Virgin Australia Financially Secure? [Now in Voluntary Administration]

[RAM]

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.

Why is it that Scott only seems to like naming States with ALP State Govts directly and not Lib States?

The VA, Rex & Q problems came to a head with international borders being closed and domesticly people NOT being allowed to travel - something that Scott drove. The pain/costs as a result were disproportionately experienced by the States & territories most dependent on tourism.

Oddly enough they are NT, Qld, SA, Tas & WA. That each of these chose to ensure that if they were going to be restricted then they'd make it a proper restriction by enforcing the internal border closures (vs the 'Don't travel' version from Scott) - is oddly coincident with their success in having no domestic related cases for extended periods whereas NSW & Vic have.

Perhaps NSW & Vic would have benefitted from having VA headquartered in their State - if one follows Scott's (il)logic?

Meanwhile AJ's latest 'enhancements' on QFF redemptions for Emirates flights would appear to be a gift to whoever gets (wins?) VA sold to them.

 

[woodborer]

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.

And yet the federal governments advice is

Travel within Australia
Australians must avoid all non-essential domestic travel.

https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov-health-alert/coronavirus-covid-19-advice-for-travellers


Someone needs to sort their messaging out...

 

[NM]

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.

Keep in mind that the Qld Government is still interested in investing into VA2 via their investment group. So I wonder how the state government's border controls policy may be impacting the "value" of VA as the administrators negotiate the sale price to the bidders, and how that may impact the perceived investment opportunity for the Qld Government? Naturally, these decisions will be considered in complete isolation and independence, as we would certainly expect.

 

[RAM]

Keep in mind that the Qld Government is still interested in investing into VA2 via their investment group. So I wonder how the state government's border controls policy may be impacting the "value" of VA as the administrators negotiate the sale price to the bidders, and how that may impact the perceived investment opportunity for the Qld Government? Naturally, these decisions will be considered in complete isolation and independence, as we would certainly expect.

I think you may be crediting them with far more financial understanding than deserved...

ON the Fed scale, just think JobKeeper debacle. The rule of thumb is that of all public sector posts (Fed, State or Local) then Federal Treasury, Finance or ATO get the best & brightest...

 

[jase05]

The DANS package has been extended to Sept 30th now whilst the RANS will continue to Dec 31st so hopefully it helps VA

 

[Melburnian1]

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.

Your comments don't pass the pub test. (Apologies for not being on-topic).

Highly likely there'll be less demand for air travel (the $64 million question is 'how much less?')

Redundancies will occur, unless QF wants to stay unprofitable and continue to bleed shareholders' funds or secure more loans against previously unencumbered aircraft (that in any case have dropped in value by as much as 30 per cent recently).

 

[dajop]

Redundancies will occur, unless QF wants to stay unprofitable and continue to bleed shareholders' funds ....

Unless VA doesn’t emerge from administration, and there’s some slack to pick up there . But even then, that would just shore up domestic (assuming that state borders might open up soon), but international is going to be suffering for a long long time .....

 

[Melburnian1]

...
international is going to be suffering for a long long time .....

dajop, irrespective as to whether VA survives or not, from talking with your work colleagues, are they all raring at the bit to travel internationally for work and/or leisure, is it 'same same' as pre-COVID-19 or is there reluctance with one or the other, or both re air travel?

 

[BNEFlyer]

Unless VA doesn’t emerge from administration, and there’s some slack to pick up there . But even then, that would just shore up domestic (assuming that state borders might open up soon), but international is going to be suffering for a long long time .....

I'm unsure why people still think VA may not emerge from administration. I suspect they have a plan in place that will allow domestic travel as soon as the government allows to, same with international.

 

[oz_mark]

I'm unsure why people still think VA may not emerge from administration. I suspect they have a plan in place that will allow domestic travel as soon as the government allows to, same with international.

I can only see ongoing dithering over opening state borders as the main reason it may not emerge from administration. Certainly seems to be the most significant risk.

 

[Melburnian1]

I can only see ongoing dithering over opening state borders as the main reason it may not emerge from administration. Certainly seems to be the most significant risk.

Creditors' attitude is extremely important, even thiough so far (probably due to a lack of information) the media doesn't mention it much.

I don't see this as a positive for VA's chances, but I guess we'll know in a few weeks.

 

[jakeseven7]

I can only see ongoing dithering over opening state borders as the main reason it may not emerge from administration. Certainly seems to be the most significant risk.

Appears the QLD government will cave into pressure from all sides this week hopefully!

Will be a huge help to having a stronger VA2 reborn from the ashes of VA1!

Premier will be able to commit to border date this week

Dozens of results are expected on Tuesday after a major testing effort sparked by a Melbourne fruit picker who travelled to Queensland for work before testing positive.

www.smh.com.au

 

[Melburnian1]

Appears the QLD government will cave into pressure from all sides this week hopefully!

Will be a huge help to having a stronger VA2 reborn from the ashes of VA1!

Premier will be able to commit to border date this week

Dozens of results are expected on Tuesday after a major testing effort sparked by a Melbourne fruit picker who travelled to Queensland for work before testing positive.

www.smh.com.au

But the national Cabinet is considering those marches in the city centres from Saturday 6 June, with the implication being these have heightened the risk of 'community transmission.' Don't know if this means further delay to reopenings but media mentioned the '4-5 to 14 day incubation period' in the same breath.

 

[oz_mark]

But the national Cabinet is considering those marches in the city centres from Saturday 6 June, with the implication being these have heightened the risk of 'community transmission.' Don't know if this means further delay to reopenings but media mentioned the '4-5 to 14 day incubation period' in the same breath.

My guess is that they'll wait 14 days to see what happens, and that will inform the next steps.

