Virgin Australia Financially Secure? [Now in Voluntary Administration]

[jakeseven7]

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

This article at least suggests the Bain/Cyrus strategy will be picking up more up market leisure customers (who don't want to fly JQ) and implies smaller, more price conscious businesses. It suggests the strategy will move away from trying to dent QF"s hold on big corporate which has been unsuccessful anyway - and the new model VA2 won't have the frequency or route network to pick these up anyway.

 

[p--and--t]

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?

Agreed. And allegedly PS was just starting down the track to resolve that with moves to put the portly overblown over complicated corporate office without any clear direction on where they were going on a diet until covid came along.

Don't think its helpful for RB to come back into the picture and starting with marketing hype and embellish things with semi naked models, stupid jokes on the tannoy.

My feeling is corporate Australia and discerning members of the public want a no fuss reliable operator. None of this fee for a bag, fee to pick a seat , no refund, Avalon airport stuff of TT & JQ.

The majority of flights are under 3 hours. Tea/Coffee/orange juice and a muffin should suffice (unless in J) and don't pretend you are full service, charge full price, and disappoint people with half a muesli bar and a cup of water and try to up-sell.

 

[dajop]

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 bankrupts. So they need to learn this lesson, not attack JQ or QF,

I think they had learnt this lesson ... if you look at the last 2-3 years. Domestic was doing OK and a lot of capacity discipline in place. Had things continued as they were in the last 12 months, and PS had been given a hand to further deal with VAi + Tiger, may be they could have continued. But such were the losses from the earlier domestic capacity orgy + ongoing losses for VAi + Tiger, it would only take a small external shock to send the company to the wall. And what they got was not a small external shock - but evaporation of 98% of the market almost overnight.

 

[moa999]

If they are running 737s only, will be interesting what they do with J.
I'd possibly been expecting a single brand but with a 'City' sub-fleet that would have J and lounges in major capitals only. But it would suffer versus the suite in the 330s on the competition

 

[TheInsider]

If they are running 737s only, will be interesting what they do with J.
I'd possibly been expecting a single brand but with a 'City' sub-fleet that would have J and lounges in major capitals only. But it would suffer versus the suite in the 330s on the competition

If it's J, then probably a European style J class maybe?

Just with that sub-fleet there if it were to be the case, would incur significant additional costs. Everything would need to be streamlined, one way or another. From a cost and operational perspective you can't have different configurations on the same fleet.

 

[antycbr]

If it's J, then probably a European style J class maybe?

Just with that sub-fleet there if it were to be the case, would incur significant additional costs. Everything would need to be streamlined, one way or another. From a cost and operational perspective you can't have different configurations on the same fleet.

I think ripping J out on a sub fleet is stupid. They used to not sell it on thin sectors but let platinum sit there. Having said that if the plane isn’t full in Y there’s no real pressure to not sell the J cabin.

 

[BNEFlyer]

If they are running 737s only, will be interesting what they do with J.
I'd possibly been expecting a single brand but with a 'City' sub-fleet that would have J and lounges in major capitals only. But it would suffer versus the suite in the 330s on the competition

The J would be the same, why would it change?

Post automatically merged: Jun 15, 2020

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

I did read the article, and I'm not a Cyrus insider, but the article doesn't say everything that's being discussed.

 

[BNEFlyer]

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

Before going into administration, and where they would be had it not been for Covid and the travel downturn.

 

[antycbr]

Before going into administration, and where they would be had it not been for Covid and the travel downturn.

If you strip out the following follies you would save a heap of coin:

• A330s with extortionate lease costs with "world's best domestic business" but not able to charge a premium fare
• A330s flown internationally to HKG (although HKG wasn't really their fault, but they were pressured into it by HNA)
• TigerAir
• Buying a fleet of E190/170s and dumping them
• Buying a fleet of ATR72s and dumping half of them
• Buying Skywest and then gutting half of it
• Catching the Ansett disease (see above points) and having 7 different types of aircraft
• Busting up with your Tasman partner and having to do wingtip flying to maintain frequency and network on the Tasman (largely led by NZ though for good reasons)
• Dartboard attempts to find a home for 777s (JNB, AUH) and not having enough to operate SYD and MEL-LAX daily and trying to cover BNE
• Maintaining a corporate office in SYD because your CEO (Borghetti) didnt like BNE
• Building the Clubs in airports when you have an incomplete lounge network in the main ports for business and premium travel (HBA) and trying to out QF on QF's home ground of VIP travel
• Launching partnerships and doing the systems integration with airlines that won't bring meaningful traffic to you (Air Serbia, Alitalia come to mind, while not launching or half launching partnerships such as those with Air Canada who would)

 

[BNEFlyer]

If you strip out the following follies you would save a heap of coin:

• A330s with extortionate lease costs with "world's best domestic business" but not able to charge a premium fare
• A330s flown internationally to HKG (although HKG wasn't really their fault, but they were pressured into it by HNA)
• TigerAir
• Buying a fleet of E190/170s and dumping them
• Buying a fleet of ATR72s and dumping half of them
• Buying Skywest and then gutting half of it
• Catching the Ansett disease (see above points) and having 7 different types of aircraft
• Busting up with your Tasman partner and having to do wingtip flying to maintain frequency and network on the Tasman (largely led by NZ though for good reasons)
• Dartboard attempts to find a home for 777s (JNB, AUH) and not having enough to operate SYD and MEL-LAX daily and trying to cover BNE
• Maintaining a corporate office in SYD because your CEO (Borghetti) didnt like BNE
• Building the Clubs in airports when you have an incomplete lounge network in the main ports for business and premium travel (HBA) and trying to out QF on QF's home ground of VIP travel
• Launching partnerships and doing the systems integration with airlines that won't bring meaningful traffic to you (Air Serbia, Alitalia come to mind, while not launching or half launching partnerships such as those with Air Canada who would)

No doubt not doing some of those things would have saved some money, but none of those things are why they went into administration.

