Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Inlander]

Well I doubt it was difficult in the sense that it absolutely had to be done. But CEOs are people too (well...most are), and to have on your conscience that 20,000 people are going to really struggle for at least 2-3 months would be psychological torture.

1 in 5 CEOs are psychopaths, study finds

An Australian study has found that about one in five corporate executives are psychopaths – roughly the same rate as among prisoners.

www.telegraph.co.uk

 

[Fortheloveofflying]

Or I wonder if they've already blocked people spending their points this way, to slow down the cash bleeding?

A few colleagues and myself have cashed out our points for various gift cards. They were ordered last Friday and the order status is still "Pending". Hopefully it's just a massive backlog and they are slow to process.

 

[jakeseven7]

A few colleagues and myself have cashed out our points for various gift cards. They were ordered last Friday and the order status is still "Pending". Hopefully it's just a massive backlog and they are slow to process.

Wow really..... let us know if you manage to get them?
I wonder if Virgin will clamp down on this?

 

[PDF]

Prime Minister says no plans to nationalise large companies such as VA. From the ABC feed:



If you want to be pedantic he didn't quite rule the option out It is just not part of the plan right now.

 

[jonboixxx]

Wow really..... let us know if you manage to get them?
I wonder if Virgin will clamp down on this?

I don't understand. Why would they clamp down, when Velocity are being paid to liquidate points cheaply into gift cards and other paraphernalia?

 

[moa999]

I don't understand. Why would they clamp down, when Velocity are being paid to liquidate points cheaply into gift cards and other paraphernalia?

Because those outflows are costing VA real $$s

 

[jonboixxx]

Because those outflows are costing VA real $$s

Points liability will be looking good if they come out the other side.

 

[ozstamps]

I don't understand. Why would they clamp down, when Velocity are being paid to liquidate points cheaply into gift cards and other paraphernalia?

There is a REAL and IMMEDIATE $$$$$ cost to Velocity for each airline mile transferred out to David Jones or JB HiFi or Priceline or whatever, in funding Gift cards. A $1000 David Jones gift card COSTS Velocity serious money. Right NOW, exactly when they are running short of it. Are you imagining David Jones give VIRGIN money for each $1000 card?? Velocity simply wipes 188,000 hard won points off their balance liability sheets, and gives DJ something less than $1000. In normal times a WIN-WIN for both, and a happy Business guy who does not need more airline flights, but his wife like new Jewellery!

There are many posts here that great numbers of Velocity points holders and doing just that - buying gift cards. Terrible value for money, but many like me feel the program will fold in the very near future, and a $1000 Gift Card is better than a Velocity account full of worthless miles. (Transferring to SQ is far better value but many do not have enough points to made that viable)

If they had a REAL decent fare sale on - Biz Class RT to Perth from East Coast to $999 at specified future dates of THEIR choosing to offer, 1000s would be booked, that EARNS 7 figures in dollars right here and now, or award seats to LAX or Japan etc, for later year, at 50% off, that means many will lock those in, rather than bother transferring points - saving these immediate cash outlays.

Yes, a COVID is one-off situation no-one had predicted, but they DO have 10,000 staff, and one or some of them should have been proactive here in both creating revenue and at the same time, protecting a Tsunami of points being transferred into gift cards. Companies get just ONE chance in such crisis's - they either do it well or they implode.

If Virgin has the same massive level 20,000 staff Furloughs (66%) that Qantas just announced, some of those 10,000 might be wishing they had a little more forward vision in mid March.

 

[jonboixxx]

There is a REAL and IMMEDIATE $$$$$ cost to Velocity for each airline mile transferred out to David Jones or JB HiFi or Priceline or whatever, in funding Gift cards. A $1000 David Jones gift card COSTS Velocity serious money. Right NOW, exactly when they are running short of it. Are you imagining David Jones give VIRGIN money for each $1000 card?? Velocity simply wipes 188,000 hard won points off their balance liability sheets, and gives DJ something less than $1000. In normal times a WIN-WIN for both, and a happy Business guy who does not need more airline flights, but his wife like new Jewellery!

There are many posts here that great numbers of Velocity points holders and doing just that - buying gift cards. Terrible value for money, but many like me feel the program will fold in the very near future, and a $1000 Gift Card is better than a Velocity account full of worthless miles. (Transferring to SQ is far better value but many do not have enough points to made that viable)

If they had a REAL decent fare sale on - Biz Class RT to Perth from East Coast to $999 at specified future dates of THEIR choosing to offer, 1000s would be booked, that EARNS 7 figures in dollars right here and now, or award seats to LAX or Japan etc, for later year, at 50% off, that means many will lock those in, rather than bother transferring points - saving these immediate cash outlays.

Yes, a COVID is one-off situation no-one had predicted, but they DO have 10,000 staff, and one or some of them should have been proactive here in both creating revenue and at the same time, protecting a Tsunami of points being transferred into gift cards. Companies get just ONE chance in such crisis's - they either do it well or they implode.

If Virgin has the same massive level 20,000 staff Furloughs (66%) that Qantas just announced, some of those 10,000 might be wishing they had a little more forward vision in mid March.

Thanks ozstamps for your response, as the reason I am here is to develop better flyer strategies .
I see that you had lost in the Ansett washout, but you are still in the "game", and everyone can learn from your commentary. I see also that in multiple posts that you are foreseeing the failure of VA, by June 30.
Apart from previous experiences, do you have any reasoning that VA would be allowed to fail, as a competitor to QF?
My take on the economic rationalists in government is provision of sufficient assistance to both airlines to maintain competition. They've already signalled excise and other assistance for both as a first measure.
Like most here, I am trying to mitigate risk in my frequent flyer portfolio. I have skin in the "game" and transferred 2M+ points to SQ last week (I would be stupid not to), who the Singaporean government would probably save at all costs; but who knows, this is a new world. I might lose those, as well as the considerably more points that I've left in velocity.

