Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Melburnian1]

Totally agree. It appears there is an advisory firm, Morgans, who were pushing these hard and they were based in Queensland so there's lots of local investors losing their shirt in Brisbane at the moment. I would love to see what advice Morgans provided investors.

While those of us who have had an interest in shares for more than a couple of years can appreciate that with shares, bonds or other forms of placing one's hard earned, one has to start somewhere, 'investing' in VA shares was risky, and expecting bonds to keep their value not far short of lunacy.

But unfortunately many don't understand that often, the higher the reward, the greater the risk.

'The Australian' article was lengthy. Here is a small part:

----------------

...Morgans, Australia’s largest full-service stockbroker with a strong client base in Queensland, where Virgin is headquartered, has more than 500 investors in Virgin including many who bought ASX-listed notes issued by the company last November.

“Our clients are just a small proportion of the thousands of retail investors from right across Australia who invested in Virgin Australia notes,” Mr Wright said.

“They are growing increasingly anxious.

“In most cases we are talking typical mums and dads with retirement savings at risk. We are watching this closely.”...

-----------------------------

To me, this discord among interested parties heightens the likelihood of liquidation. Unfortunately a lot of VA staff who may not understand (nor should they be expected to) how nasty things like this can get in the end are set to be disappointed if they were clinging to some hope of keeping their jobs.

 

[jakeseven7]

Yep (myself and a few others). Hoping, and feeling like it will be Cyrus who are successful.

I'm personally hoping that Cyrus win because I think their version of VA2 will be more like what VA1 was like - allbeit with some frills trimmed off.

I think Bain would probably make VA2 a more successful COMPANY but I think they are tipping VA 2 to be more of a LCC.

So:
- As a customer for comfort: CYRUS
- As a shareholder / wanting to see a real and strong competitor to QF Group: BAIN

 

[antycbr]

I'm personally hoping that Cyrus win because I think their version of VA2 will be more like what VA1 was like - allbeit with some frills trimmed off.

I think Bain would probably make VA2 a more successful COMPANY but I think they are tipping VA 2 to be more of a LCC.

So:
- As a customer for comfort: CYRUS
- As a shareholder / wanting to see a real and strong competitor to QF Group: BAIN

I do think that Bain are what is needed for VA. Short term pain and loss of frills (which would also happen if VA collapsed, QF would trim many frills in this scenario) for a longer term sustainable airline. No point recapitalising VA only to have it collapse again a few years later on and proving, perhaps permanently, that Australia can't have two major airlines and would look more like the Canadian aviation market.

Both airline groups are going to need to trim frills and comfort anyway to start to turn a profit again in a post Covid-19 world.

And I'd question how many of the frills are that worthwhile anyway? Aside from the core partners of SQ, DL and arguably EY the current international network isn't worth wasting time on (AZ, SA etc). The Club is an expensive indulgence. Flat beds transcon? The catering in economy seems pointless - unless the intent is to drive sales of drinks by making them so salty that you have to buy something?

Getting back to some basics like frequency and network, domestic earn partners, retaining a reasonable (not excessive) business class on core routes and some logical international partners not the grab bag of whoever EY has invested in seems the way forward. Close some lounges (MKY, ASP spring to mind). Partner with Rex and abandon regional flying. Consider international long haul only if you have somewhere where you can fly the widebody aircraft that will make a profit 6 months after you start.

 

[p--and--t]

As a shareholder / wanting to see a real and strong competitor to QF Group: BAIN

Critical for AU to have a healthy competitive aviation sector. In an (hopefully interim) post covid environment, flying over frills.

 

[HS-TQE]

Bain has already publicly said that they prefer to drive VA mk2 towards their DJ/VB LCC roots.

The question is which form VA mk 2 would it take?
* The original DJ LCC version
* The Godfrey Era 'New World Carrier' Hybrid
* Jetstar v2.0 (Potentially with 'disgruntled' former JQ CEO Hrdlicka at the helm)
* Tiger v2.0

 

[BNEFlyer]

I do think that Bain are what is needed for VA. Short term pain and loss of frills (which would also happen if VA collapsed, QF would trim many frills in this scenario) for a longer term sustainable airline. No point recapitalising VA only to have it collapse again a few years later on and proving, perhaps permanently, that Australia can't have two major airlines and would look more like the Canadian aviation market.

