Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Must...Fly!]

Domestic was making money, but dragged down by the dead weight of Tiger, the mountain of debt, and the conflicting shareholder interests.

The money (billions!) has been spent getting the airline where it is. Dead weight has to be cut in all areas, but the fundamentals of the airline should be strong.

It makes zero sense to buy the airline, break deals with all the creditors you have to and then take the airline down to LCC.

Why not just wait for the whole thing to go in to receivership, then pick the Tiger AOC off the bones of the carcass, if that's what you want? I'm sure at least one of the bidders is eyeing that possibility.

If you want Virgin Australia and the rest of the great things that come with the airline (already there, ready to go & paid for largely by someone else) then now is the time...

F100s make money courtesy of the mining sector, unfortunately the problem here is that the B737s are not suited to a lot of the flying done by the ageing F100s - engines are too low on the Boeing to land at various airstrips, hence why the A320s have ended up with VARA, almost by necessity. Not sure on the group-wide solution there as the 737 is clearly the workhorse. But they should all be able to co-exist and make money given how lucrative mining contracts are in the North West (and useful to east-west seat filling, too).

 

[BNEFlyer]

It makes zero sense to buy the airline, break deals with all the creditors you have to and then take the airline down to LCC.

Why not just wait for the whole thing to go in to receivership, then pick the Tiger AOC off the bones of the carcass, if that's what you want? I'm sure at least one of the bidders is eyeing that possibility.

I'll make an educated guess that VA management didn't propose going back to an LCC to the prospective investors.

 

[DavidFlynn]

I'll make an educated guess that VA management didn't propose going back to an LCC to the prospective investors.

it was reportedly tabled as an “optional extra”.

 

[Must...Fly!]

I'll make an educated guess that VA management didn't propose going back to an LCC to the prospective investors.

Probably not, but I am talking more from the perspective of the bidders. If you don't like VA in it's current form (substantially current, anyway) & just want an LCC without the start up delays & problems, then you may as well wait and see what happens.

All the money that was spent on the lounges, business class, etc etc...I mean, it was pretty successful within the domestic realm and will cost you just cents on the dollar to have, minus all the things that were actually dragging financial performance down now and in future (i.e. the A330s, excess leased aircraft, stored aircraft, MAX order)...

 

[esseeeayeenn]

Did we go too far – could we have done with really good recliners instead of long-haul grade flat beds with direct aisle access, whopping great video screens etc?

The true, long term cost of a business class seat is not the hardware and installation cost but the space it takes up in the aircraft.
A really good recliner could take up as much space as a well designed suite.
Or more!

 

[jakeseven7]

I'll make an educated guess that VA management didn't propose going back to an LCC to the prospective investors.

Doesn’t really matter what VA1 management proposed and PS is doing backflips in this space as we speak, probably because he sniffs Jayne and John coming for his job and they have very firm views about what to do with VA2, John’s have been pretty public too.

 

[BNEFlyer]

Probably not, but I am talking more from the perspective of the bidders. If you don't like VA in it's current form (substantially current, anyway) & just want an LCC without the start up delays & problems, then you may as well wait and see what happens.

All the money that was spent on the lounges, business class, etc etc...I mean, it was pretty successful within the domestic realm and will cost you just cents on the dollar to have, minus all the things that were actually dragging financial performance down now and in future (i.e. the A330s, excess leased aircraft, stored aircraft, MAX order)...

Agree that the investment in lounges, business class, terminal upgrades etc. was very successful and would most likely continue to be as they've built that client base. It's been touted that the A330's will go and perhaps any excess leased 737's. But the Max order is still in play, though Boeing seem to have that on idefinite delay.

 

[Must...Fly!]

Agree that the investment in lounges, business class, terminal upgrades etc. was very successful and would most likely continue to be as they've built that client base. It's been touted that the A330's will go and perhaps any excess leased 737's. But the Max order is still in play, though Boeing seem to have that on idefinite delay.

