Blood on the walls - vah full year results

[Fruitcake]

There are headlines on the wire services now stating that VA has obtained separate unsecured one year loan commitments from EY, NZ and SQ for a total of $90m.

EDIT: ASX release:
http://www.asx.com.au/asxpdf/20130830/pdf/42j16knz7mvm4q.pdf

 

[Mogul]

$98.1m dollar loss.

 

[markis10]

Surprising results, including revenue growth year on year!

 

[Fruitcake]

Results are out.
http://www.asx.com.au/asxpdf/20130830/pdf/42j171dhtxt365.pdf

$98.1m loss

Since the Sabre transition "domestic bookings made within the final three weeks prior to departure have experienced a doubling of yield premium."

Flat group yield growth, which beats QF.

 

[MartinMemo]

All in all I think a good result after a year of difficult changes and expensive acquisitions. The only way from here is up; pending any further serious sabre issues.

 

[lovestotravel]

Of course yield is up, Virgin continue to raise ticket prices

There are lots of "transformation/one-off" costs in there

As much as I dislike Virgin, I do hope Virgin can actually make a profit in the next 12 months, because if it wasn't for them, QF wouldn't be putting such a great new business product in their A330's

 

[Deleted member 29185]

I'm wondering how much of that $12mil was sabre freebie flights that many of us benefited from.

 

[Fruitcake]

Kindly disregard.

 

[markis10]

The Alliance model seems to be working with codeshare revenue up 45%

 

[UP4014]

All in all I think a good result after a year of difficult changes and expensive acquisitions. The only way from here is up; pending any further serious sabre issues.

I think that is what they said last year. Airlines are a fickle business.

 

[mono88]

They should show progress, but they don't as they had a downgrade and not on budget. (Even if that budget was a loss)

Budgets are a guide only and are almost useless as a guide to results the day they are written. What is important is the rigour and the business thinking put into the process.
The results are what they are, progress towards goals and objectives need to be shown. Perhaps these VA results show that.

I think that is what they said last year. Airlines are a fickle business.

You expect VA to be original in announcing results? It is something done by thousands of companies every day, there is only a small range of words they can acceptably use.
I do agree wholeheartedly with you that the airline business is very fickle, I don't invest directly in them myself, but I do have indirect investments

 

[pauly7]

There are headlines on the wire services now stating that VA has obtained separate unsecured one year loan commitments from EY, NZ and SQ for a total of $90m.

EDIT: ASX release:
http://www.asx.com.au/asxpdf/20130830/pdf/42j16knz7mvm4q.pdf

Will be interesting to see if/when they draw down on the loan and I'd love to know what little strings are attached to it

 

[cove]

It will be a hard 2014 unless fuel prices drop.
Of course it would have been better if the majors had taken a placement at 40 but with these loans they don't get to rank last as shareholders do.

 

[pauly7]

It will be a hard 2014 unless fuel prices drop.
Of course it would have been better if the majors had taken a placement at 40 but with these loans they don't get to rank last as shareholders do.

What are you suggesting Cove?

 

[cove]

If I was CFO of that company I would prefer losses to be covered with capital and not loans.
Loans are fine for temporary coverage of losses so maybe they see some profits coming from the darkness.
If the losses continue that would prove capital was needed.

 

[Melburnian1]

Given that neither VA or QF benefit from subsidised fuel as allegedly do some Middle Eastern airlines, and both VA and QF have high labour costs by world standards, when will either offer shareholders a decent return on the significant capital tied up in each of these airlines?

The industry is fickle, but when examining both airlines in totality (i.e. QF including JQ, the FF division, other Jetstars), the managements of both tend to blame one off factors each year for poor financial performance yet neither has produced an acceptable profit since AJ and JB assumed the CEO's roles. How long before shareholders lose patience with either or both CEOs?

Change strategies are not five minute affairs, but the managements of Wesfarmers and Woolworths (despite their difficulties with Target and Masters respectively) take responsibility for any muck-ups but also manage (when they are in low margin, high volume sectors like retailing dry groceries) to deliver a pretty good return to shareholders. In Coles' case it's been an amazing transformation (and earlier at Woolies). Yes, different industries, so any analogy is limited - but neither of our airlines is overall delivering satisfactory returns to its shareholders despite domestically being a duopoly with all the advantages that duopolies normally enjoy (mind you, the two airlines have to deal with monopolies such as the major Australian airports, which must be hard going).

 

[AdMEL]

Given that neither VA or QF benefit from subsidised fuel as allegedly do some Middle Eastern airlines, and both VA and QF have high labour costs by world standards, when will either offer shareholders a decent return on the significant capital tied up in each of these airlines?

