Virgin Australia Financially Secure? [Now in Voluntary Administration]

[jakeseven7]

Interesting and a good long summary of where we are today, from all aspects.

Massive job cuts looming under both models for the old VA1 HQ. And fleet size of around 75/80 (from 130) - scaling it back to about the size of JQ Australia.

Very interesting as it covers how the vote is going to work!


VIRGIN LEAVES WORKERS IN THE DARK

As the Virgin Australia sale enters its final phase, there is an ominous silence over the fate of the company's 9000 employees.

Poorly informed union members might themselves inadvertently tip Virgin into liquidation if they decide to vote down a change of ownership that involves significant job losses.

The cost cutting contained in Scurrah's plan, labelled Virgin 2.0, is similar to the cost cutting contained in the plans put forward by leading bidders including Bain Capital, BGH Capitaland Indigo Partners.

It would seem there is consensus among bidders contemplating a full service airline that Virgin can be profitable with about 75 to 80 aircraft, or about 40 per cent fewer than in operation before insolvency.

Virgin leaves workers in the dark

As the Virgin sale reaches another milestone, there is a general unwillingness to discuss the elephant in the room – the prospect of thousands of job losses.

www.afr.com

 

[andrewpf]

The most interesting bits in the AFR (Virgin leaves workers in the dark) article to me are about the process :

A decision on who owns Virgin requires the approval of more than half the number of creditors and more than half of the total debt.

Virgin has about 12,000 creditors, which means Virgin's employees control about 75 per cent of the votes by volume of creditors.

On the debt side, the unsecured bond holders, who are owed about $2 billion, will likely control the voting by value by the time of the next creditors' meeting in August.

When a poll is taken and there is a deadlock, the chairman may use their casting vote either in favour of or against the resolution.

 

[aaronm]

Rough for the employees, even if VA were not in administration they would likely be shedding a substantial number of staff given the current operating environment. QF will be doing the same no doubt, at least over the coming 12-18 months demand for air travel will not warrant maintaining 100% of the workforce.

I am hopeful that regardless of the winning bidder they can maintain the international partnerships with SQ, DL etc. Substantial value for loyal flyers there even if VA don't operate any international routes.

 

[TheInsider]

Rough for the employees, even if VA were not in administration they would likely be shedding a substantial number of staff given the current operating environment. QF will be doing the same no doubt, at least over the coming 12-18 months demand for air travel will not warrant maintaining 100% of the workforce.

I am hopeful that regardless of the winning bidder they can maintain the international partnerships with SQ, DL etc. Substantial value for loyal flyers there even if VA don't operate any international routes.

QF management have stated countless time to their staff during the past few months and up until recently, that "redundancies are NOT on the cards", and they "they haven't even thought about it", to as much as "it's not going to happen".
This excludes the people that are still employed there that were meant to receive a VR the last round from many years ago.
Sorry i'm aware this is OT.

 

[p--and--t]

Rough for the employees, even if VA were not in administration they would likely be shedding a substantial number of staff given the current operating environment. QF will be doing the same no doubt, at least over the coming 12-18 months demand for air travel will not warrant maintaining 100% of the workforce.

I am hopeful that regardless of the winning bidder they can maintain the international partnerships with SQ, DL etc. Substantial value for loyal flyers there even if VA don't operate any international routes.

Reading reports from around the globe, most of the majors have been talking about dropping 25-50% of staff because of Covid.

Emirates, profitable and owners with very deep pockets announced 30% drop of staff in last 72 hours. 180 A380 pilots and 400 crew in training let go yesterday.

UA who got a $B bailout from the US gov has announced 30% reduction in staff. BA have announced 30 % cut (12,000) in first wave.

Anybody thinking there won't need to be a very significant haircut in labour resources at VA has been sniffing some pretty powerful stuff.

 

[jakeseven7]

Anybody thinking there won't need to be a very significant haircut in labour resources at VA has been sniffing some pretty powerful stuff.

According to the AFR report, both bidders will come after VA2 HQ staff numbers hard.

But also... if both bidders are targeting a fleet size around that of JQ, we also know that hundreds, perhaps 1000's of front line staff will go as well. It is unfortunately inevitable...

 

[RAM]

According to the AFR report, both bidders will come after VA2 HQ staff numbers hard.

But also... if both bidders are targeting a fleet size around that of JQ, we also know that hundreds, perhaps 1000's of front line staff will go as well. It is unfortunately inevitable...

A 40% fleet reduction which includes the A330s & B777s suggests more than a 40% staff reduction & a closure of one maintenance base entirely unfortunately.

Makes sense though as, just as like when a new CEO is appointed, the new owner will prune it back to a healthier (profitable?) trunk and look forward for the upside. I'd be (pleasantly) surprised if any route that had less than a 75% ticketing rate for 2019 will be operating in 2021 but only time will tell.

Given VFF was generating around $30m net profit/month in 2018/19 - the steps this week with points transfers to VFF beginning again should see +ve cash flow to repay the $100m (plus accrued interest) loan to VA. Notably, over the entire time it seems that the various credit cards that paid VFF points for amount spent have been sending the cash across to VFF for the points accrued over that period.

What really complicated cashflow for the administrators were reportably some banks that decided to NOT allow cash held in VA accounts with them to be used by the administrators. A strategy that could backfire badly for them perhaps...