A single type solution makes sense from an eastern states perspective, however it extremely significantly dents any ability to compete for most of the resources contracts & intrastate WA flying. Again you could spin this off, but they bought Skywest for almost nothing and there is no doubt that the WA state network is one of the strengths of the group, at least on paper if not financially (impossible to think that it's making a loss though, given the aircraft they have progressively shifted to VARA & investment in modernising fleet & operation)

At the end of the day I guess we have to remember the administrator is not working on behalf of the entity but on behalf of the creditors, so this all may be moot.

 

[DavidFlynn]

Speaking of leased Virgin Australia aircraft...

• Virgin Australia administrators have reached in-principle agreements with aircraft lessors covering the bulk of its fleet to wait until after August 31 to repossess planes
• Lessors would normally be able to repossess planes from June 19, which is 60 calendar days after the appointment of administrators. But the coronavirus pandemic has decimated travel demand, giving lessors few alternative options for placing the planes.
• Virgin Australia has a monthly rental liability of A$40 million for the 117 leased aircraft and engines in its fleet, but is only bringing in A$25 million of monthly revenue due to the collapse in demand, the documents showed.

Virgin Australia lessors agree in principle to delay plane repossession: administrators

Virgin Australia Holdings Ltd's <VAH.AX> administrators have reached in-principle agreements with aircraft lessors covering the bulk of its fleet to wait until after Aug. 31 to repossess planes, to allow them to complete a sale, an affidavit showed.

www.reuters.com

 

[Borisdog]

Funnily enough, folk with starry Ansett eyes seem to forget that parts of their fleet were grounded twice over safety issues....

Yep.

Over how many years of operations?

Not good at all, being grounded for safety issues, but Ansett was a very long way superior to Tiger.

 

[Ansett]

And wasn't that under the watchful eyes of Air NZ who were bleeding Ansett.... Whilst being a bit broke themselves,

 

[MH_fan]

The look of VA 2.0 is a perplexing one to say the least, mainly because of the ramifications on travel demand as a result of COVID. However, I do agree that a hybrid model would work as it positions VA 2.0 inbetween QF and JQ. The Euro style business class would be perfectly acceptable for flights up to 3 hours (or so) but not longer than that. I think that having a subfleet of 737s that have the lie-flat seats would go a long way towards keeping the premium and corporate passengers on the transcontinental flights and would also be attractive to premium leisure travellers flying to NZ (to compete with QF's widebodies trans-Tasman) or to other international destinations should VA 2.0 chose to do so sometime in the future. So what if occasionally some of that subfleet gets used on the golden triangle route? Bonus for those passengers and nothing different from the widebodies that fly the golden triangle as re-positioning flights. This kind of model (good premium product, lounges, priority services, etc) will also help to retain those loyal Velocity members and provide benefits for high status passengers.

 

[jakeseven7]

Agree that the investment in lounges, business class, terminal upgrades etc. was very successful and would most likely continue to be as they've built that client base.

Perhaps it was 'very successful' for us passengers who enjoyed the service, but financially the investment in all the above has not been successful and VA1 were not able to build a big enough client base of premium passengers to pay for it.

Personally (from my own selfish view point) I hope they retain all the frills, but it clearly hasn't been a successful and sustainable strategy for them, so it really feels like there will be some changes here, especially in a massively shrunk market place.

 

[docjames]

Interestingly, and some here may know more of this than I, at one stage several years ago Virgin was in discussions with Sumo Salad to trial a ‘buy and bring on board’ system at Brisbane - as I understand, the plan called for Sumo carts at the departure gate, Economy passengers would buy the meal and bring it on board. There’d be no onboard f&b except for business class, and the cabin crew would just walk down the aisle and collect all of the Sumo salad bowls into a rubbish bag just before the end of the flight.

Not an ideal scenario when you consider people boarding with their hands already full with carry-on luggage and trying to stow some of that in the overhead compartments, but still, one way to reconsider the whole economy f&b proposition.

