VA half yearly results to 31 December 2018

[AviationNZ]

This probably won't help...
Virgin Australia trans-Tasman loads hit seven-year low following termination of its Air New Zealand alliance – Blue Swan Daily

 

[Must...Fly!]

This probably won't help...
Virgin Australia trans-Tasman loads hit seven-year low following termination of its Air New Zealand alliance – Blue Swan Daily

Not a good initial sign, that's for sure but it's early days.

They mention that TT coming in may be an option, but what is this going to do? If VA can't attract people on to their aircraft currently, why would TT make a difference? And with such a small market share would bringing TT in not just cannibalise VA's already (apparently) slender base of passengers and get two airlines of the group in to a capacity war instead of one....

 

[Melburnian1]

Not a good initial sign, that's for sure but it's early days.

They mention that TT coming in may be an option, but what is this going to do? If VA can't attract people on to their aircraft currently, why would TT make a difference? And with such a small market share would bringing TT in not just cannibalise VA's already (apparently) slender base of passengers and get two airlines of the group in to a capacity war instead of one....

One assumes VA's belief is that two distinct brands would attract different types of travellers and hence help to cannibalise Jetstar's market share (with TT an option).

However< I sure can see your point.

A lot of this 'analysis' on Blue Swan Daily doesn't need much thought to figure out, and yet sometimes they manage to get things wrong.

 

[Bagpuss]

Will the new CEO of VA be the recipient of any pressure from part owners to reduce VA's international flying given it is unprofitable?

New CEO's don't get much pressure until after their 1st year.
Whilst international maybe "unprofitable" ... It's not that simple.
For example: Someone buys an international flight, say from LAX to SYD. As they are booked on Virgin they may then buy a couple of Virgin domestic flights. Things like this must be factored in.

Fares to the USA which is the key market have very cheap lead in price.
A B777 has 278 economy seats. So if the plane is full (to make it simple) if you can get an $10 per paying economy passenger by increasing the fare in each direction that's $2,780 per flight. So simply times than by 365 (OK I know the B777 takes flight more than once a day) that's a little over $1 million. There's 5 aircraft so that's a little over $5 million.
So imagine where as SYD - LAX return economy fare probably "should be" $1,500, it's actually about $1,000. It's purely massive figures which could make $1 million difference per flight.

You will probably find that routes are on / off being profitable.

There's on going commentary about fuel being high but it's not even at the $1 a barrel when that was deemed as being high.

 

[Melburnian1]

New CEO's don't get much pressure until after their 1st year.
Whilst international maybe "unprofitable" ... It's not that simple.

For example: Someone buys an international flight, say from LAX to SYD. As they are booked on Virgin they may then buy a couple of Virgin domestic flights. Things like this must be factored in.

Fares to the USA which is the key market have very cheap lead in price.
A B777 has 278 economy seats. So if the plane is full (to make it simple) if you can get an $10 per paying economy passenger by increasing the fare in each direction that's $2,780 per flight. So simply times than by 365 (OK I know the B777 takes flight more than once a day) that's a little over $1 million. There's 5 aircraft so that's a little over $5 million.
So imagine where as SYD - LAX return economy fare probably "should be" $1,500, it's actually about $1,000. It's purely massive figures which could make $1 million difference per flight....

Interesting analysis and I'm not disagreeing, but on occasion in the past, I've found that some international airlines 'common rate' even discount Y fares from the three east coast Australian major airports to get one on board.

For instance, VA only flies five days a week from MEL, five (not all the same) from SYD and four days a week from BNE to LAX, so, given its competitors where they offer this route fly at least daily, VA analysts may decide to offer a MEL - SYD - LAX - MEL return Y fare at the same price as SYD - LAX return. In that case, putting one on a domestic flight from MEL to SYD is "costing" the airline, but it does it because it works out it can't otherwise sell all the seats on its B773ER ex (or to) Sydney, and so given it perceives it's making an overall profit, it's prepared to 'common rate' the fare from MEL.

VA doesn't have the available aircraft, but flying less than daily on major routes like to LAX is suboptimal and puts it an immediate competitive disadvantage. I've used it one way to LAX but returned on another airline as the VA schedule did not operate on the night I was wanting to depart from the USA.

 

[Bagpuss]

VA doesn't have the available aircraft, but flying less than daily on major routes like to LAX is suboptimal and puts it an immediate competitive disadvantage. I've used it one way to LAX but returned on another airline as the VA schedule did not operate on the night I was wanting to depart from the USA.

I agree and there has always been the comment to make international work it needs to be a daily service. (I had a chat once with Mark Hassell who was CCO at the time and he said they were sticking with BNE and SYD only as it was daily which was needed and it worked for them. That was around August 2016.)

If fares were higher and the demand there I am sure they would get an additional aircraft to have BNE, SYD and MEL daily. This could be in 10 years time if/when Qantas stop flying the A380.

It was rumored years ago that Delta would do the MEL - LAX leg daily on top of the SYD service, but that never happened. Which is I guess part of the thinking of Virgin doing it.