The industry is fickle, but when examining both airlines in totality (i.e. QF including JQ, the FF division, other Jetstars), the managements of both tend to blame one off factors each year for poor financial performance yet neither has produced an acceptable profit since AJ and JB assumed the CEO's roles. How long before shareholders lose patience with either or both CEOs?

Change strategies are not five minute affairs, but the managements of Wesfarmers and Woolworths (despite their difficulties with Target and Masters respectively) take responsibility for any muck-ups but also manage (when they are in low margin, high volume sectors like retailing dry groceries) to deliver a pretty good return to shareholders. In Coles' case it's been an amazing transformation (and earlier at Woolies). Yes, different industries, so any analogy is limited - but neither of our airlines is overall delivering satisfactory returns to its shareholders despite domestically being a duopoly with all the advantages that duopolies normally enjoy (mind you, the two airlines have to deal with monopolies such as the major Australian airports, which must be hard going).

Agree that change strategies are not 5 minute affairs. On the subject of Woollies and Coles/Wesfarmers, one thing you failed to mention is that Coles underperformed Woollies for years! It's only in the last couple of years that situation has reversed, with Woollies faltering due to things such as Majors and Coles having closed the gap, due to things like putting pressure on suppliers and basically doing what Woollies did years ago (as far as I can tell). Having worked in Coles 20 years ago, I remember at that time that Coles was the better performer and was spending massive amounts of money refurbishing stores. It occurs to me that the Aussie supermarket business is cyclical - one leads by innovation and then eventually falters, meanwhile the other copies the innovation and then outperforms when the other falters.

On the airline business, notwithstanding Australia has a duopoly of airlines, compared with other airlines in the world, our airlines have to deal with many issues that other airlines don't, including:

- high wages;
- no government support;
- no chapter 11 bankruptcy protection.

Notwithstanding our airlines are at a distinct disadvantage compared with other airlines in the world, Qantas has been one of the profitable airlines in the world.

Effectively, it seems that airlines are one of those industries which will never be profitable, at least in Australia (like the car manufacturing industry and others).

 

[cove]

Once you are losing 2 million a week for a whole year it gets difficult to fix that. I hope they can turn it around.

 

[pauly7]

Once you are losing 2 million a week for a whole year it gets difficult to fix that. I hope they can turn it around.

Was talking to a senior BA at VA last week at a function, he was saying that they are in the midst of a strategic review of which a lot of the recent Village job cuts and airline ops cost cutting has been the first step - which most of us are across.

More interestingly for me however was the strategic positioning of Tiger v VA. Currently VA have a bunch of routes that they just can't turn a coin on and maintain simply as feeder to other ops / not to let QF/JQ take a complete stranglehold. VA are looking at scaling back mainline ops on these routes and throwing Tiger on them to help reposition the brand and increase profitability.

I thought this all made a lot of sense but reads eerily similar to what QF/JQ did, although we have seen QF re-enter some markets on mainline and via QFLink over time as well.

Tasmania is apparently a market high on VA's list to 'consolidate'. PER flights are also a pain point for VA - probably too much capacity I'm guessing.

Just thought some might find this interesting, allbeit not that surprising I would imagine!

 

[Melburnian1]

pauly7, one might have thought with the decline (from a very high base) of the WA mining industry that transcontinental demand for air travel would have declined quite a bit.

Unfortunately the statistics have a lengthy time lag, which may explain how in June 2013, the BITRE said that passenger numbers for PER - MEL - PER rose 15.2 per cent compared with June 2012, while BNE- PER - BNE was up 6.8 per cent and ADL - PER - ADL was up 3.8 per cent.

The laggard, however, was SYD - PER - SYD that rose only 1.1 per cent.

So at least in June 2013, the PER routes across the continent were doing quite well, although those figures above do not tell us the split between VA, QF, JQ and TT.

As a comparison total June 2013 passenger numbers on the monitored Australian domestic air routes (which is the vast majority) rose 3.9 per cent.

BITRE monitors those airline routes used by 8000 or more passengers in a month, but with the important rider that there must be two or more airlines competing on the route. So routes such as ASP - MEL and ASP - SYD sneak in (and have only just begun to be included) but a route such as AVV - BNE - AVV (which usually has one daily JQ flight in each direction, meaning about 5400 seats a month in each direction as capacity or 10800 seats in total) or AVV - SYD - AVV (usually with four return JQ flights a day) are excluded.

When the monthly statistics for industry-wide passenger numbers are issued for July, August and September, we may have a clearer picture about what your contact was saying.