This model (collect at gate) was used by eg. LH in the 1990’s where pax would collect their preferred onboard snack as they boarded. Was free however (not paid).

Would make a good retrospective article and look at it’s viability in Aus. Agree with your concerns re: slowing boarding although I don’t recall it as a huge issue, most pax didn’t both grabbing anything. I think initially brought in to reduce need to service on short intra-DE flights and reduce food wastage. Have very clear memory of it on FRA-MUC in late 1991.

 

[jakeseven7]

This model (collect at gate) was used by eg. LH in the 1990’s where pax would collect their preferred onboard snack as they boarded. Was free however (not paid).

Would make a good retrospective article and look at it’s viability in Aus. Agree with your concerns re: slowing boarding although I don’t recall it as a huge issue, most pax didn’t both grabbing anything. I think initially brought in to reduce need to service on short intra-DE flights and reduce food wastage. Have very clear memory of it on FRA-MUC in late 1991.

Interesting. They would have to pick the right partner though and a salt/fat drenched salad from a franchise like Sumo wouldnt personally be at the top of my list

I wonder if they will just move back to 100% pay onboard. With the cuts PS made shortly before they collapsed they weren’t far off that anyway...

 

[jakeseven7]

Another watchout for the longer the sale process take, is the more talent will jump ship. Not saying this person was any good, but I imagine alot of VA1 staff are out there trying to get new jobs...

Virgin Australia's loyalty CIO decamps to icare NSW

Moves on after two years.

www.itnews.com.au

 

[Carrots]

Another watchout for the longer the sale process take, is the more talent will jump ship. Not saying this person was any good, but I imagine alot of VA1 staff are out there trying to get new jobs...

Virgin Australia's loyalty CIO decamps to icare NSW

Moves on after two years.

www.itnews.com.au

Whilst it's a valid point, highly unlikely this particular person wasn't moving out the door well before administration occurred. Seems more like the usual 2-3 year stint done, time to hop up the ladder for a new role.

 

[DavidFlynn]

Interesting. They would have to pick the right partner though and a salt/fat drenched salad from a franchise like Sumo wouldnt personally be at the top of my list

I believe (and again, could be mistaken) that BNE's Sumo Salad was run by the some company which held the management contract for Virgin's BNE lounge, hence a logical connection. That said...

1. If I was to choose a 'franchise' for a light healthy not-messy economy meal to pick up at the gate and bring on board, it'd be Pret a Manger. I will admit to being a real Pret fan! But their rolls and sandwiches for example always strike me as simple yet satisfying 'plane food'.

2. If one wanted to do economy-of-scale stuff, then if you have your own lounge and catering staff and supplies, so why not make your own sangers and salad bowls and what-not, bundle 'em with some fruit or packed snacks into lunch boxes and sell those at the departure gate, without getting a third-party involved?

Honestly, if Virgin 2.0 goes 'hybrid' with Euro-business on the triangle, runs a 737 sub-fleet with the 'Perth Product' for east-west routes and drops inflight f&b for economy in favour of selling its own lounge-prepared food at the departure gate, I'm claiming copyright on those ideas and demanding lifetime membership to The Club. Assuming The Club still exists in Virgin 2.0.

 

[Bundy Bear]

Another watchout for the longer the sale process take, is the more talent will jump ship. Not saying this person was any good, but I imagine alot of VA1 staff are out there trying to get new jobs...

Virgin Australia's loyalty CIO decamps to icare NSW

Moves on after two years.

www.itnews.com.au

Ooh I know someone who could do her job.

 

[DavidFlynn]

Jostling and positioning by Virgin bidders is getting really interesting. Cyrus reportedly blowing the full-service trumpet, but domestic fleet pared back to B737s

Virgin bidder Cyrus plans to keep airline as full-service Qantas competitor

The Richard Branson-linked investment fund has said it wants to maintain Virgin Australia as a full-service international airline if it wins the race for the collapsed carrier.

www.smh.com.au