Virgin Australia Financially Secure? [Now in Voluntary Administration]

[oz_mark]

My understanding is that BGH's approach is to capitalise on it being an Australian equity firm with the whole "Team Australia" rhetoric that's out there at the moment. It's an approach that makes sense considering an effect of Covid has been Australians coming together and wanting to support Australian businesses (and workers), and would also be handy ammunition considering the public backlash VAMkI received with its foreign owners when they first started asking for money.

All good, except they have given little indication as to the business model they would use.

 

[travel_bug]

All good, except they have given little indication as to the business model they would use.

Correction: they have given little indication to the public as to the business model they would use.
To get to this stage they would have had to give a business model to whom it matters, Deloitte.

Considering the amount of sources with loose lips during this administration process, maybe the fact they're a contender who's able to keep their cards to their chest and keep their business proposals where they belong - in the administration process - is a strength.

Additionally, the public knowing (and providing opinion) of these proposals, whether full service or LCC, domestic or international, really makes no difference as to which buyer is victorious at the end of the day. And if public opinion does matter, how many people are realistically going to care whether the carrier is any of the above?
The simple "we're Australian and we support Australian workers" rhetoric may be enough in the court of public opinion in this environment, particularly when coupled with the strength of workers and their union reps as creditors.

 

[hydrabyss]

LMAO! I’ve resigned myself to that weasel worming in with whoever is successful

From what I have read in the media their proposal appears to be the best option if they keep it for us that will fly with them.

 

[docjames]

From what I have read in the media their proposal appears to be the best option if they keep it for us that will fly with them.

Yes but presumably the administrators will go for whomever provides the best financial return for the creditors. Irrespective of virtually everything else.

 

[antycbr]

According to The Australian Brookfield are back and submitting a bid which will mean a shortlist of 3

 

[BNEFlyer]

Yes but presumably the administrators will go for whomever provides the best financial return for the creditors. Irrespective of virtually everything else.

If Deloitte accepted a bid from an investor whose sole purpose was to provide the best financial return to creditors with no regard for the employees jobs or the future of the airline then they're not doing their job properly. But when there are multiple investors vying to take over the business, Deloitte should be able to find one that gives a reasonable return to creditors, retains staff and brings the airline back as it was (mid-full service), but perhaps with some changes as reported being 737/777 only and maybe a streamlined route network.

 

[docjames]

If Deloitte accepted a bid from an investor whose sole purpose was to provide the best financial return to creditors with no regard for the employees jobs or the future of the airline then they're not doing their job properly. But when there are multiple investors vying to take over the business, Deloitte should be able to find one that gives a reasonable return to creditors, retains staff and brings the airline back as it was (mid-full service), but perhaps with some changes as reported being 737/777 only and maybe a streamlined route network.

I probably should have said “creditors, claimants and investors” rather than “creditors”.

In which case (as you rightly point out) , the other factors (ongoing employment / staff entitlements / job losses) will be factored into any sale.

The actual final outcome of whether any ongoing operation is LCC, full service, hybrid will be a long way down the list of things to consider (but may be a factor into achieving outcome for vested parties - a pure LCC would presumably mean a greater number of changes ,job losses etc so may be considered “less attractive”).


Are we all just arguing (but really agreeing) “it’s complex” and “pax would love it to be a direct competitior to QF to keep them honest (but that’s financially fraught)”????

 

[woodborer]

All good, except they have given little indication as to the business model they would use.

Reports suggest a substantially shrunk operation (to begin with) - smaller than the other bidders are suggesting.

 

[HappyFlyerFamily]

... Deloitte should be able to find one that ...

Sorry but the cynicism in me thinks the administrators will be taken on whatever ride the bidders will offer and the creditors agree (to get as much money back perhaps either now or in combination in the future) and unions think might be workable (to save as many jobs possible perhaps)

 

[RooFlyer]

Remember that the 'consideration' offered or paid may not be a simple cheque slid across the table. There may be all sorts of conditional or deferred components. For instance "If we make a return above a hurdle of X% in the first 3 years, then we will pay 33% of the extra to the Administrators.".

The Administrators will be able to render such offers to a NPV today, but it will be less straightforward for those not skilled in valuation to understand why an offer with less up-front gets the nod (if it does...)

