Virgin Australia Financially Secure? [Now in Voluntary Administration]

[kamchatsky]

I just cannot see VA2 spending more money buying/leasing 787s, unless they get a super exceptional deal. International markets is always very competitive and really VA should just focus on domestic flying first.

 

[oz_mark]

I just cannot see VA2 spending more money buying/leasing 787s, unless they get a super exceptional deal. International markets is always very competitive and really VA should just focus on domestic flying first.

There was an existing plan to replace the A330s and 777s with a single type (and the 787 seems the most logical).

While the existing management plan may be interesting, and help form a new plan, I think the bidders need to work out for themselves what any new strategy would be. Regardless of whether the existing plans would have turned the airline around, there is a different world now..

 

[RooFlyer]

Bidders can impose conditions on the seller in a bid, and they can be compelling if the mix of herbs & spices is otherwise attractive. Like, YOU sack everyone and THEN we'll offer $X [which is a good large number]. What I mean is that a bidder doesn't have to accept the operational scenario imagined by the seller/administrator. To have the administrators enter into any material agreement of contract not in 'the regular course of business' would be unthinkable.

 

[muppet]

Bidders can impose conditions on the seller in a bid, and they can be compelling if the mix of herbs & spices is otherwise attractive. Like, YOU sack everyone and THEN we'll offer $X [which is a good large number]. What I mean is that a bidder doesn't have to accept the operational scenario imagined by the seller/administrator. To have the administrators enter into any material agreement of contract not in 'the regular course of business' would be unthinkable.

I'm pretty sure that would just lead to the 10,000 employees voting against it wouldn't it? Leading to liquidation?

 

[RooFlyer]

I'm pretty sure that would just lead to the 10,000 employees voting against it wouldn't it? Leading to liquidation?

"Like" was used, in the sense of 'an example'. Do employees get a vote? If yes, I doubt its a vote per head but rather proportional to whats owed to them; value of entitlements would be small in the scheme of things.

But if a bidder didn't want any employees , they could make a bid with that condition, which would be unlikely to make it past the indicative bid stage. Or they could make an offer for the assets, not the corporation.

 

[muppet]

"Like" was used, in the sense of 'an example'. Do employees get a vote? If yes, I doubt its a vote per head but rather proportional to whats owed to them; value of entitlements would be small in the scheme of things.
....

It was a genuine question because it sounded like you had some experience with voluntary administration.

According to ASIC voting is settled by a majority by number and value. So I guess it depends if “employee entitlements” is one vote or 10,000.

Voluntary administration: A guide for creditors | ASIC

asic.gov.au

 

[hydrabyss]

It was a genuine question because it sounded like you had some experience with voluntary administration.

According to ASIC voting is settled by a majority by number and value. So I guess it depends if “employee entitlements” is one vote or 10,000.

Voluntary administration: A guide for creditors | ASIC

asic.gov.au

This is from a news article a few weeks ago.

Eight unions are included in the proposed 32-seat creditors' committee alongside aircraft lessors, major Australian airports and banks.

Not sure how many seats the unions get but they represent the 9000 staff. But the article mentions this

Almost 9000 Virgin workers have registered as creditors and will hold significant sway in determining the outcome of the administration process, including voting to approve or block any deal put forward.

 

[RooFlyer]

It was a genuine question because it sounded like you had some experience with voluntary administration.

Experience in corporate sales and acquisitions ( otherwise known as ‘M&A’). Was involved in a few offers for corporates in administration, but I don’t think we/ client were serious in any of them. “ Cheeky offers”. So I can’t think of the subsequent process.

 

[HS-TQE]

In related news: Delta has just announced that they'll be retiring their entire 777 fleet (including the 77Ls used on LAX-SYD).

Speculative: It'll be interesting if DL continues with SYD and the JV with VA post-covid. The earliest Trans-Pac flying will resume will be early 2021 at the soonest. Some scenarios include
(1) DL continuing with LAX-SYD with the A350
(2) leaving LAX-SYD to VA or
(3) pull out entirely.

Personally i'd say it's 50/50 between Options 1 and 3.

DL taking option 1 would be in a likely scenario if DL does the sole SYD-LAX flying for the DL/VA group, with VA pulling out of SYD-LAX route and VA directing the 4x owned 77Ws onto daily MEL/BNE to LAX.

If DL takes Option 3, then the chances of VA sticking around on TransPac would be unlikely post-COVID. The other exception is in the unlikely situation of VA2 striking up a partnership with UA to handle LAX (in absence of the recently closed UA crew base in LAX) whilst UA handles SFO (UA hub) flying.

 

[jakeseven7]

Fair bit of discussion on the radio this morning, people speculating mostly, the ‘business plan’ from the administration has been largely laughed at and basically it will be heading straight to the shredder room once a new owner takes control.

Few accusations that the administration don’t seem to be as independent as they should be.

But I guess it’s their job to pump up and black the tires, paint over the structural cracks though right to try and get the max $ for the failed company? I just think the complete replacement of a loss making VAi1 with brand new toys was a bit laughable - and probably has undermined their efforts.

 

[travel_bug]

Fair bit of discussion on the radio this morning, people speculating mostly, the ‘business plan’ from the administration has been largely laughed at and basically it will be heading straight to the shredder room once a new owner takes control.

Few accusations that the administration don’t seem to be as independent as they should be.

But I guess it’s their job to pump up and black the tires, paint over the structural cracks though right to try and get the max $ for the failed company? I just think the complete replacement of a loss making VAi1 with brand new toys was a bit laughable - and probably has undermined their efforts.

