Qatar Airways to acquire 25% of Virgin Australia

[RooFlyer]

If you’re buying an airline and you don’t consider what the odds of it failing are, you aren’t very smart. No airline has a 0% chance of failure.

Sure, that applies to any investment in any business, not just airlines. But the point Im laboriously making is that a supposed smart airline management like QR, a successful airline you’d have to agree, has made an investment in VA2 via Bain after due diligence. That would give confidence to other investors that it’s not a bad bet.

The point was not that VA is a risk of failure but these sky high valuations based on an acquisition from a foreign state owned company with an obvious self interest don’t mean they’ll get the same rate from other investors.

That we can certainly agree. That’s why I’m only calling the QR buy-in a yardstick valuation, ( I think I also called it a rule of thumb valuation somewhere) in the absence of any other information.

Just say there are other groups who are doing due diligence now with a view to making an investment. They will be thinking gee, do we have the capacity to absorb ups and downs like QR might? Am I going to have the same leverage in the boardroom as QR will have? Am I going to have a say in the appointment of a CEO? If on balance it’s a ‘no’ for those, then they will value it lower, but Bain will have a hard price starting point of the QR buy-in. It will be up to the other potential investors to argue down from that# and that’s why I think the QR buy-in is of additional value beyond the money tendered.

# and you would think they would be able to successfully do that, but as I’ve said, they’re arguing down from the QR high price not from an investment bankers theoretical valuation or a lower valuation without hard money behind it.

 

[justinbrett]

Just say there are other groups who are doing due diligence now with a view to making an investment. They will be thinking gee, do we have the capacity to absorb ups and downs like QR might? Am I going to have the same leverage in the boardroom as QR will have? Am I going to have a say in the appointment of a CEO? If on balance it’s a ‘no’ for those, then they will value it lower, but Bain will have a hard price starting point of the QR buy-in. It will be up to the other potential investors to argue down from that# and that’s why I think the QR buy-in is of additional value beyond the money tendered.

“Am I going to be able to get VA to wet lease my aircraft and effectively double my capacity into a heavily regulated market?”

I mean if you could find an investor where that could apply, the valuation might be closer to reality.