 

[TheInsider]

No doubt not doing some of those things would have saved some money, but none of those things are why they went into administration.

Not individually, no. But all of them together and then them losing money for 10 years straight, yes.

OT: The general public have this hard-on about how VA and TT and whoever else always need to provide cheap fares for 'competition', yet when all these cheap fares happen, airlines go bust, then they still all cry about more competition. Also aware price is not the only factor, but for Joe Blow out there, that's all they care about.

 

[RooFlyer]

How do people think the VA2 management will deal with the price war that QF (QF+JQ) may feel inclined to unleash when VA2 struggles back into the air? Say on the MEL-SYD-BNE routes, at least?

 

[jakeseven7]

How do people think the VA2 management will deal with the price war that QF (QF+JQ) may feel inclined to unleash when VA2 struggles back into the air? Say on the MEL-SYD-BNE routes, at least?

I actually think QF and JQ will be well behaved if they see a path for VA2 to be taken down market, down sized and not going aggressively after either of their customer bases (corporate/premium - QF and bargain seekers - JQ).... my guess

 

[TheInsider]

How do people think the VA2 management will deal with the price war that QF (QF+JQ) may feel inclined to unleash when VA2 struggles back into the air? Say on the MEL-SYD-BNE routes, at least?

I can see QF/JQ going hard for the first few months possibly but after that QF group will want the yields to return and also 'create value for shareholders'.

 

[antycbr]

I can see QF/JQ going hard for the first few months possibly but after that QF group will want the yields to return and also 'create value for shareholders'.

They would actually be hoping for a crippled VA which will happily let QF group have 70 percent of the market. That would be ideal for QF as it is competitive enough to keep the regulator at bay; and enough to stop a cashed up startup from entering.

 

[antycbr]

Not individually, no. But all of them together and then them losing money for 10 years straight, yes.

Totally agree with your rebuttal. Each individual decision was made based on facts at the time but the collective impact was to load up the balance sheet with debt which meant one black swan incident and there’s no financial firepower there to draw upon.

It also led to a strong perception with the government, commentators and public that VA has been mismanaged and doesn’t deserve to come out of Administration.

 

[moa999]

How do people think the VA2 management will deal with the price war that QF (QF+JQ) may feel inclined to unleash when VA2 struggles back into the air?

I'd think it's in both interests to stimulate demand on the domestic side first, before they start worrying about yield

 

[N860CR]

I'd think it's in both interests to stimulate demand on the domestic side first, before they start worrying about yield

The best outcome for Qantas is a smaller VA. The worst is a dead VA, a market of dirt cheap aeroplanes/crew and an unknown competitor.

I can’t see joyce playing too many fare games.

 

[jakeseven7]

Now this has the potential to cause some headaches, the remnants of VA1 senior management must be kicking themselves over this bond issue, its come back and bitten them a lot.... 6000 of them in the group.

Virgin bondholders swell in number

The group, which is receiving advice from Faraday and Corrs Chambers Westgarth, is the second significant kingmaker to emerge in Virgin's whirlwind sale.

www.afr.com

 

[HS-TQE]

If you strip out the following follies you would save a heap of coin:

• A330s with extortionate lease costs with "world's best domestic business" but not able to charge a premium fare
• A330s flown internationally to HKG (although HKG wasn't really their fault, but they were pressured into it by HNA)
• TigerAir
• Buying a fleet of E190/170s and dumping them
• Buying a fleet of ATR72s and dumping half of them
• Buying Skywest and then gutting half of it
• Catching the Ansett disease (see above points) and having 7 different types of aircraft
• Busting up with your Tasman partner and having to do wingtip flying to maintain frequency and network on the Tasman (largely led by NZ though for good reasons)
• Dartboard attempts to find a home for 777s (JNB, AUH) and not having enough to operate SYD and MEL-LAX daily and trying to cover BNE
• Maintaining a corporate office in SYD because your CEO (Borghetti) didnt like BNE
• Building the Clubs in airports when you have an incomplete lounge network in the main ports for business and premium travel (HBA) and trying to out QF on QF's home ground of VIP travel
• Launching partnerships and doing the systems integration with airlines that won't bring meaningful traffic to you (Air Serbia, Alitalia come to mind, while not launching or half launching partnerships such as those with Air Canada who would)

Some of those points stretch back to the Godfrey CEO (pre-Borghetti) era, such as Godfrey's decision to acquire the Embraers with DJ's first foray into regional services. The 777 acquisition also had the smaller cargo doors on two of their earlier builds.

Although to be fair, the 77Ws were the only 'economical' widebodies available at the time with a long queue for the 787s and the A350s at the time. 744s and the old A343s were considered too "gas guzzling" for the old V Australia long-haul venture.

If I also recall correctly Godfrey also sent the 77Ws on the short lived MEL-JNB/HKT services. Which was ended by Borghetti/Hogan in favour of daily BNE-LAX and SYD-AUH (an 'owner' hub) to compliment the daily SYD-LAX.

The Air NZ bustup was a result of "too many cooks" in the kitchen. Also didn't help with the ongoing 'battle of the egos' between Luxon and Borghetti, and Luxon finding out he was the "third wheel" in the dysfunctional VA boadroom arrangement (wasn't in the 'circle of power') with many other airlines on the shareholding register.