Virgin Australia Financially Secure? [Now in Voluntary Administration]

[BNEFlyer]

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.

It would be a surprise if Paul Scurrah wasn't CEO of VA after administration, particularly when his work as CEO was putting them on the right track pre-admin.

 

[Notyourbag]

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.

Could we then see VA Mk2 fly to SFO and tie up with UA? This could align back to being an unofficial Star Alliance carrier without membership.

 

[tomlee1986]

Could we then see VA Mk2 fly to SFO and tie up with UA? This could align back to being an unofficial Star Alliance carrier without membership.

To be honest.. I would say VA Mk2 should focus on local domestic services first, build up good competition against QF with a good balance in the bank, before venturing into international services..

 

[BNEFlyer]

Could we then see VA Mk2 fly to SFO and tie up with UA? This could align back to being an unofficial Star Alliance carrier without membership.

That would involve dissolving the JV with DL, starting talks with UA. And SFO has previously been looked into by VA and it wasn't viable. They should just continue with LAX.

 

[tomlee1986]

That would involve dissolving the JV with DL, starting talks with UA. And SFO has previously been looked into by VA and it wasn't viable. They should just continue with LAX.

I agree with the idea to stay with LAX.. it is a bigger port than SFO.. more choices for US connections there i think

 

[flydoc]

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.


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...

Unprecedented?

 

[dajop]

Surely, with international travel unlikely to resume in a meaningful way anytime soon,and massive competition internationally, potential acquirers would be focussing squarely on the domestic market. Talk of international has to be a distraction.

 

[tomlee1986]

Surely, with international travel unlikely to resume in a meaningful way anytime soon,and massive competition internationally, potential acquirers would be focussing squarely on the domestic market. Talk of international has to be a distraction.

I completely agree with you.. there is talk international travel will not return to normal until 2023

 

[travel_bug]

Unprecedented?

To the extent they've applied the exemption from liability, it's certainly something.

In large administrations, it is not unheard of for the Court to provide an extension to the 5 day "risk-free" period provided under the Corps Act, but this is huge.

 

[BNEFlyer]

Surely, with international travel unlikely to resume in a meaningful way anytime soon,and massive competition internationally, potential acquirers would be focussing squarely on the domestic market. Talk of international has to be a distraction.

It would be foolish to solely focus on the domestic market, VA had a good international network and when international travel resumes they can/will be a contender in the market. One would think LAX and HND will be definite, probably NZ and Pacific Islands too.

 

[tomlee1986]

It would be foolish to solely focus on the domestic market, VA had a good international network and when international travel resumes they can/will be a contender in the market. One would think LAX and HND will be definite, probably NZ and Pacific Islands too.

US and NZ market is already very competitive... wouldnt it be better for pacific island markets?

 

[BNEFlyer]

US and NZ market is already very competitive... wouldnt it be better for pacific island markets?

Their US market is LAX, from BNE and MEL at least there's little competition. They're a competitor to QF to WLG, ZQN and CHC as both use the 737 and the only operator from AU-DUD. NAN and POM has competition but VLI, TBU, RAR and HIR are all but VA's so they'd be smart to keep flying there.

 

[jakeseven7]

It would be a surprise if Paul Scurrah wasn't CEO of VA after administration, particularly when his work as CEO was putting them on the right track pre-admin.

Although I agree with you that he was on the right track - that is our opinions and not a borne out fact - some commentators are suggesting he didn't go hard enough early enough restructuring VA1 (pre-Corona).

Many are thinking JT (the original man for JB's job) might be better suited to hard nosed, quick decisions and profitability.

Surely, with international travel unlikely to resume in a meaningful way anytime soon,and massive competition internationally, potential acquirers would be focussing squarely on the domestic market. Talk of international has to be a distraction.

To be honest.. I would say VA Mk2 should focus on local domestic services first, build up good competition against QF with a good balance in the bank, before venturing into international services..

I would say most seem to be agreement that this should be VA2's plan. A new domestic model and perhaps some short haul Pac flying - get that going right and forget medium/long haul international.

That would involve dissolving the JV with DL, starting talks with UA. And SFO has previously been looked into by VA and it wasn't viable. They should just continue with LAX.

