.

On top of that, it seems that Qantas has started going after Rex's profitable regional routes ... which they use to cross-subsidise other services; so we'll see how it all ends up for them.

 

[AustraliaPoochie]

Has to be said though, VA and ZL can have a relationship, if both side agreed to it, as there are some airports that VA does not serve, and some that ZL don't serve.
Of course, not that the 2 can ever come to an agreement on a lot of things
Ie, if a person or family from regional countryside wants to go overseas on a holiday, they could, IF there was a FF or other arrangement/agreement to go with VA and SQ on one PNR to somewhere VA flies ie, DPS/NAN, or to link to an SQ airport like a country town to east coast Au/ADL to link onto an SQ flight.
But seriously, VA and ZL will never do it.

 

[HS-TQE]

Has to be said though, VA and ZL can have a relationship, if both side agreed to it, as there are some airports that VA does not serve, and some that ZL don't serve.
Of course, not that the 2 can ever come to an agreement on a lot of things
Ie, if a person or family from regional countryside wants to go overseas on a holiday, they could, IF there was a FF or other arrangement/agreement to go with VA and SQ on one PNR to somewhere VA flies ie, DPS/NAN, or to link to an SQ airport like a country town to east coast Au/ADL to link onto an SQ flight.
But seriously, VA and ZL will never do it.

With 'egos' and 'prides' at the USA and Singapore PE companies behind the helm at Virgin and REX, it's a case of 'hell will freeze over' before those two will come to the table for a 'partnership deal'.

It wouldn't surprise me if both Bain/Virgin and 777/Bonza are waiting for (at least) REXJet to 'fall over' before looking at the scraps (If there is anything of value at REX).

 

[Harrison_133]

It wouldn't surprise me if both Bain/Virgin and 777/Bonza are waiting for (at least) REXJet to 'fall over' before looking at the scraps (If there is anything of value at REX).

I think you answered your own question. If the hypothetical did happen, why would either Bain or 777 bother? Rex have no brand recognition, a lack of passengers and no permanent slots in Sydney etc. VA can easily add extra aircraft and take on the crew themselves, without needing to waste money ‘acquiring’ anything from Rex, and they still have the Tiger slots to play with. Similarly, Bonza wouldn’t want the old -800’s, they seem to be chasing low-frequency routes and they’ve already said Sydney Airport is too expensive.

Maybe VA might see some value in Rex if we’re talking about the regional network, but I think it’s more likely we’d see an expansion of the Link Airways partnership before VA & ZL become friends again. I also don’t think VA & Bain would be that interested in Rex’s regional network. VA don’t need to be everything to everyone, focus on what works, forget whatever doesn’t. They did that by ditching the ATR fleet and routes. Rex also doesn’t have to be everything to everyone either, focus on regional like they have successfully done for 15+ years.

PS in a way, maybe not to our liking, did VA a good thing by putting it into VA when covid struct, otherwise, what could have been the outcome now, SQ and the rest letting VA1 die, as NZ did to AN all those years ago.
Maybe an all 737 fleet is a good thing, also, not to our liking, but it does reduce costs.

Completely agree. While we might not like all the decisions that Bain & Jayne have made, ultimately I don’t see how things would have ended well or better if SQ and friends had remained in control (IMO there would have been no VA at all, or at least a VA on borrowed time). They obviously needed some serious structural changes, and that clearly wasn’t going to happen with SQ/EY/HNA Group, so I agree, perhaps the best thing PS did was put VA into administration. It wouldn’t had been in any of our interests if VA had continued in the state it was.

I think some here would criticise Virgin for anything they do, but they seem to be hitting a lot of home runs lately. And with the many QF shambles of late, it’s good they’re focusing on being themselves and not a copy of Qantas. Obviously there are still things they need to work on (premium entry please), but returning to profitability in such a short period is good news for us all. A stable VA is better in the long-term than the VA that tried to do everything and just bled money.

 

[Saab34]

What’s they delay with the wifi and premium entry? Seems to be dragging on a bit. I assume they cannot agree on pricing around contracts?

Are newspapers and magazines back yet?

 

[openseat]

While we don't know exactly what is happening with VA under Bain, we do know that with increasing interest rates - Qantas' capital position doesn't look good. (From WSJ)

Capital Structure​

Total Debt to Total Equity 1,604.09

Total Debt to Total Capital 94.13

Total Debt to Total Assets 46.02

Interest Coverage -8.48

Long-Term Debt to Equity 1,340.55

Long-Term Debt to Total Capital 78.67

Long-Term Debt to Assets 0.38

The liquidity position is hardly confidence inspiring:

Liquidity​

Current Ratio 0.45

Quick Ratio 0.41

Cash Ratio 0.29

 

[Saab34]

That’s pretty ugly. They might need to sell some more land, I was reading somewhere about the huge upside should they decide to partially float Jetstar Australia. Would solve debt issues almost immediately. Would generate a huge figure for the business when looking at its earnings in the back half of this decade.

 

[openseat]

That’s pretty ugly. They might need to sell some more land, I was reading somewhere about the huge upside should they decide to partially float Jetstar Australia. Would solve debt issues almost immediately. Would generate a huge figure for the business when looking at its earnings in the back half of this decade.

AJ must be thinking how he parachutes out of QF and maybe this is the answer. Richard Goyder must also be thinking along similar lines.

 

[AustraliaPoochie]

Although, in the end, we can't say never never.
Who would have thought that a major airline in OW would ever begin an agreement with VA.
Meaning QR.
Smart move all round on that one!
Revenue sharing there, of course, and cost minimising too, ADL - AKL on QR, VA does not spend too much on the planes, as its QR who flies it, and bears the majority of the cost of the route.
I wouldn't have even thought they would have such an agreement.
But its a good thing though, like if someone had the inclination, they could fly QR ADL - AKL direct, by passing the east coast capital cities transit wise at their airports.
Yes, the schedule might not be an ideal, ie, its not a daily but an alternate day service, but in a way too it gives time to finish work at 5.45pm/6pm, for the 10pm flight to AKL.
(A)NZ will when they start coming back to ADL, fly their neo aircraft, single aisle, with no J cabin, and their own FF system is quite hard to earn in, more worthwhile to put points to KF and then when and if points transfers come back, use the points on VAd flights.
Must say/admit, JH is shrewd!

 

[jase05]

AJ must be thinking how he parachutes out of QF and maybe this is the answer. Richard Goyder must also be thinking along similar lines.

Slightly OT but AJ is going nowhere and plenty within believe he has another 3-4 years in him