The higher the cash the better

 

[melb78]

Well after the fresh news this morning that the administrators have asked again from the Gov for money to help VA stay afloat till the end of the sale process has been knocked backed. makes me wonder if VA has any money left or the admin has not done a great job at this. at this race VA will end up in liquidation before it is sold

 

[jakeseven7]

Well after the fresh news this morning that the administrators have asked again from the Gov for money to help VA stay afloat till the end of the sale process has been knocked backed. makes me wonder if VA has any money left or the admin has not done a great job at this. at this race VA will end up in liquidation before it is sold

They won’t get a dime from the feds it is their problem, they ran the process, they did the numbers.

And the QLD state government is shovelling the dirt on top of the VA1 carcass by not opening their borders as well. I wonder if the QLD government will offer to fund them through to sale.... I certainly hope not!

The administrators will just have to finance it themselves, or get the bidders to chip in.

But as some have speculated perhaps the bidders may want VA1 to liquidate...

Interesting times...

 

[jakeseven7]

Deloitte's call for Virgin emergency cash rejected as liquidity fears rise

Deloitte's lead administrator Vaughan Strawbridge said a fortnight ago Virgin had enough money to last until mid- to late-June but would have to find fresh funding after that, nominating bidders, banks and government as possible sources of short-term cash to see it through the six weeks after that.

Three people close to the administration, who spoke on the condition of anonymity because the process is confidential, said that Deloitte had already asked the federal government for financial support on at least one occasion but was knocked back.

Administrators from Deloitte will spend the weekend weighing up second-round bids for Virgin from four shortlisted bidders, said to be worth around $3.5 billion to $4 billion, along with an 11th hour pitch from Canadian asset manager Brookfield, which wants to re-enter the race after earlier dropping out of the sale process.

Full article:

Deloitte's call for Virgin emergency cash rejected as liquidity fears rise

The federal government has rejected at least one direct plea from Virgin Australia's administrator Deloitte for emergency funding, raising concerns it might fall into liquidation before new owners are found.

www.google.com.au

 

[jakeseven7]

More on BGH plans to slim VA2 down, nothing on model (LCC v ‘full’ service:



Fleet size pinched significantly in BGH's bid for Virgin

BGH Capital could restart Virgin Australia with as few as 15 Boeing 737 planes in the air if its bid for the airline is successful, reflecting the depressed state of travel demand in the COVID-19 pandemic.

But, as things return to some normality on the other side of the crisis, BGH Capital said expects to be able to have between 75 to 80 737 aircraft in the sky.

Still, it represents a substantial reduction in the size of Virgin's fleet – last year's annual report said Virgin Australia had more than 130 planes

Fleet size pinched significantly in BGH's bid for Virgin

BGH Capital could restart Virgin Australia with as few as 15 Boeing 737 planes in the air if its bid for the airline is successful.

www.afr.com

 

[Carrots]

The airline could return to the skies (they’re still in them) with as little as 15 aircraft...

That must’ve taken weeks of quality investigative journalism to work that out.

Or could it possibly be because there is currently 0.0001% of the historical averages of commercial flights actually in the skies (ok so maybe I embellished a tad!) and that the restarting of increased schedules will take weeks. (Naturally that is because Jakesevens friends at Parliament House in Brisbane don’t want to to be friends with anyone else ).

 

[jakeseven7]

The airline could return to the skies (they’re still in them) with as little as 15 aircraft...

That must’ve taken weeks of quality investigative journalism to work that out.

Nah just 4 days of investigation - the 15 plane restart was presented by BGH on Monday... did you even read the article...?

 

[Must...Fly!]

So are they going to entirely give up on the resources sector and North West flying in WA?

These stories are such rubbish.

 

[jakeseven7]

So are they going to entirely give up on the resources sector and North West flying in WA?

I wonder what BGH’s rationale is for that... in the article it reports the ACTU was far from impressed with the ‘15 plane restart’ plan... I imagine lots of people wouldn’t be!

 

[melb78]

the only 2 that I think my get in is Brookfield and Cyrus and wildcard Bain

 

[oz_mark]

I'll go with BGH and Cyrus

I am pretty sure Cyrus will be there, and Indigo will not.

Between BGH and Bain, more of a coin toss, but I'll go with BGH.

I'm starting to rethink my 'guess'. Brookfield returning, and more information has caused this!

Cyrus, and hmm...