Both airline groups are going to need to trim frills and comfort anyway to start to turn a profit again in a post Covid-19 world.

And I'd question how many of the frills are that worthwhile anyway? Aside from the core partners of SQ, DL and arguably EY the current international network isn't worth wasting time on (AZ, SA etc). The Club is an expensive indulgence. Flat beds transcon? The catering in economy seems pointless - unless the intent is to drive sales of drinks by making them so salty that you have to buy something?

Getting back to some basics like frequency and network, domestic earn partners, retaining a reasonable (not excessive) business class on core routes and some logical international partners not the grab bag of whoever EY has invested in seems the way forward. Close some lounges (MKY, ASP spring to mind). Partner with Rex and abandon regional flying. Consider international long haul only if you have somewhere where you can fly the widebody aircraft that will make a profit 6 months after you start.

With the eventual reduction of aircraft I think we'll see a smaller yet workable domestic route network and a similar but possibly reduced frequency international network (LAX, HND, NZ, perhaps just NAN in Pacific). Partnering with Rex would only benefit Rex, they have a smaller market share than VA, older planes and no network connectivity.

 

[HS-TQE]

Ansett in its final years had only 4 International Destinations prior to Voluntary Administration and eventually liquidation. From memory it was HKG, KIX (763s/744s) and DPS/NAN with A320s and 762s from the domestic fleet.

Bain IIRC was open to NZ only, whilst Cyrus had previously announced that they had intended to keep the 77W fleet as International 'starts to recover'

This leaves only LAX, HND (both with the Cyrus bid), AKL (NZ) and perhaps NAN as VA's 4 international destinations. Other NZ routes such as WLG/CHC out of BNE/MEL and seasonal DUD are potential candidates.

Talking international for the Short Term on the scenario of Cyrus getting the nod.

If VA are to hold onto their 77W fleet (4 of the 5 are 'owned' anyway) and are able to either re-negotiate the DL partnership perhaps BNE/MEL-LAX (Initially at a reduced 5-6 weekly frequency) and daily BNE-HND with NH could be operated. SYD-LAX could be operated with DL's A350s.

The A330s are increasingly likely to be returned regardless if Bain or Cyrus gets the nod.

If in the unlikely case that VA forms a 'new' partnership with UA instead, in combination with UA's decision to close the LAX long-haul crew base, perhaps SYD/BNE-LAX could be operated, leaving SYD/MEL-SFO flights to UA as SFO is UA's primary hub.

 

[dajop]

Partnering with Rex would only benefit Rex, they have a smaller market share than VA, older planes and no network connectivity.

I'm not sure it would benefit Rex, or that they would be even interested in it. They operate essentially as a point to point carrier. A 34 seat version of an LCC in many ways (except the fares they charge ) Adding network connectivity and sharing revenue with another carrier, could dilute their revenue and increase complexity (and therefore cost) to their operation.

 

[BNEFlyer]

Ansett in its final years had only 4 International Destinations prior to Voluntary Administration and eventually liquidation. From memory it was HKG, KIX (763s/744s) and DPS/NAN with A320s and 762s from the domestic fleet.

Bain IIRC was open to NZ only, whilst Cyrus had previously announced that they had intended to keep the 77W fleet as International 'starts to recover'

This leaves only LAX, HND (both with the Cyrus bid), AKL (NZ) and perhaps NAN as VA's 4 international destinations. Other NZ routes such as WLG/CHC out of BNE/MEL and seasonal DUD are potential candidates.

Talking international for the Short Term on the scenario of Cyrus getting the nod.

If VA are to hold onto their 77W fleet (4 of the 5 are 'owned' anyway) and are able to either re-negotiate the DL partnership perhaps BNE/MEL-LAX (Initially at a reduced 5-6 weekly frequency) and daily BNE-HND with NH could be operated. SYD-LAX could be operated with DL's A350s.

The A330s are increasingly likely to be returned regardless if Bain or Cyrus gets the nod.

If in the unlikely case that VA forms a 'new' partnership with UA instead, in combination with UA's decision to close the LAX long-haul crew base, perhaps SYD/BNE-LAX could be operated, leaving SYD/MEL-SFO flights to UA as SFO is UA's primary hub.