 

[Mattg]

I wonder if routes like NTL-AKL will be back. VA had signed an agreement with Newcastle Airport to continue the route for another 3 years, despite achieving load factors of around 50% in the first summer season.

 

[bernardblack]

It was underwritten by NTL and/or the City of Newcastle, right? If that continues and there's still a VA that seems like something they could keep doing with remaining 737s for free money. They would likely still need MEL-NTL or BNE-NTL (or a turnaround in AKL from SYD/BNE/MEL) to position the aircraft.

 

[Must...Fly!]

Staff numbers will drop, that is completely inevitable sadly, across aviation and within Australia.

QF management have stated countless time to their staff during the past few months and up until recently, that "redundancies are NOT on the cards", and they "they haven't even thought about it", to as much as "it's not going to happen".
This excludes the people that are still employed there that were meant to receive a VR the last round from many years ago.
Sorry i'm aware this is OT.

Wow so QF is immune to the rest of the aviation world after all. Scientists need to go after them for the COVID vaccine...

Meanwhile it's rather cute that you continue to believe it

 

[jakeseven7]

Staff numbers will drop, that is completely inevitable sadly, across aviation and within Australia.


Wow so QF is immune to the rest of the aviation world after all. Scientists need to go after them for the COVID vaccine...

Meanwhile it's rather cute that you continue to believe it

Agree with you, perhaps they will manage through with voluntary redundancies, who knows - but this is the VA thread, there is another for QF as well

Back on topic:

QLD Government has emerged, sensibly just to partner with whoever.

But I hope they make sure they aren't shelling about tens/hundreds of millions to see the VA2 HQ employee numbers being cut in half. And if they do cut HQ in half - QLD goverment should make sure their support levels are proportionate to the new reduced size of VA2.

Queensland breaks cover and hints at Virgin bidder partnership

Treasurer Cameron Dick said that the Queensland Investment Corporation had “very positive engagement” with both Cyrus Capital Partners and Bain Capital.

australianaviation.com.au

 

[TheInsider]

Meanwhile it's rather cute that you continue to believe it

Right, never said I did.

 

[jakeseven7]

Another article discussing the two remaining bidders.

As we all predicted, the Feds don't care who VA2 is sold to - they never have.


Virgin unions to grill Bain as concerns grow over quick resale

Virgin Australia's unions will demand more information from suitor Bain Capital about its plans for the collapsed airline as Canberra echoes concerns the airline could quickly be "flipped" by one of its two remaining bidders.

The winning takeover bid is set to sail through the Foreign Investment Review Board, despite concerns in Canberra about it being "flipped", or resold, shortly after by its new owners, with government sources confirming it would not stand in the way of either bidder.

Virgin currently has 132 aircraft. There have been suggestions Bain is considering an operation of about 75 aircraft over the medium term. Cyrus intends to keep most of Virgin's 75 Boeing 737s for domestic flying but offload its mixed bag of other domestic aircraft types.

Virgin unions to grill Bain as concerns grow over quick resale

Virgin Australia's unions will demand more information from suitor Bain Capital about its plans for the collapsed airline as Canberra echoes concerns the airline could quickly be resold.

www.smh.com.au

 

[Must...Fly!]

In that context it feels like the smart money is sitting on the sideline and picking up the F100 fire sale for all but guaranteed operational profit. Alliance may be doing just that...(ah yes with Qantas owning 19.9%)?

 

[antycbr]

In that context it feels like the smart money is sitting on the sideline and picking up the F100 fire sale for all but guaranteed operational profit. Alliance may be doing just that...(ah yes with Qantas owning 19.9%)?

I think that QF may be forced to sell that stake to ensure competition if there is a reduced VARA/VA fifo operation.

 

[jakeseven7]

Well well what a surprise, Branson finally found some money after all.... after bleating poor for weeks


Branson pushes for ownership stake in relaunched Virgin Australia

Virgin Australia's billionaire co-founder Richard Branson wants to invest up to $100 million in the collapsed airline to maintain a minority ownership stake alongside one of two private equity bidders if it emerges from administration.

The Virgin Group has signalled it wanted to "play a role" in the airline's future but it has not been clear if that would include owning some of the carrier, or simply maintaining the Virgin brand and the associated licensing fees, which were around $15 million a year.

Branson pushes for ownership stake in relaunched Virgin Australia

Virgin co-founder Richard Branson wants to invest up to $100m to maintain a minority stake alongside the successful private equity suitor when it emerges from administration.

www.google.com.au

 

[docjames]

Needs to get a seat at the table to (try to) ensure they keep the virgin name (and sending handsome royalties to him).

 

[p--and--t]

Needs to get a seat at the table to (try to) ensure they keep the virgin name (and sending handsome royalties to him).

You left off - "and feed the ego".

 

[woodborer]

Well well what a surprise, Branson finally found some money after all.... after bleating poor for weeks

The Virgin group have said all along they were willing to take a part in the new airline, whoever took it over. Even before administration they said that. Just couldn't do it themselves.

 

[jakeseven7]

Scott Morrison in his press conference just now again called out that QLD and the other 'closed border' state governments are destroying the tourism and aviation industry and specifically called out VA2 administration process being hampered by this.