I do feel for the administrators though - parties have allegedly thrown their confidentiality agreements to the wind and are apparently speaking out to the AFR any chance they get, and I doubt that Deloitte has the ability to clarify or defend without breaching their own confidentiality obligations.

It also makes me wary, without actually viewing any of these documents or proposals first hand, all these “confidential sources” that are “close to discussions” are starting to feel like the kind of tabloid magazine you’d find in a waiting room.

 

[RooFlyer]

But I guess it’s their job to pump up and black the tires, paint over the structural cracks though right to try and get the max $ for the failed company? I

Strictly, the 'data room' should speak for itself, and the 'seller' can be held accountable if things are misleading there, or later found to be with-held. But in the case of a high profile company, I guess the Administrators are obliged to tell the media things and they take the opportunity to be 'positive' there.

Apropos nothing here, I was once involved as an adviser to a company looking to buy an asset, where there was a 'physical' data room (full of binders with every conceivable document you would want to find - these days its all electronic). The seller's adviser was playing hard-ball, setting up 'competitive tension' by saying that they had a pretty full schedule of data room visits and we could only get in towards the end of the exposure period, yada yada yada. So, when we got in, and started looking through the binders, all the little hole-punch pieces of paper started falling out of them. We were the first party to look. Immediate offer price drop.

 

[RAM]

Fair bit of discussion on the radio this morning, people speculating mostly, the ‘business plan’ from the administration has been largely laughed at and basically it will be heading straight to the shredder room once a new owner takes control.

Few accusations that the administration don’t seem to be as independent as they should be.

But I guess it’s their job to pump up and black the tires, paint over the structural cracks though right to try and get the max $ for the failed company? I just think the complete replacement of a loss making VAi1 with brand new toys was a bit laughable - and probably has undermined their efforts.

You could be right.

About the only plausible reason for that suggestion would be if Boeing Australia had approached them and made a deal for the 787s that is too good to refuse, possibly including taking back the B777s with possibly the enjoined requirement that VA mk2 becomes an all Boeing operation.

Boeing now has quite a few already built 787s who's contracted owners are unable to finance (Airbus has similar issues) & they are very keen to find them a home. Compared to VA's B777s the equivalent 787-9 would save 15-20% of the fuel to the US as well as having much lower maintenance (both from being a brand new plane but also with the carbon fibre advantage). At the right price any airline (with the funds) would swap their old B777s for a new B787 at the right price currently (especially with the slightly lower passenger capacity given the likely outlook for international travel).

 

[melb78]

I wonder if it would be a mix of 787-9 and 10's

 

[jakeseven7]

I wonder if it would be a mix of 787-9 and 10's

I suspect it will be mix of the new variant - 787 'You're dreaming' and 787 'Maybe in 3 years'

 

[Doctore1003]

Jayne Hrdlicka is reportedly tied to the Bain Capital bid and could become CEO if successful. She plays hardball. Not sure she would gel with the current Virgin culture.

 

[jakeseven7]

Jayne Hrdlicka is reportedly tied to the Bain Capital bid and could become CEO if successful. She plays hardball. Not sure she would gel with the current Virgin culture.

She used to be a mini AJ that is for sure... Based on her previous rep - she would gut the flabby old VA1 guard.

....But there were some very odd things happened in her last CEO role at A2 and she was booted out which saw her left wanting.... I know people who have worked with A2 and well you can imagine the rumours, not worth reporting here but pretty damning.

 

[Carrots]

New 787s (or A350s) vs retaining the existing 777s and A330s (or not!) would simply become a numbers game.

Seems people are quick to shoot down the suggestion, but it would be interesting to see what the cost savings vs outlay numbers are.

As mentioned, it's a very different time now to 6 months ago - if it seemed viable 6mths ago, it's probably actually more viable now as better deals could be had.

 

[jakeseven7]

New 787s (or A350s) vs retaining the existing 777s and A330s (or not!) would simply become a numbers game.

Seems people are quick to shoot down the suggestion, but it would be interesting to see what the cost savings vs outlay numbers are.

As mentioned, it's a very different time now to 6 months ago - if it seemed viable 6mths ago, it's probably actually more viable now as better deals could be had.

I don't think anyone would be disputing the advantages of an all 787 fleet over a mix of 777/A330 for a possible VAi2.

I suspect all the reactions from the bidders, media etc are down to the fact that VAi just hasn't been able to get enough bums on seats regardless of the metal they were running and the fact that with covid, international demand is going to be suppressed for an extended period of time making life hard for the big players, let alone the fringe players who couldn't even get mass traction with their offer beforehand.

 

[travel_bug]

I don't think it's been discussed yet, but Middleton J made orders in the Fed Court that the administrators are off the personal liability hook for some debts incurred through administration, including the conditional credits (paras 14 and 15). That's pretty huge.

I know the Loyalty Lobby link posted on Wed noted that Deloitte had filed an affidavit regarding the amount of credit/refund requests sent through, I guess this is the Court's response.

[FONT="Open Sans",BlinkMacSystemFont,-apple-system,Segoe UI,Roboto,Helvetica,Arial,sans-serif]https://www2.deloitte.com/content/d...eloitte-au-fa-virgin-sealed-orders-130520.pdf[/FONT]


Very interesting considering how strictly an administrator's liability for debt incurred has been enforced in the past. Now there's just any JobKeeper related debt to contend with...