It would be BNE-LAX and HND with 777's, everything else with 737's. Unsure why VA would partner with UA even if the DL partnership ends. With four 777's neither HND or LAX could be daily though, but then VA have indicated they want to procure 787 8's and 9's for longhaul to replace the 777's.

Post automatically merged: Jun 9, 2020

I'm not sure it would benefit Rex, or that they would be even interested in it. They operate essentially as a point to point carrier. A 34 seat version of an LCC in many ways (except the fares they charge ) Adding network connectivity and sharing revenue with another carrier, could dilute their revenue and increase complexity (and therefore cost) to their operation.

This is true. They should really focus on improving their fleet, network and products instead of looking for a partnership.

 

[antycbr]

I'm not sure it would benefit Rex, or that they would be even interested in it. They operate essentially as a point to point carrier. A 34 seat version of an LCC in many ways (except the fares they charge ) Adding network connectivity and sharing revenue with another carrier, could dilute their revenue and increase complexity (and therefore cost) to their operation.

My thinking is that having Rex would remove the need for ATR flying (if Rex can be coaxed back on to SYD-CBR) whilst still having the potential of offering these ports to be served through a partner.

Also don't discount the potential feed from smaller ports on to say Transtasman or long haul international e.g. TMW-SYD-AKL. From Rex's perspective it provides revenue from a pax who would book that journey on QF instead to provide the seamless connection at Sydney rather than two separate tickets with the risk that carries. Rex's biggest competitor is QF and I think QF have decided to go after ZL recently (e.g. Orange, Kangaroo Island).

I am guessing that Rex aren't interested as it would have happened already with VA1. They might have had to upgrade their reservation system to something that was written after Y2K!

 

[antycbr]

* Jetstar v2.0 (Potentially with 'disgruntled' former JQ CEO Hrdlicka at the helm)

Please no. Let's not have another ex-QF Group CEO at the helm of VA, this time with a downmarket version of the "pi**ing contest" we had with Borghetti. VA need to define themselves and get their own identity rather than continually trying to emulate QF.

 

[BNEFlyer]

My thinking is that having Rex would remove the need for ATR flying (if Rex can be coaxed back on to SYD-CBR) whilst still having the potential of offering these ports to be served through a partner.

Also don't discount the potential feed from smaller ports on to say Transtasman or long haul international e.g. TMW-SYD-AKL. From Rex's perspective it provides revenue from a pax who would book that journey on QF instead to provide the seamless connection at Sydney rather than two separate tickets with the risk that carries. Rex's biggest competitor is QF and I think QF have decided to go after ZL recently (e.g. Orange, Kangaroo Island).

I am guessing that Rex aren't interested as it would have happened already with VA1. They might have had to upgrade their reservation system to something that was written after Y2K!

VA will have the ATR-600's after admin, it's the 500's (that are out of service) that are going).

 

[dajop]

Also don't discount the potential feed from smaller ports on to say Transtasman or long haul international e.g. TMW-SYD-AKL. From Rex's perspective it provides revenue from a pax who would book that journey on QF instead to provide the seamless connection at Sydney rather than two separate tickets with the risk that carries. Rex's biggest competitor is QF and I think QF have decided to go after ZL recently (e.g. Orange, Kangaroo Island).

I am guessing that Rex aren't interested as it would have happened already with VA1. They might have had to upgrade their reservation system to something that was written after Y2K!

Yes, but connecting traffic can and does dilute revenue. If you are charging quite handsomely for a single sector (as well know Rex does), it could undermine profitability. If you look at some of the consistently profitable airlines globally over an extended period - they by and large are not network carriers.

 

[antycbr]

Yes, but connecting traffic can and does dilute revenue. If you are charging quite handsomely for a single sector (as well know Rex does), it could undermine profitability. If you look at some of the consistently profitable airlines globally over an extended period - they by and large are not network carriers.

Past ZL charging isn't going to be an indication of future charging potential. Before Covid QF were expanding quickly into regional Australia with the Q300s that came back from NZ.

