Virgin Australia Financially Secure? [Now in Voluntary Administration]

[serfty]

Hard to know though whether those overseas airlines ever made money out of the arrangement. I suspect they did not after accounting for the losses on their investment in VA.

Maybe non investing carrier partners like Delta did ...

 

[jakeseven7]

Bond holders of VA1 discussed quite a lot in this article if you are unlucky enough to be one...

Brighter skies as Virgin sale nears

Good news in the domestic aviation industry is not necessarily being shared equally between the two players - Qantas and Virgin. But there is optimism Australians will soon start flying for leisure again.

www.afr.com

 

[clarkkent]

Cyrus sees smaller, simpler Virgin profitable in three years

The Richard Branson-linked investment firm Cyrus Capital says it will turn Virgin into a mid-market airline.

www.brisbanetimes.com.au

Cyrus aiming mid-market, with international and without Tiger.

 

[Carrots]

It's just dawned on me no one has actually mentioned the most important decision factor in this whole sale process...

Whichever prospective purchaser agrees to retain the chicken skewers in J will have my vote.

(not that I have a vote).

 

[HS-TQE]

Cyrus sees smaller, simpler Virgin profitable in three years

The Richard Branson-linked investment firm Cyrus Capital says it will turn Virgin into a mid-market airline.

www.brisbanetimes.com.au

Cyrus aiming mid-market, with international and without Tiger.

Seems that Cyrus is positioning VA Mk2 between QF and JQ. Domestic and Short Haul International (NZ/Fiji) only initially with a 737 only fleet.

Long Haul International will be mothballed (77Ws are stored) until demand recovers for VA2 to either restart or sell off the 77Ws (with the view of leasing A350s or 787s in tradeoff for the owned 77Ws)

 

[Carrots]

Long Haul International will be mothballed (77Ws are stored) until demand recovers for VA2 to either restart or sell off the 77Ws.

You'd have to think in time this would follow with a 787 or A350 lease (can't imagine purchase but who knows) to help drive cost efficiencies and versatility. Might be the 787 given they're likely to get a half decent trade in on them from Boeing.

 

[jakeseven7]

Cyrus sees smaller, simpler Virgin profitable in three years

The Richard Branson-linked investment firm Cyrus Capital says it will turn Virgin into a mid-market airline.

www.brisbanetimes.com.au

Cyrus aiming mid-market, with international and without Tiger.

Both Cyrus and Bain are taking VA2 down a peg or two (appears Bain is leaning towards more pegs down the ladder than Cyrus).

Whoever wins will have to be ultra ultra careful not to automatically hand back the small number (but profitable) premium / Corporate flyers VA1 had, straight back to QF.

The danger with a smaller VA2 airline with less frequency and less connectivity/destinations is that you make it hard to win solus accounts, and people will be flying your competitor more than you would like.

Strategically by moving down market and smaller, they fly straight back into the ‘pincer movement’ that QF applied to them by launching JQ and stealing the leisure market, the very pincer movement JB was trying to escape by moving up market....

But clearly both Bain and Cyrus have reached the conclusion it’s pointless trying to compete with QF for the high flying corporates and premium passengers and if they take VA2 right back to LCC they have a very large and lean JQ waiting there to rip them to shreds - so there really isn’t anywhere else to go!

Interesting.....

 

[BNEFlyer]

Both Cyrus and Bain are taking VA2 down a peg or two (appears Bain is leaning towards more pegs down the ladder than Cyrus).

Whoever wins will have to be ultra ultra careful not to automatically hand back the small number (but profitable) premium / Corporate flyers VA1 had, straight back to QF.

The danger with a smaller VA2 airline with less frequency and less connectivity/destinations is that you make it hard to win solus accounts, and people will be flying your competitor more than you would like.

Strategically by moving down market and smaller, they fly straight back into the ‘pincer movement’ that QF applied to them by launching JQ and stealing the leisure market, the very pincer movement JB was trying to escape by moving up market....

But clearly both Bain and Cyrus have reached the conclusion it’s pointless trying to compete with QF for the high flying corporates and premium passengers and if they take VA2 right back to LCC they have a very large and lean JQ waiting there to rip them to shreds - so there really isn’t anywhere else to go!

Interesting.....

Cyrus are looking to get VA back to where they were, with some improvements to the business. That’s good for customers, good for staff, good for investors. Hopefully they’re the successful candidate.

