Air NZ looking to sell some/all of stake in VA

[andrewpf]

To clarify, if you transfer Velocity points to KrisFlyer, Velocity would earn an income as they are effectively selling the points. So it's actually "costing" Singapore Airlines.
Depending on the deal between the two partners Velocity/Virgin could be financially gaining by transferring points out.

Ummm, surely that's wrong. To Virgin, the velocity points are like a debt they owe you. You can call on that debt to book flights with them, which costs them money. Transferring points from Velocity to SIA is like transferring the debt off Virgin's books and onto SIA's. So presumably Virgin is paying SIA cash in exchange for them taking the points. While it might be better value for Virgin to transfer points to SIA then to have you redeem them on their own flights, ultimately the best thing for Virgin from a cash flow perspective would be that you don't redeem them for anything.

 

[theevilmuppet]

Ummm, surely that's wrong. To Virgin, the velocity points are like a debt they owe you. You can call on that debt to book flights with them, which costs them money. Transferring points from Velocity to SIA is like transferring the debt off Virgin's books and onto SIA's. So presumably Virgin is paying SIA cash in exchange for them taking the points. While it might be better value for Virgin to transfer points to SIA then to have you redeem them on their own flights, ultimately the best thing for Virgin from a cash flow perspective would be that you don't redeem them for anything.

Not quite. Regardless of how they are accrued, the Velocity Trust has been paid for each and every point.

Further, Velocity actually needs to purchase Reward Seats from Virgin. Their business model relies on maximising the difference between how much they charge parties to offer Velocity points and how much they spend to fulfill the redemptions.

 

[deva22]

I'm more concerned about AirNZ selling out meaning that I'll no longer be able to accrue status using AirNZ for trans-tasman and domestic NZ flights than anything else

 

[Cryptarcadian]

I'm more concerned about AirNZ selling out meaning that I'll no longer be able to accrue status using AirNZ for trans-tasman and domestic NZ flights than anything else

Make of this what you will, from the ASX release:

“We look forward to continuing our partnership on the Tasman alliance, providing customers of both airlines with the most comprehensive trans-Tasman network,” Mr Luxon says.

 

[Jousams]

In relation to the above conversation, Velocity would pay SIA. Transaction for Velocity would be DR liability , CR cash/payable. Transaction for SIA would be DR cash, CR Liability.

 

[HeavyElectricity]

Moody’s has placed Virgin Australia in line for a potential credit rating downgrade due to its balance sheet profile and major shareholder Air New Zealand’s move to potentially offload all or part of its 26 per cent stake in the Australian carrier.

Moody’s places Virgin Australia on review for credit downgrade | Australian Aviation

 

[UP4014]

I remember AN with sadness.
This news brings back memories.
It probably won't go the way of AN, but yeah, not good news.

Nothing stays the same........

If one pulls out you're hoping the others will step in, they may not, just strip it, sell whats left and move on.

 

[UP4014]

Make of this what you will, from the ASX release:

Is that the same as we're right behind Tony Abbott at the same time they are drawing their knives. :shock:

 

[Milefest]

Make of this what you will, from the ASX release:

“We look forward to continuing our partnership on the Tasman alliance, providing customers of both airlines with the most comprehensive trans-Tasman network,” Mr Luxon says.

Related: Virgin Australia, Air New Zealand alliance is 'business as usual' - Australian Business Traveller

 

[UP4014]

AN nearly bankrupted NZ, don't think there was much flesh stripping going on.

Didn't the AN engineering dept and perhaps even the administrators at the time say there had been stripping going on. Like the story of the missing simulator and engines.

 

[Cryptarcadian]

I'm personally not that worried about the VA-NZ alliance for now -- both still need each other to compete effectively with QF, and that's not changed by whether a stake in VA itself makes sense to NZ any more.

 

[dajop]

I'm more concerned about AirNZ selling out meaning that I'll no longer be able to accrue status using AirNZ for trans-tasman and domestic NZ flights than anything else

Lack of equity ownership doesn't preclude strong commercial arrangements (as we see between QF& EK and QF & AA). I can't imagine why NZ would want to pull back from their commercial arrangements with VA, unless VA's other owners required them to (but NZ also have commercial relationships with SQ & EY). Freeing up capital by divesting their share of VA, doesn't mean they would have to destroy the relationship, it is handy for them to have a strong Australian partner, otherwise they are up against QF/EK alliance & VA by themselves.