 

[eastwest101]

Yes there was some debateable stuff in that Blue Swan Daily article but I think they got this part right:

It’s time for some hard decisions by Virgin’s owners

If Virgin is to be a truly viable and sustainable force for the long term, the first act of Mr Scurrah, like it or not, will be to seek major new commitments from his owners. He arrives as the Group reaches an important crossroad. Mr Borghetti has done most of the hard yards in converting what was a hybrid LCC into a substantial force, but the current half-pregnant ownership structure is untenable beyond the short term.

Time for all the owners of VA to grow up and agree to decide what they want VA to do, the latest info from the Trans-Tasman and AUS-HGK are all ringing alarm bells with low yields and high levels of competition, and competitors that are competent and highly motivated to defend their turf (such as NZ, CX and QF). If Tiger were working properly as an operation they would be a viable solution for trans-tasman but at the moment the incompetence in re-fleeting and staff shortages have resulted in TT becoming as much of a mess as it was when CASA shut them down and a massive burden for the VA group.

I can't see how DL, SQ, EY or HNA ever suggesting to VA management that "You know what we should do? They should keep doing what has failed in the last 3-4 years and lose money by competing in the Transpacific, Trans-Tasman and HGK-Australia markets!".

I think its will be a case of the riding instructions being:

1. Fix TT now or close it down
2. Concentrate on the Aus domestic market where there are still decent yields to be had.
3. Find somewhere to make money with those B777s and A330s soon, or get rid of them.

Of all of these owners of Virgin - I can only see DL as being competent and profitable enough to do anything meaningful, SQ and NZ have had their chances and choked, the HNA and EY groups are disaster areas and their days are limited.

 

[Cool Cat Phil]

This probably won't help...
Virgin Australia trans-Tasman loads hit seven-year low following termination of its Air New Zealand alliance – Blue Swan Daily

Disappointing, but hardly surprising.

For myself, I received a cheque last year from my last remaining V.A. shares, which were compulsory acquired.

Reading the article above makes me think the small payout received, was a blessing in disguise. Without question, it was was a substantial capital loss for myself against the initial purchase purchase of shares in DJ , but I can watch the company slowly strangle itself up it a right old mess.

 

[Melburnian1]

....1. Fix TT now or close it down...

Of all of these owners of Virgin - I can only see DL as being competent and profitable enough to do anything meaningful, SQ and NZ have had their chances and choked, the HNA and EY groups are disaster areas and their days are limited.

How do you 'fix' an airline that previously was shocking (the CASA reference), then became good and now is bad again?

Maybe you are a little unfair re SQ. After all it's the world's best airline, and while its level of profitability swings markedly, we ought remember it doesn't have the luxury of a domestic operation with only one other airline group against which it competes.

Some of these major Asian city pairs, while very busy, have four or five distinct airline groups competing.

SIN - MNL is one example: 3K, 5J, PR and SQ/TR. SIN - CGK has 3K, GA, ID/JT, QZ and SQ/TR.

SIN - BKK has 3K, FD, SQ/TR, SL and TG.

So irrespective of its past reticence re VA, let's give SQ - a great airline - some credit. After all apart from its flights to SIN (thank you dajop), Australia is its largest overall market (though SIN - CGK is its busiest single route).

 

[Bagpuss]

TT becoming as much of a mess as it was when CASA shut them down and a massive burden for the VA group.

I can't see how DL, SQ, EY or HNA ever suggesting to VA management that "You know what we should do? They should keep doing what has failed in the last 3-4 years and lose money by competing in the Transpacific, Trans-Tasman and HGK-Australia markets!".

When TT was shut down it wasn't owned by Virgin at that point in time.

DL has no ownership of Virgin

I agree mainly with your comments but I think it's a difficult situation. Many airlines (like many companies) seem to do some things very well and other things very poorly.

VS = Always been good at being a far reaching international airline. Not very good at UK / Europe operations (see what happens with FlyBe)
SQ = Disaster at investing into other airlines ... VS (over paid, wrong timing) / VA / Tiger etc.

DL is probably one of the best and QF do most things well

 

[Melburnian1]

...QF do most things well

I don't want to go off topic too much but those who fly internationally (and some who fly domestically) wouldn't agree.

Cancelled and badly late international flights are a constant at QF. Ask passengers on QF7 yesterday, or QF8 now, or those who've travelled from HND/NRT/JNB/BKK/MNL/LAX/HKG or SIN recently, to name a selection. And its domestic timekeeping is nothing startling. especially when one considers what high speed rail would be like - fantastic - between BNE/OOL/NTL/SYD/CBR/WGA/ABX/MEL if we had the vision to build it.

 

[HS-TQE]

DL is really the only logical airline to take a majority ownership in VA at this point. Like DL did with VS, VA int'l will likely be reduced to NZ (AKL/CHC/WLG) and LAX as VA's only international commitments. With VA's unaligned and SkyTeam partners taking over the rest.

 

[ric_melb]

Not a good initial sign, that's for sure but it's early days.