 

[jakeseven7]

Cyrus are looking to get VA back to where they were, with some improvements to the business. That’s good for customers, good for staff, good for investors. Hopefully they’re the successful candidate.

Did you read the article? Because that is not what the article suggests. Are you a Cyrus insider, if so do tell

 

[TheInsider]

Did you read the article? Because that is not what the article suggests. Are you a Cyrus insider, if so do tell

I think some people are getting emotionally attached to these business that are going to take over. People want the status-quo, but people need to remember the status-quo didn't work and that's why they are in this mess

 

[dajop]

Cyrus are looking to get VA back to where they were

Where they were before going into administration, or where they were when they were called "Virgin Blue"??

 

[jase05]

For me it all hinges on whether VA2 has Domestic J or not. That will determine where my money will go

 

[jakeseven7]

For me it all hinges on whether VA2 has Domestic J or not. That will determine where my money will go

If they ditch regional flying (Bain and Cyrus keep saying 'all 737 fleet') then they will lose our exclusive account and we would either move to BFOD or QF....

EDIT: But I guess we are a corporate that they will apparently be targeting less moving forward, so probably deliberate decision....

 

[Melburnian1]

I think some people are getting emotionally attached to these business that are going to take over. People want the status-quo, but people need to remember the status-quo didn't work and that's why they are in this mess

Agree! $7 billion in debt is a huge mess (not that QF is perfect financially by any stretch, with the suggestions made by one AFFer about QF's accounts rather concerning for investors.)

Apart from the 'Brisbane Times' (Nine Group online) article above, there's an extremely lengthy one in 'The Australian' on Monday 15 June:

(this is how it commences - buy the paper to read in full):

'New York hedge fund Cyrus Capital is planning to relaunch Virgin Australia as a “hybrid” airline, ranging from economy to business class, in a deal that could take in investments from Virgin founder Richard Branson and other airlines.

In an interview with The Australian from New York, Cyrus Capital adviser and former Virgin America chief executive Jonathan Peachey, who is leading the negotiations in the bid for the airline, said Cyrus would keep Virgin chief executive Paul Scurrah and the management team if it succeeded in buying the airline.

He said Virgin Australia, which went into administration on April 22 with debts of almost $7bn, had become a “a little too corporate”

Mr Peachey said Cyrus would seek to revive its brand as being an “entrepreneurial, challenger brand”, following Sir Richard’s “employee first, customer close second” strategy. “The cultural element which Virgin brings to the table is really key,” he said.

“The word I use is ‘entrepreneurial’. Giving employees of an airline the ability to be entrepreneurial, giving them permission to think for themselves, allowing them to bring their personality to the table, is the key to making the customer experience really special. The Virgin brand has this sweet spot that’s sort of in the middle, that’s focused on offering a high-quality product at a value price point with a service that is differentiated.”

Cyrus and the other short-listed bidder for Virgin, Bain Capital, have to submit binding bids for the airline on June 22...'

 

[jakeseven7]

Good summary of both plans overall and the strategic quandry VA2 will face as we have been discussing....

Basically people will need to let VA1 go as @TheInsider points out, and accept that VA2 will have to be different to survive. They won't be challenging QF for corporate anymore, maybe some smaller more price conscious SME's with a stripped back, mid market offering.

I don't think its a dumb strategy but VA2 will be smaller, less fancy and lets just hope the jokes are still banned

I wonder if VA2 will cut their prices as well?

----
The Virgin Australia of the future is set to be very different - but very familiar


In broad outline both strategies are strikingly similar. They involve smaller fleets, focused on Virgin’s narrow-bodied Boeing 737s, stripping out the costs and complexity of flying the seven different aircraft types Virgin had in the fleet when it crashed. A much smaller and simpler fleet flows through into far smaller staff numbers

Anyone looking at the Australian aviation industry and any awareness of its recent history would come to the same set of conclusions: it would be suicidal to try to compete directly with Qantas for corporate customers and, given the strength of Jetstar, there isn’t sufficient volume and margin available to return to Virgin’s roots as a low-cost carrier.

Providing Virgin has costs within sight of Jetstar’s but below Qantas’ it can attract value-driven customers while segmenting its cabins to offer differentiated services at different price-points. Others – like Air New Zealand or Canada’s Westjet – do exactly that.

As long as Virgin doesn’t directly challenge Qantas and Jetstar for their core customer bases and is disciplined on how much capacity it puts into the market they will focus on maximising their own margins and profits, leaving – as the original Virgin understood – plenty of profit available to a disciplined competitor.

