Virgin Australia Financially Secure? [Now in Voluntary Administration]

[RooFlyer]

Deloitte have confirmed EIGHT potential interested parties so far.

How many of these will get tired with the process and retire, and are any of them retreads?

Having been in the investment banking business, including when the federal airports were privatised (so its a while back), let me say (in general, not aimed at the quotees) how the numbers of interested parties might come about.

Every damn investment bank would have a team or at least one exec dedicated to airlines / transport. As soon as it was evident that Virgin was in trouble, the 'Advisory Team' (M&A) would have hit the phones/meetings with suitable (and some non suitable) clients who might have even the remotest interest in VA. They would 'pitch' the idea of the client acquiring VA, perhaps in tandem with a finance or other 'strategic partner' to mitigate the risk; financial modelling of all sorts of structures to make it 'work'. Most of the bigger investment banks would already have these scenarios up their sleeves - already modelled. The investment bank may spec its edit: initial time and money making the bid, or at least the tyre-kicking, worthwhile to the client. Many clients will say 'OK, not costing us anything to have a look, why not?' So an Expression of Interest goes in, and the banks might then start the meter if the interest is 'serious' or may continue to spec their time if that's whats required to keep the client in the game.

Administrators are quite happy for this to happen - the more in the room the better for 'competitive tension'.

The truly serious players would have a permanent relationship with an investment bank and would have worked with them on offers, actual and postulated, for other airlines/transport companies; may already have a Virgin 'model'.

 

[travelislife]

I did hear Virgin did not get much and well below what Rex was getting and no where near what the Deputy PM kept repeating they where giving the airline sector.

And wasn’t the bulk of it in waiving if government fees? I.e. the assistance package value was calculated on ‘normal flying’. But they only incur these costs if flying passengers and that pretty much went to zero anyway so they weren’t incurring the fees in the first place? Very different to direct cash or subsidy. Feel free to correct me of wrong there...

 

[33kft]

Just a side note: super system tax concessions cost $40b a year... (of which i too benefit) .. but "self-funded retirees" rarely acknowledge the tax they don't pay which is funded by workers.

To keep them off a safety net entirely funded by workers.

 

[p--and--t]

Being a pedantic pr... that I am, the taxpayer cannot and does not fund "tax that is not collected".

It might mean the taxpayer pays more to support other government expenditure as an effect. But I like the statements to be accurate

 

[OATEK]

To keep them off a safety net entirely funded by workers.

Just like they did for previous generations while still working.

 

[jakeseven7]

Indigo Partners mulling whether to start applying for their own Australian AOC.

Paywall Article: NoCookies | The Australian

This truly terrifies me.

But maybe VA2 does need a massive shake up...

 

[Harthagan]

A purely selfish question but if virgin comes out the other end of this in one form or another what will happen to travel banks for passengers affected by cancelled flights.

Will that just be debt that is absolved, or will the travel banks be inherited as a liability and honoured by whoever the new owners become?

 

[jakeseven7]

A purely selfish question but if virgin comes out the other end of this in one form or another what will happen to travel banks for passengers affected by cancelled flights.

Will that just be debt that is absolved, or will the travel banks be inherited as a liability and honoured by whoever the new owners become?

Its been made clear that is entirely up to the new owners how they want to play it.

You would think they wouldn’t want to piss off thousands of potential future customers before VA2 even took flight though... I guess?

Who knows? Maybe people will get a partial credit? Better than the $0 if old VA goes to the grave though.

 

[cove]

Currently unsecured creditors are lining up for zero back so a bit of give would be nice.

 

[Harthagan]

Yeah just as I suspected. The travel banks they've been issuing instead of refunds were never worth the paper their written on

 

[oz_mark]

Its been made clear that is entirely up to the new owners how they want to play it.

You would think they wouldn’t want to piss off thousands of potential future customers before VA2 even took flight though... I guess?