They mention that TT coming in may be an option, but what is this going to do? If VA can't attract people on to their aircraft currently, why would TT make a difference? And with such a small market share would bringing TT in not just cannibalise VA's already (apparently) slender base of passengers and get two airlines of the group in to a capacity war instead of one....

I agree, the issue seems to be that Virgin can't attract people to fly with them. I doubt that they can attract extra passengers by adding Tiger to the mix. It doesn't seem to be a pricing issue, more a visibility and brand preference issue.

 

[dajop]

It doesn't seem to be a pricing issue, more a visibility and brand preference issue.

And/or shackle issue (corporate shackles, and QFF/Airpoints shackles)?

 

[Melburnian1]

I agree, the issue seems to be that Virgin can't attract people to fly with them. I doubt that they can attract extra passengers by adding Tiger to the mix. It doesn't seem to be a pricing issue, more a visibility and brand preference issue.

Many corporates and government departments/ agencies (and staff) seem to be in lock step with QF and fixated on accruing QFF points, even though Qantas imposes huge fees for redemption and on some routes makes very few seats available in particular classes.

In contrast I've always found redemption through Velocity FF satisfactory for international and domestic flights. However I endeavour to avoid school holidays and other peak demand days and refuse to redeem on EY given its heinous extra charges. The higher cost in miels/kilometres for SQ and some other redemptions via VFF is annoying but the EY situation takes that to a whole new level in favour of the airline.

 

[pauly7]

And/or shackle issue (corporate shackles, and QFF/Airpoints shackles)?

I’m not so sure about this but they sure did have a lot of NZ code prior to the break up and NZ was quoted as saying they had a lot of complaints of their customers ‘unknowingly’ booking a NZ code and ending up on VA metal...

I agree, the issue seems to be that Virgin can't attract people to fly with them. I doubt that they can attract extra passengers by adding Tiger to the mix. It doesn't seem to be a pricing issue, more a visibility and brand preference issue.

I don’t think they have a visibility problem. They have a brand preference problem on trans Tasman (and most of their international flying actually). Something isn’t connecting consumers to VA flying internationally despite reasonable hard product on their wide bodies.

And it seems that NZ were powering their trans Tasman business with codeshare customers that now seemed to have evaporated overnight and returned to NZ I assume!

 

[Melburnian1]

...I don’t think they have a visibility problem. They have a brand preference problem on trans Tasman (and most of their international flying actually). Something isn’t connecting consumers to VA flying internationally despite reasonable hard product on their wide bodies...!

Is it possible that prospective passengers continue to believe that food and drink are not included in the VA TransTasman ticket price?

VA has been advertising 'all inclusive' so it must be something it knows it needs to publicise.

 

[pauly7]

Time for all the owners of VA to grow up and agree to decide what they want VA to do, the latest info from the Trans-Tasman and AUS-HGK are all ringing alarm bells with low yields and high levels of competition, and competitors that are competent and highly motivated to defend their turf (such as NZ, CX and QF). If Tiger were working properly as an operation they would be a viable solution for trans-tasman but at the moment the incompetence in re-fleeting and staff shortages have resulted in TT becoming as much of a mess as it was when CASA shut them down and a massive burden for the VA group.

I tend to agree, if VA had TT running properly they should just drop it onto TT, undercut JQ and keep the dominant main line players honest. They could then streamline unprofitable VA metal on that route or withdraw VA all together.

The challenge is though with TT on trans Tasman is that JQ (love or hate them) have built up a nice little business in NZ - slowly gutting Air NZ (Although the heat has come out of that with the new QF/NZ deal!) and building a brand in NZ, generating demand for their trans tasman business on both sides of the ditch. And they are aggressive.

I don’t think there are any quick solutions for VA on trans Tasman or Hong Kong flights....

 

[Must...Fly!]

Is it possible that prospective passengers continue to believe that food and drink are not included in the VA TransTasman ticket price?

VA has been advertising 'all inclusive' so it must be something it knows it needs to publicise.

Given the amount of advertising they've been pumping out for over 6 months now, frankly if the message has not gotten through yet I find it hard to believe it ever will....

I don't want to see VA disappear from trans tasman because it will provide yet another example of how useless status with the airline can be...the NZ agreement was a wonderful one, slowly gutted and then the relationship evaporated....given nothing is given to VA passengers flying TT yet, they ought to be very careful.

The offering out of MEL to NZ is...hmm. Double daily to Auckland, ok. 5 x weekly to CHC and 4 x weekly to ZQN, I think (perhaps 5).

Codeshare on the 4 x weekly SQ MEL-WLG-MEL but always very expensive as with pretty much every VA codeshare that exists.

They don't have much of a competitive advantage out of MEL, imo (and that's a platinum talking). But at least it's something.

 

[pauly7]

Is it possible that prospective passengers continue to believe that food and drink are not included in the VA TransTasman ticket price?

VA has been advertising 'all inclusive' so it must be something it knows it needs to publicise.

Totally agree and yes they would only advertise that if it was a problem so it is a problem. Their meagre domestic fun size snacks will be hurting them because that is what people will be assuming you get on Trans Tasman. And that advertising campaign was not cheap