Virgin Australia Financially Secure? [Now in Voluntary Administration]

[RooFlyer]

Do we know if the Qld Gov in their bid ever got entry into the data room? I wonder if those tea leaves would have changed their mind.

My understanding is that they didn't join any of the consortia. I dare say they are hanging around the edges, possibly talking to each of the short-listed parties (to the extent they are able), whispering lovely things to each that there's ?$200mill coming your way if you keep the base in Queensland. I wonder if Victoria are doing the same to get them to change

 

[jakeseven7]

My understanding is that they didn't join any of the consortia. I dare say they are hanging around the edges, possibly talking to each of the short-listed parties (to the extent they are able), whispering lovely things to each that there's ?$200mill coming your way if you keep the base in Queensland. I wonder if Victoria are doing the same to get them to change

We wouldn't know because Victoria aren't dumb enough to screech it in the news But it has been reported that MEL and the Vic Government are circling the bidders as well. Sydney has gone a bit quiet, they would be an outside chance anyway I suspect - costs too high.

 

[HS-TQE]

Been reported in the Australian (Today's paper) according to "sources" that 3 out of the 4 bids are planning to reduce the fleet of 738s (e.g goodbye TT and VARA), with scope for limited international flying on Tran-Tasman only. No mention of what they're planning to do with the 4x owned Boeing 77Ws as there is basically no buyers in this environment (question is whether to mothball or scrap)

This goes against the suggestion by administrators in another news article that they want the bidders to retain long-haul international.

My tip is the sole bidder against the plan of the reducing the VA fleet to 738s only, is (of course) Indigo which will likely be planning to take on the TT/VARA A320s instead.

 

[Must...Fly!]

VARA doesn't fly B738s, they are VA mainline running charters to the ports that can take B738s. The F100s (in particular) and A320s have utility in regional WA which the B738s simply don't.

 

[jakeseven7]

This goes against the suggestion by administrators in another news article that they want the bidders to retain long-haul international.

VA1 management want the bidders to retain THEM and long-haul international.... That is the business plan they put together according to the media. There are clearly still alot of the old JB VA guard creaking around the Village HQ if they honestly think long haul is going to be continued....!

 

[BNEFlyer]

VA1 management want the bidders to retain THEM and long-haul international.... That is the business plan they put together according to the media. There are clearly still alot of the old JB VA guard creaking around the Village HQ if they honestly think long haul is going to be continued....!

With 4 777’s LAX and HND can be continued.

 

[dajop]

With 4 777’s LAX and HND can be continued.

The question isn’t “can they be continued with existing assets?”, but rather “can they be continued profitably?” The answer this question is almost certainly a resounding no in the next 12 months. After that .... who knows.

 

[BNEFlyer]

The question isn’t “can they be continued with existing assets?”, but rather “can they be continued profitably?” The answer this question is almost certainly a resounding no in the next 12 months. After that .... who knows.

Well no one is going anywhere overseas for at least another 7+ months.

 

[HappyFlyerFamily]

Well no one is going anywhere overseas for at least another 7+ months.

According to the Australian Government roadmap, July is the aspirational goal for international trip to NZ and Pacific Islands.

Not applicable to Virgin, but also Vietnam and Taiwan are in the mix for a travel bubble.

 

[glasszon]

According to the Australian Government roadmap, July is the aspirational goal for international trip to NZ and Pacific Islands.

Not applicable to Virgin, but also Vietnam and Taiwan are in the mix for a travel bubble.

July is truly aspirational, I would be surprised if all interstate travel restrictions are lifted by July, let alone international travel.

 

[oz_mark]

VARA doesn't fly B738s, they are VA mainline running charters to the ports that can take B738s. The F100s (in particular) and A320s have utility in regional WA which the B738s simply don't.

Indeed. There's a reason QFLink operate A320s in Western Australia...

 

[ja1]

The question isn’t “can they be continued with existing assets?”, but rather “can they be continued profitably?” The answer this question is almost certainly a resounding no in the next 12 months. After that .... who knows.

Every route flown by an airline isn't profitable, unless you're a much smaller airline (such as REX) where you can define any route as profitable because a government will pay you to fly it.

VA's international flying wasn't (at this stage anyway) about being profitable in and of itself but to feed into the domestic flying which was profitable.

I suspect that if VA could have gotten its shareholders to provide international feedin to a VA only domestic network it would be a materially different airline but that never really happened.

And once they went down an international strategy it was likely hard to rein it..

As an exaple, having done the VA SYD-RAR (SYD-BNE-AKL-RAR in fact) I have trouble understanding how that route would ever be profitable.. and i doubt HKG was ever profitable either ? But I assume all the non local folk flying that route then went on to book a bunch of domestic legs..