Redux: The Virgin Australia of the future is set to be very different - but very familiar

The two bidders in the race for Virgin Australia will try to recreate a version of the airline from its past, one that will be quite different to the airline we know today.

www.smh.com.au

 

[p--and--t]

Agree! $7 billion in debt is a huge mess (not that QF is perfect financially by any stretch, with the suggestions made by one AFFer about QF's accounts rather concerning for investors.)

Apart from the 'Brisbane Times' (Nine Group online) article above, there's an extremely lengthy one in 'The Australian' on Monday 15 June:

(this is how it commences - buy the paper to read in full):

'New York hedge fund Cyrus Capital is planning to relaunch Virgin Australia as a “hybrid” airline, ranging from economy to business class, in a deal that could take in investments from Virgin founder Richard Branson and other airlines.

In an interview with The Australian from New York, Cyrus Capital adviser and former Virgin America chief executive Jonathan Peachey, who is leading the negotiations in the bid for the airline, said Cyrus would keep Virgin chief executive Paul Scurrah and the management team if it succeeded in buying the airline.

He said Virgin Australia, which went into administration on April 22 with debts of almost $7bn, had become a “a little too corporate”

Mr Peachey said Cyrus would seek to revive its brand as being an “entrepreneurial, challenger brand”, following Sir Richard’s “employee first, customer close second” strategy. “The cultural element which Virgin brings to the table is really key,” he said.

“The word I use is ‘entrepreneurial’. Giving employees of an airline the ability to be entrepreneurial, giving them permission to think for themselves, allowing them to bring their personality to the table, is the key to making the customer experience really special. The Virgin brand has this sweet spot that’s sort of in the middle, that’s focused on offering a high-quality product at a value price point with a service that is differentiated.”

Cyrus and the other short-listed bidder for Virgin, Bain Capital, have to submit binding bids for the airline on June 22...'

Aside from when they went into a lose lose market share war with too many vacant seats against QF, VA have been able to mostly fill planes.

Surely the focus should be on making money rather than marketing hype about personality.

Domestically we need a reliable on-time airline at a reasonably competitive price to give QF a run for their money.

There are a lot of people who don't/won't fly TT or JQ and want to fly at a reasonable price

 

[Melburnian1]

Aside from when they went into a lose lose market share war with too many vacant seats against QF, VA have been able to mostly fill planes.

Surely the focus should be on making money rather than marketing hype about personality.

Domestically we need a reliable on-time airline at a reasonably competitive price to give QF a run for their money.

There are a lot of people who don't/won't fly TT or JQ and want to fly at a reasonable price

p--and--t, in recent times prior to the administration was it not the case that VA's 'cost per available seat kilometre' domestically was either not much less than QF's, or level with it, when VA ought have had a cost advantage despite it being smaller?

 

[HS-TQE]

If they ditch regional flying (Bain and Cyrus keep saying 'all 737 fleet') then they will lose our exclusive account and we would either move to BFOD or QF....

EDIT: But I guess we are a corporate that they will apparently be targeting less moving forward, so probably deliberate decision....

Considering that Alliance was looking for "new" jets, I do wonder if the Deloitte team is looking at giving Alliance a call in regards to the VARA F100s (if not the AOC + the VARA liabilities on that AOC) itself.

 

[muppet]

.....
As long as Virgin doesn’t directly challenge Qantas and Jetstar for their core customer bases .....

Ummmm. very weird article.. so as long as Virgin goes after no customers, no corporate, no premium and no-nofrills customers... it will somehow get market share and make money....

 

[jakeseven7]

Domestically we need a reliable on-time airline at a reasonably competitive price to give QF a run for their money.

Domestically VA2 needs to be a 'disciplined' competitor. ie. return to a cosy duopoly. They went after corporate, poked the QF bear and got absolutely walloped - pretty much sent them bankrupt. So they need to learn this lesson, not attack JQ or QF, just be a mid size, mid market sensible competitor and pick up the people who can't afford QF / don't want to fly as no frills as JQ.

My only concern with this strategy is that QFLink will run rings around Rex and on skinny routes in the meantime if VA abandon regional flying and QF Link is a huge feeder into QFd. QFLink is also going to eat VA up if they are head to head and try and stay on regional because VA don't have the right equipment to compete.

SURELY someone at Bain/Cyrus can work out how to fly a few ATR's to Tassie etc and not lose money?? How hard can it be??