If you have a well funded competitor (QF) bumping you off or keeping a lid on what you can charge on the larger regional premium routes where you will make a profit such as Dubbo, Orange, Mildura, Port Lincoln and the like, then your overall operation starts to look marginal. You're left with the services that are state subsidised (QLD, WA) and these are vulnerable to a lower cost entrant starting up and you potentially losing the tender.

I agree if Rex were filling every seat on the plane then no need to dilute revenue, but I suspect they are not. Note that such fares won't be available for point to point, only when combined with a VA mainline sector.

I guess we will see but I think ZL needs to start thinking about a future QF that is going to take them on.

 

[jakeseven7]

This leaves only LAX, HND (both with the Cyrus bid), AKL (NZ) and perhaps NAN as VA's 4 international destinations. Other NZ routes such as WLG/CHC out of BNE/MEL and seasonal DUD are potential candidates.

I suspect Japan will never see the light of day under either VA2 bid winner.
The 777 is a very heavy plane for a brand new route for any airline, let alone one like VA with little brand awareness in Japan, let alone in a weak travel market. I suspect Japan will be mothballed.

From Rex's perspective it provides revenue from a pax who would book that journey on QF instead to provide the seamless connection at Sydney rather than two separate tickets with the risk that carries. Rex's biggest competitor is QF and I think QF have decided to go after ZL recently (e.g. Orange, Kangaroo Island).

Kinda makes sense in theory but Rex's operation is so basic I suspect a partnership would tip them upside down in terms of integration. Also, I don't think QF is going after Rex - at all, QF is going after the dollars - like they always do. They saw opportunity and had the means (With JQ NZ planes coming back) to try some new routes.

Please no. Let's not have another ex-QF Group CEO at the helm of VA, this time with a downmarket version of the "pi**ing contest" we had with Borghetti. VA need to define themselves and get their own identity rather than continually trying to emulate QF.

But VA2 in the Jayne / Bain arrangement would be trying to emulate JQ not QF

VA will have the ATR-600's after admin, it's the 500's (that are out of service) that are going).

That is not confirmed sorry, in fact both bidders have specifically not called out retaining any turbo prop flying for VA2.

 

[antycbr]

But VA2 in the Jayne / Bain arrangement would be trying to emulate JQ not QF

That's why I said "downmarket"

 

[p--and--t]

Being in indefinite lock-down I haven't searched for flights for a couple months.

I used one of the search engines I often use (skyscanner) tonight to look for some flights and they no longer offer any VA or TT options at all for October. Webjet are still offering VA options (but zero TT)

Got me wondering how many other search engines have deleted VA and TT.

Won't help with future booking cash flows and forecasting.

 

[jakeseven7]

Being in indefinite lock-down I haven't searched for flights for a couple months.

I used one of the search engines I often use (skyscanner) tonight to look for some flights and they no longer offer any VA or TT options at all for October. Webjet are still offering VA options (but zero TT)

Got me wondering how many other search engines have deleted VA and TT.

Won't help with future booking cash flows and forecasting.

I mentioned in the ‘Virgin refusing to refund me’ thread that our corporate travel booking tool has VA completely blocked - as of a couple of weeks ago... TT has always been blocked due to reliability issues (no good for business travel)

 

[Melburnian1]

Another article in 'The Australian' tonight (Tuesday 9 June 2020, will be in the paper tomorrow morning) about the bondholders' attitude.

A snippet:


'The fate of the $2bn unsecured bond holders in Virgin Australia could affect public confidence in the emerging corporate bond market in Australia, Steven Wright, a Brisbane-based director of stockbroker Morgans warned yesterday.
In an interview with The Australian, Mr Wright — whose organisation represents more than 500 mum and dad investors in Virgin bonds, now worried they could lose their investment — said thousands of retail investors in the Virgin bonds and other potential retail investors in corporate bonds were now watching how the bond holders were being treated in the sale process for the airline. “A lot of people are watching to see how the bond holders fare in the administration process,” he said.

Deloitte’s Vaughan Strawbridge, who was appointed administrator of the airline on April 21, is now in discussions with two short-listed bidders, Bain Capital and New York hedge fund Cyrus Capital...'

 

[drron]

Quite frankly the fact that Morgan's let mum and dad investors invest in VA bonds suggest that they would be a firm I would not use.