 

[dajop]

Every route flown by an airline isn't profitable, unless you're a much smaller airline (such as REX) where you can define any route as profitable because a government will pay you to fly it.

VA's international flying wasn't (at this stage anyway) about being profitable in and of itself but to feed into the domestic flying which was profitable.

I don’t think the profitability of international services lies in the “feed” in terms of specific connecting traffic, but more about having a broad enough offering that keeps high value accounts and individuals in your sphere, or “handcuffed” to the airline.

In any event no point in having loss making international flights to feed domestic traffic if the losses of the international operation outweigh the profit of the domestic operations.

 

[Melburnian1]

Every route flown by an airline isn't profitable, unless you're a much smaller airline (such as REX) where you can define any route as profitable because a government will pay you to fly it... and i doubt HKG was ever profitable either ? But I assume all the non local folk flying that route then went on to book a bunch of domestic legs..

VA admitted that its forays to HKG from MEL and SYD lost a collective eye-watering A$130 million.

I'd guessed '$20 million' but someone on AFF said it would have only been '$10 million.' We were hugely incorrect.

 

[HS-TQE]

Every route flown by an airline isn't profitable, unless you're a much smaller airline (such as REX) where you can define any route as profitable because a government will pay you to fly it.

VA's international flying wasn't (at this stage anyway) about being profitable in and of itself but to feed into the domestic flying which was profitable.

I suspect that if VA could have gotten its shareholders to provide international feedin to a VA only domestic network it would be a materially different airline but that never really happened.

NZ was the only airline wanting to go down that direction. Luxon found out he was the third wheel as it's commonly known.

Borghetti was buddies with Hogan (EY) and the SQ rep, which was enough to stave off any Luxon/NZ push to remove JB.

And once they went down an international strategy it was likely hard to rein it..

As an exaple, having done the VA SYD-RAR (SYD-BNE-AKL-RAR in fact) I have trouble understanding how that route would ever be profitable.. and i doubt HKG was ever profitable either ? But I assume all the non local folk flying that route then went on to book a bunch of domestic legs..

The International strategy started way back in the Godfrey era with NZ through Pacific Blue, with expansion to Fiji and Denpasar using Australian-based crews on Pacific Blue service (those planes had "Airline of Virgin Blue" painted on it) and RB/BG established the long-haul V Australia with LAX and the short lived MEL-JNB/BNE-HKT. The later two were axed upon JB taking over from BG (and JB bringing along his mates from EY and SQ - plus introducing AUH)

BG's mistake however was ordering the 77Ws despite no other realistic alternative available (IIRC they also looked at the gas-guzzling A346s and the 744s) but they ruled that out, and the queues for the 788s/789s at the time were considered "too long"

 

[tomlee1986]

VA admitted that its forays to HKG from MEL and SYD lost a collective eye-watering A$130 million.

I'd guessed '$20 million' but someone on AFF said it would have only been '$10 million.' We were hugely incorrect.

I am not surprised about this loss, because of the cost of international flights costs, and what happened at HKG last year since June!

 

[Melburnian1]

I am not surprised about this loss, because of the cost of international flights costs, and what happened at HKG last year since June!

I haven't calculated how many individual one-way flights were operated by VAi on these two routes but I'd guess under 2000 so if you divide one by the other, it's equal to a huge loss of A$65000 for a single (i.e. one way) flight from either MEL, SYD or HKG. If I really wanted to, the BITRE monthly reports would allow calculation of exactly how many times a VA aircraft pushed back on the routes.

The loss of $130 million includes head office and other overheads. Those of us who don't work as an accountant for an airline are never sure exactly what percentage of each cost centre is allocated: is it done on available seat kilometres or some other way, bearing in mind costs per ASK are not the same for smaller and larger aircraft?

To me it remains a staggering amount of money to flush down the toilet.

 

[BNEFlyer]

VA admitted that its forays to HKG from MEL and SYD lost a collective eye-watering A$130 million.

I'd guessed '$20 million' but someone on AFF said it would have only been '$10 million.' We were hugely incorrect.

Hopefully HND performs better for them, they at least have minimal/no competition (only QF BNE-NRT).

 

[kamchatsky]

Hopefully HND performs better for them, they at least have minimal/no competition (only QF BNE-NRT).

To be honest given travel will be very weak over next few years, with major competition from JL, QF, JQ, ANA for AU-JP, I just cannot see how they can run this route profitably in the future. All the alliance with ANA in the past is gone.

 

[jakeseven7]

Interesting comment in article how most bidders don't agree with the administrators/VA1's business plan.

So regardless of who wins, big changes afoot.

Indigo Partners Eye Return To Low Cost For Virgin Australia

simpleflying.com