Who knows? Maybe people will get a partial credit? Better than the $0 if old VA goes to the grave though.

Assuming someone take over the busines, my guess is that they may do something for those holding credits. Maybe offering to match any amount you spend, up to the value of the credit.

I think just saying 'too bad, so sad' will just get a whole lot of your customers off side, and they will be hard to get back.

 

[cove]

Yes I am thinking that too @oz_mark. I just loved the availability of business class seats on points when Qantas had dust.

 

[Major]

Whilst I have a small amount in travel credit I am more interested in how any new management treat VA's status customers. Having reached WP in Jan I was not able to make use of any of the benefits.

I will not be happy if VA2 simply wipe out status.

 

[melb78]

This truly terrifies me.

But maybe VA2 does need a massive shake up...

I for one would not travel on any airlines that Indigo owns there ullc and not sure if it would suit the Aust market.

 

[hydrabyss]

Whilst I have a small amount in travel credit I am more interested in how any new management treat VA's status customers. Having reached WP in Jan I was not able to make use of any of the benefits.

I will not be happy if VA2 simply wipe out status.

From the figures I found in 2018-19 they generated $3.9b in revenue and $437m in earnings before costs where taken so I can't see why you a new owner would change what already works.

As far as I know Velocity runs the status side and the business is profitable with a percentage of each flight going to them to cover costs for points and presumably the cost for maintaining status perks.

I remember the old business saying you make 80% of your income from 20% of your customers so with a new owner this gives a fresh set of eyes to focus on the important parts that generate profits. Those with status would have to be their most profitable and most would not mind being squeezed a little more regarding the cost to fly considering the alternative if they don't make it.

 

[Borisdog]

To keep them off a safety net entirely funded by workers.

Yep. Dead right.

And let's not allow the story of exactly HOW we got to be self-funded retirees get in the way of a good "free-ride" bash.

 

[serfty]

[MODERATOR HAT]

Please keep this thread focusing on the topic as in the title.​

[/MODERATOR HAT]

 

[samh004]

The old VA used to be an almost completely foreign owned and controlled business with some fairly ‘interesting’ foreign-government backed interests.

How on earth is anything going to be worse than that

VA2 can be completely foreign owned and controlled again - who really cares?

I would imagine a large consideration would be that their previous structure has helped lead them to this mess and when things got tough, not one of them stepped forward to help, despite some receiving rather large bailouts from their local-foreign owners. Hence, why would you let them take the same path?

Indigo Partners mulling whether to start applying for their own Australian AOC.

Paywall Article: NoCookies | The Australian

This truly terrifies me.

But maybe VA2 does need a massive shake up...

I think this is a very interesting development, as it shows they're clearly serious about the market again. However, I think their comment is a trick to worry other potential suitors, per:

A financial expert who did not want to be named said it would be madness to launch another airline if Virgin Australia was successfully restructured and recapitalised. “The only avenue for a new airline operating under a new AOC would be if Virgin Australia was liquidated.”

If you think about it, even if it took them a year to establish a domestic golden triangle route with good schedule, VA2 would be facing competition from them on the low prices and QF/JQ on the higher prices. Whatever chance they had to recover would be dashed a little and market share most likely taken from them. So to me, this comment from Indigo Partners sounds more like a threat of what they could unleash than an actual plan. However, it would probably be easier and cheaper than dealing with the VA1 baggage, so maybe it is a serious plan. It would probably take a year for the domestic market to really recover anyway.

 

[p--and--t]

Surely JQ would not be liking the commentary from Indigo more than most.

 

[samh004]

Surely JQ would not be liking the commentary from Indigo more than most.

I'm sure it would affect them as well, but a VA2 that is being chased by essentially 3 other airlines on different price points is probably not the best environment to be re-starting operations under.

Dare I say it though, might make JQ more consistent with 'benefits' if they need to elevate themselves above Indigo's offering, which will then have a flow on effect to be attacking VA2 from below (with QF attacking from above).