Fortunately, it was outside, and they were generally wearing masks (from what I saw), so maybe it won't be so bad. Time will tell.

 

[jakeseven7]

But the national Cabinet is considering those marches in the city centres from Saturday 6 June, with the implication being these have heightened the risk of 'community transmission.' Don't know if this means further delay to reopenings but media mentioned the '4-5 to 14 day incubation period' in the same breath.

If you read between the lines the QLD CHO is warming everyone up for Friday - a significant change in tone from the stonewalling over the last few weeks. I’d put money on them folding.

 

[jakeseven7]

Back more on topic a long piece on the bidders again.

Interesting the unions seem a little scared of Jayne

——

Bain sets tone for ‘partnership’ with grounded airline

Bain certainly has its critics, most notably among the union movement which is worried the American private equity giant will slash and burn the airline for what is known in private equity parlance as a “quick flip”.

Some in the union movement are also deeply worried about the presence of former Jetstar chief executive and long-time Bain adviser Jayne Hrdlicka on the private equity group’s bid team. One union member even started a hashtag on Twitter this week that read #IfBainNoJayne.

Virgin has 132 aircraft and there are suggestions that Bain is looking at an operation of 75 aircraft. Cyrus has reportedly told people that it intends to keep most of Virgin’s Boeing 737s for domestic flying while selling its other domestic aircraft.


In a scathing commentary, Alistair Osborne, business commentator for The Times of London, attacked Cyrus and its partners for the way they handled the already struggling Flybe, calling the consortium of Cyrus, Branson and UK-listed Stobart “greedy owners” who bought the airline but when things got tough did not want to put any money into it.

“It’ll be no consolation to the airline’s 2400 staff that its minted shareholders had the financial fuel to keep it flying,” Osborne wrote in March

NoCookies | The Australian

www.theaustralian.com.au

 

[RAM]

The lastest CV positive in Qld may well see border opening put off once again given they flew in undeclared and tested positive not long after (as reported briefly on the radio news this morning). Interesting to see what the full (& accurate) story is.

BTW - one of the best 'rule of thumb' money making trades consistently was comparing the share price of Boeing vs Merrill Lynch (worked well from mid 80s to mid 2000s.

Recessions/downturns looming would hit the ML price and see BA & airlines suffer a mulitple. Simple explanation - cross Atlantic business & first class flights always one of the earliest cost cuttings by investment banks & often LEAD Govt stats by a significant period given the 'inside' nature of investment banks to the real economy.

...So moving on to today's tech-rich environment and the good-showing of IP video conferencing coupled with likely extended global downturn or rolling recessions suggests that the successful bidder will be in no rush to settle their purchase & even letting (helping?) VA go into liquidation (very briefly) is a possible option provided it did not last more than a couple of weeks at worst & the 'winner' picked up the tab for any passenger losses suffered. Value of passenger losses < value of outstanding leases & staff entitlements by a mile.

Flying will pick up but by nowhere near what it was, quite possibly back to volume levels seen in 2009/10 - and that's factoring in 'this time will be different' with a working & safe CV vaccine developed.

Liquidation would see all old VA leases gone & new leases entered into (if desired) at once in a generation prices. Secured creditors would face at least a 50% loss on any aircraft they get as a result.....

Which is why all creditors will be bending over backwards to try & stop it happening and the two final bidders may be doing the opposite. Much cheaper to let the Fed Govt take over the around $500m of employee entitlements, and all the (probably unwanted) leased planes at zero cost vs likely 20 cents in the dollar if they get paid out emerging from administration.

The Chinese Curse continues.

 

[TiredOldFlyer]

My guess is that they'll wait 14 days to see what happens, and that will inform the next steps.

Fortunately, it was outside, and they were generally wearing masks (from what I saw), so maybe it won't be so bad. Time will tell.

I think OZ MARK Maybe on the mark and Anna will use the protests to again confirm a review at the end of June.
Political grandstanding or genuine concern ?

 

[antycbr]

I think OZ MARK Maybe on the mark and Anna will use the protests to again confirm a review at the end of June.
Political grandstanding or genuine concern ?

The biggest thing that will get the QLD government to move is opinion polling. The ALP are behind the LNP for the first time in ages and the domestic border issue plays havoc with a swag of seats up the coast - I've listed the tourism-orientated seats that are on margins less than 5%:

• Townsville 0.4%
• Mundingburra (Townsville) 1.1%
• Barron River (Cairns) 1.9%
• Keppel (Yeppoon) 3.1%
• Cairns 3.4%
• Thuringowa (Townsville) 4.1%

The way forward I think is to announce the intention to open the border on 1 July, and to set some threshholds that would require that plan to change (e.g. more than 10 new cases/day of community transmission in other states).

There was also an article in The Australian talking about the bond holders who were happy to take an 8% return but are now complaining about not having some form of bailout and that their retirement savings are at risk. I would have thought that the advisory firm that recommended VA bonds to retail 'mums and dad' investors should be deregistered.

 

[antycbr]

Which is why all creditors will be bending over backwards to try & stop it happening and the two final bidders may be doing the opposite. Much cheaper to let the Fed Govt take over the around $500m of employee entitlements, and all the (probably unwanted) leased planes at zero cost vs likely 20 cents in the dollar if they get paid out emerging from administration.

The Chinese Curse continues.

The only problem with that scenario I can see is that if the original entity goes into liquidation I suspect the Air Operators Certificate goes with it, along with all the built up systems and processes. The only 'neat' solution I can see is that all entities in Adminstration go into liquidation except TigerAir, which has A320 and 737 on it's certificate. Tiger becomes the core of the new airline, a la Crossair becoming Swiss when Swissair collapsed. However the cross-entity loans and obligations will become a lawyer's picnic.