There will be a lot of movement in the industry, why not take advantage of it and make some big bold changes. UA and NZ partnerships for VA2 could equal potential Star alliance down the track, if VA2 doesn't turn out to be a LCC. I'm sure NZ would dump QF like a hot potato if VA2 wasn't a LCC and pulled back from international flying, funneling traffic onto NZ.

It would be foolish to solely focus on the domestic market, VA had a good international network and when international travel resumes they can/will be a contender in the market. One would think LAX and HND will be definite, probably NZ and Pacific Islands too.

VA1's 'good international network' bled cash all over the place. Maybe it was 'good' for some passengers to fly on but it didn't make money. Period.
Didn't get enough bums on seats for the right price so what on earth makes anyone think VA2 will be any more of a contender in an international capacity.

 

[HS-TQE]

I agree with the idea to stay with LAX.. it is a bigger port than SFO.. more choices for US connections there i think

SFO is UA's main hub and has more departures than their secondary hub at LAX.

If the VA/DL JV was to dissolve in favour of striking up a VA/DL deal, UA will want to keep the Australia-SFO routes for themselves whilst leaving Australia-LAX to VA as LAX is a secondary hub (and domestic hub) for UA.

 

[tomlee1986]

SFO is UA's main hub and has more departures than their secondary hub at LAX.

If the VA/DL JV was to dissolve in favour of striking up a VA/DL deal, UA will want to keep the Australia-SFO routes for themselves whilst leaving Australia-LAX to VA as LAX is a secondary hub (and domestic hub) for UA.

thanks for that info.. but isnt UA doing MEL to LAX on UA 99? Maybe they should do MEL to SFO, as VA was already doing that along with QF?

 

[HS-TQE]

thanks for that info.. but isnt UA doing MEL to LAX on UA 99? Maybe they should do MEL to SFO, as VA was already doing that along with QF?

Had forgotten about that.

But keep in mind at the same time UA had recently closed their "long haul international crew base" at LAX for the foreseeable future, and they were already down to SYD/MEL, NRT and LHR out of LAX prior to COVID. (only 3-4 flights a day).

UA (like DL) will want to save as much $$ as possible as well, if it's not feasible for UA to deadhead crew/widebody from another UA hub just for Australia/LHR/NRT, or even pay for $$ accomodation in SYD to do a SFO-SYD-LAX-SYD-SFO rotation, UA won't hesistate to close the Australia-LAX flights as well.

Hence the potential that SYD-LAX may end up as a QF/AA monopoly post-COVID.

 

[muppet]

VA1's 'good international network' bled cash all over the place. Maybe it was 'good' for some passengers to fly on but it didn't make money. Period.
Didn't get enough bums on seats for the right price so what on earth makes anyone think VA2 will be any more of a contender in an international capacity.

VA International lost $75m in 2019, $20m in 2018 and $50m 1H2020.

Hong Kong alone lost $130m over that period, exclude HKG and the operation isn’t that bad.... sill loss making of course.

 

[jakeseven7]

VA International lost $75m in 2019, $20m in 2018 and $50m 1H2020.

Hong Kong alone lost $130m over that period, exclude HKG and the operation isn’t that bad.... sill loss making of course.

Agreed loss making = bad business, especially when it has continued year after year and your debt piles up to drown you.

 

[tomlee1986]

VA International lost $75m in 2019, $20m in 2018 and $50m 1H2020.

Hong Kong alone lost $130m over that period, exclude HKG and the operation isn’t that bad.... sill loss making of course.

I wasnt surprised about HKG is a $130m loss.. because CX and QF were the dominant players in this routing between HKG and Australia

 

[grubbidok]

Have a look at a VA route map in QLD and combined with the HQ in BNE it makes more sense from a state development perspective, which was the previous job of the now treasurer. Not saying it makes political sense.

This makes a ton of political sense to me. No-one's going to be able to fly overseas for a long time. Queensland has a strong tourist economy throughout the state that needs to be saved - and has been devastated by many workers in that sector being excluded from JobKeeper - and could even potentially benefit from everyone now taking their holidays domestically.

None of that's going to be helped by a QF/JQ monopoly charging more than they should (and even if Alliance/Rex do get up, it will take a while before they get VA's presence). Having a government stake can also help them make sure that Queensland routes are prioritised by the new entity.

It's not just about the perceived prestige of a Brisbane HQ and saving local VA staff they're looking at.