 

[pauly7]

I'm personally not that worried about the VA-NZ alliance for now -- both still need each other to compete effectively with QF, and that's not changed by whether a stake in VA itself makes sense to NZ any more.

For the time being I agree it's safe.

But who really knows? EY could throw on some tag flights on a la EK, VA could decide to jump on those and then see you later NZ. You just never really know, certainly the pending removal of equity heightens the risk of alternative options being considered when they present themselves and certainly there has been no love lost between NZ and VA, that's abundantly clear!

 

[grubbidok]

I'm personally not that worried about the VA-NZ alliance for now -- both still need each other to compete effectively with QF, and that's not changed by whether a stake in VA itself makes sense to NZ any more.

Ditto, VA and DL have no equity tie up at all and the VA recognition on DL is prob better than the 'equity' partners, and appears to be improving.

With over half a million Kiwis spread throughout Oz (not just the capitals served by NZ) NZ also arguably need a strong Australian partner more than VA needs a strong NZ one, regardless of equity tie up. VA would see this as a good feeder into their domestic network too so I can't see EY etc competing with that even if they start tag-on flights.

Even if they hate each other, there are too many practical reasons VA and NZ need a strong partnership. I'm not too worried... about this relationship at least

 

[RobJ]

A 'run on the bank' with everyone transferring points out to KrisFlyer would cripple Velocity in an heartbeat.
Must say - I feel uneasy with a velocity balance. Especially with the junk offers they send me - says to me they're not good at monetizing their data.

Just moved 75% of my Velocity balance out to Krisflyer

While a 'bank run' seems likely given these comments, transferring to Krisflyer is probably just getting a little ahead of the game, since a Singapore takeover is the most likely end point - AirNZ could be manoeuvring to do the same, but most analysts think it really does need the capital at home. Delta is the other big possibility, unless there is Chinese interest. The big change may be in Virgin International - it's pretend Australian ownership is pretty fake and with a full foreign takeover something will have to be done to comply with the Air Navigation Act.

 

[pauly7]

While a 'bank run' seems likely given these comments, transferring to Krisflyer is probably just getting a little ahead of the game, since a Singapore takeover is the most likely end point - AirNZ could be manoeuvring to do the same, but most analysts think it really does need the capital at home. Delta is the other big possibility, unless there is Chinese interest. The big change may be in Virgin International - it's pretend Australian ownership is pretty fake and with a full foreign takeover something will have to be done to comply with the Air Navigation Act.

It's probably the best for VA and Aussie consumers that VA end up a subsidiary of Singapore. Deep pockets and strategically engaged. I suspect though it could mean the end of VA international, a fully owned foreign subsidiary would give Qantas pretty solid grounds to justifiably challenge their ability to fly internationally. I honestly don't think that is a major loss though, for VA, consumers or Singapore.

 

[PLANT]

Some Chinese Panama trillionair sheik will take VA...... Unless a super company want to move product of another company they own.......
Kogan... For a long shot

 

[Dannyism]

My money is on Singapore to increase their share.

 

[moa999]

My money is on Singapore to increase their share.

None of the existing holders can substantially increase their holdings without shareholder approval or making a takeover offer (as well as FIRB approval)

 

[RobJ]

You're right and FIRB approval is no problem since it's majority overseas owned already. My understanding (can anyone confirm?) is that under CER or other Aus/NZ deals AirNZ could fly domestically in Oz anyway - I've often wondered why they don't. I'm committed to QF as a life member of QC, but it's vital that they have effective competition to control prices. Don't want to bad-mouth Borghetti, but I've been surprised at how much praise he gets for really easy things like spending your owners' money on lounges and fancy seats; surely even the Arab owners must want the company to do the hard yards to make a profit someday. As for private equity investors, the basic rule of investing is never buy shares in an airline, they never make a profit over more than a very short term, unless they have a monopoly.