Article - Etihad ponders exit of VA

[Notyourbag]

Unfortunately the article is pay to view - Nocookies but the first line reads "There is renewed speculation in the market over the intentions of Virgin Australia's shareholders, with some pondering whether Etihad Airways is about to stake an exit."

What do we think would be the:
a) likely outcome if Etihad sells up
b) best outcome to takeover Etihad's share

Is there any chance Virgin would seek Emirates or Qatar to step in to full a Middle East gap?

 

[UP4014]

If EK was departing I'd guess a non airline might have a go, a pension fund or some other equity fund.

 

[samh004]

I'd have thought one of the Chinese carriers might take a bigger stake. Some airlines just seem to be passed around, useful at a particular time but never really carving out their own path... and it seems that is where VA has landed now. I can't imagine Emirates taking a look considering they have a tie-up with Qantas.

As for the Middle East gap... they have many gaps, so I'm not sure the Middle East is such a big concern/priority. One door closes but a whole different one opens.

 

[grubbidok]

My guess is that Delta would have at least a sniff around.

Maybe I'm biased towards EY, but I've never liked their product, and they seem to have been the kiss of death for most airlines they've invested in. Doesn't take much to assume this means their influence and vision has not been helpful to VA.

Same could be said of any ME carrier though really (none of them seem to be able to work well with others, mostly following a go-it-alone strategy). If they left the alliance it would leave a massive hole though.

 

[codash1099]

I can't see Hainan taking up a larger holding - they have their own financial problems at the moment. And there may not be a rush from others either - VA's performance hasn't actually been setting the world alight.

 

[melb78]

would be great if Singapore takes more shares of it

 

[AustraliaPoochie]

It won't be EK that is departing, Etihad is EY.
Don't think EK will burn its bridges with QF, or that QR will. These 2 are already in a tie in with QF, via its own agreement for EK, and OW with QF and QR.
Probably it would most likely be a China airline.
I could sort of see it coming the way that they (EY) are on a break "(down)" with FB as in Flybuys.

 

[Isochronous]

SQ or the Chinese would be the best bet.

 

[Strategic Aviation]

There's coverage of the coverage at Etihad says Virgin Australia remains an important partner - Airline Ratings.

There was also 'Five elephants in the room': Virgin Australia dances ownership tango - Sydney Morning Herald in January:-

“I don't see a very short-term divestment by Etihad in Virgin, but over the longer term I think that partnership can continue without the shareholding," he said, adding that Etihad would "100 per cent" want Virgin to privatise.

I can't see Hainan taking up a larger holding - they have their own financial problems at the moment.

Indeed, significant issues with parent HNA Group.

Nanshan Group is almost invisible by comparison, although there was Virgin investor Nanshan Group was named in corruption cases against officials - Australian Financial Review in 2016. They might still now be shy of doing anything that risks drawing attention to themselves.

 

[Bagpuss]

If Etihad unloads I would suspect the existing airline alliance will remain. I actually think Virgin's best alliance partner is Delta.

Given Virgin isn't asking for cash at the moment I can't think of what the benefit of selling would be, other than "cash in the bank" as the Virgin investment would still sit on their balance sheet as an asset. (Remember accounting profit's don't reflect a bank balance.)

 

[Strategic Aviation]

Indeed, significant issues with parent HNA Group.

HNA Group Wants To Sell Their Stake In Hilton - One Mile at a Time

HNA Group has stakes in about a dozen Chinese airlines (including Hainan Airlines), Hilton, and Carlson, just to give a few examples. The company has been in deep financial trouble for the past several months. The company’s chairman describes these problems as arising because they made a big number of mergers in a short period, and because they’ve transitioned from rapid to moderate growth, which has impacted their access to new financing. With rate hikes by the federal reserve, this has caused a liquidity shortage for many Chinese businesses, including HNA Group.

This liquidity shortage has turned into a crisis for some of HNA Group’s airlines, as they haven’t been able to make lease payments, and in some cases are even unable to pay for jet fuel.

To most, HNA Group is a bit of a mystery, with limited information regarding who is behind the company, and where they’re getting all their money from.

In a move that certainly won’t do anything to further peoples’ confidence in HNA Group, the company has announced that they plan to sell some or all of their stake in Hilton. The company owns a 26.1% stake in the hotel giant, making them Hilton’s largest shareholder.

 

[pauly7]

I'd have thought one of the Chinese carriers might take a bigger stake. Some airlines just seem to be passed around, useful at a particular time but never really carving out their own path... and it seems that is where VA has landed now. I can't imagine Emirates taking a look considering they have a tie-up with Qantas.

No chance their Chinese parents will stump up - they have their own biiiiggggg problems - have a google, it’s fascinating reading.

Is there any chance Virgin would seek Emirates or Qatar to step in to full a Middle East gap?

EK was working with VA but dumped them for QF tie up. Doubt they would go back. Qatar is also affiliated with QF so unlikely there too.

 

[docjames]

I’d like to see DL increase their stake. It seems to have helped VS.

VA really would be better served having 1-2 major investors rather than the current split. They should probably also consider delisting from the ASX.

 

[pauly7]

I’d like to see DL increase their stake. It seems to have helped VS.

VA really would be better served having 1-2 major investors rather than the current split. They should probably also consider delisting from the ASX.

VS has become a very small niche operator overtime it will be interesting to see what’s DL does with it I agree.

VA probably can’t afford to delist I would suggest - but yes they should, in the state that they are in now they would not be able to list ironically!

 

[Pleb Status]

I wonder if any of those predicting the demise of VAH have actually read any of their financial statements...

https://www.virginaustralia.com/cs/.../webcontent/~edisp/fy18-h1-interim-report.pdf

The underlying business (like actually flying pax around, Velocity etc) makes a reasonable profit and has done so for many years. It is their large debt and 'restructuring costs' where the problems exist. Get these under control and you will have a profitable airline in a cosy duopoly...