 

[dajop]

My take on the economic rationalists in government is provision of sufficient assistance to both airlines to maintain competition. They've already signalled excise and other assistance for both as a first measure.

I wonder what the federal government domestic flight spend is was per annum? It could actually be worthwhile, just for the various tiers of government, to ensure a second participant in the market to keep a lid on that spend in the long term, and not be exposed to monopoly forces.

 

[bulldog88]

There are many posts here that great numbers of Velocity points holders and doing just that - buying gift cards. Terrible value for money, but many like me feel the program will fold in the very near future, and a $1000 Gift Card is better than a Velocity account full of worthless miles. (Transferring to SQ is far better value but many do not have enough points to made that viable)

Velocity FF is an incredibly profitable company in its own right. It might be owned by Virgin Australia but, from what I can tell (VA annual report 2019), Velocity has its own board and management. It might be more valuable than VA's entire airline operations right now. I am not burning Velocity points on the assumption they will be worthless in 3 months (and I did lose a lot of miles in Ansett).

 

[dajop]

Velocity FF is an incredibly profitable company in its own right. It might be owned by Virgin Australia but, from what I can tell (VA annual report 2019), Velocity has its own board and management. It might be more valuable than VA's entire airline operations right now. I am not burning Velocity points on the assumption they will be worthless in 3 months (and I did lose a lot of miles in Ansett).

You make a good point. When Jet Airways (India) colllapsed their loyalty program continued and rebranded, albeit diminished by the absence of its main partner.

 

[Jack_OC]

Velocity FF is an incredibly profitable company in its own right. It might be owned by Virgin Australia but, from what I can tell (VA annual report 2019), Velocity has its own board and management. It might be more valuable than VA's entire airline operations right now. I am not burning Velocity points on the assumption they will be worthless in 3 months (and I did lose a lot of miles in Ansett).

What value would Velocity points hold if VA (the airline) folds? As I see it, at best, you might still be able to redeem for gift cards or transfer to KrisFlyer at current rates. I stress at best. Bear in mind that if it all goes wrong, the billions of Velocity points currently held by members are a (significant) liability. Additionally, the profitability of Velocity is inherently linked to the existence of VA. For those reasons, I'm struggling to see why administrators might want to keep Velocity alive if they can't keep the airline alive.

Just to be clear - I am not saying the airline will fail, just saying that if it does, I suspect Velocity points would indeed become worthless very quickly. I'd have the same concern about any points in any FF scheme.

 

[HS-TQE]

Velocity is pretty much the reason why SQ has maintained their stake in VA for all those years, despite not being hands-on in VA for years since the JB/CL bust-up.

Velocity would be an "asset" relatively cheap for SQ to buy should VA fold up (by administrators), allowing SQ to fold Velocity in KrisFlyer so SQ can "acquire" the VA FF base.

 

[Must...Fly!]

Well given all the talk of Velocity ownership.

Imagine you were in charge of the equity firm that took the stake in Velocity.

You're either feeling really smart or really lucky right now. Perhaps both! (oh, and much wealthier, either way)

 

[jonboixxx]

I wonder what the federal government domestic flight spend is was per annum? It could actually be worthwhile, just for the various tiers of government, to ensure a second participant in the market to keep a lid on that spend in the long term, and not be exposed to monopoly forces.

Full disclosure, I'm an eternal optimist, and believe VA and QF would both be sufficiently assisted by government for the extensive benefits to country that brings; I just don't think either side of politics would accept a reversion to monopoly pricing of our relatively recent past.

 

[jonboixxx]

Well given all the talk of Velocity ownership.

Imagine you were in charge of the equity firm that took the stake in Velocity.

You're either feeling really smart or really lucky right now. Perhaps both! (oh, and much wealthier, either way)

Probably smart. We've just had yet another 5 years of prosperity. A lot have at least doubled their net worth in that period. Now we give a little back on a significant pullback.

 

[Must...Fly!]

Probably smart. We've just had yet another 5 years of prosperity. A lot have at least doubled their net worth in that period. Now we give a little back on a significant pullback.

For those of us who joined the stock market in the last 6 months, giving back what we never got! But that's the game. Long term thinking is key.

 

[hydrabyss]

Full disclosure, I'm an eternal optimist, and believe VA and QF would both be sufficiently assisted by government for the extensive benefits to country that brings; I just don't think either side of politics would accept a reversion to monopoly pricing of our relatively recent past.

I agree as airlines are an important part of public transport I would think the cost to keep them both going would be far cheaper in the long run than not to.

 

[ozstamps]

Thanks ozstamps for your response, as the reason I am here is to develop better flyer strategies .

I have skin in the "game" and transferred 2M+ points to SQ last week (I would be stupid not to), who the Singaporean government would probably save at all costs; but who knows, this is a new world. I might lose those, as well as the considerably more points that I've left in velocity.

My prediction elsewhere is that if there are only two FF programs left on earth - Kris Flyer will be one of them,

Hedging your bets is generally very wise for those who weigh things up cautiously. Good on you for your balanced approach - I have far less confidence and I certainly might be wrong - we will all know the answer soon enough.

SQ will survive even if Virgin and/or Velocity crashes. Even if most airlines on the planet crash.

Virgin in my view might last a month. Possibly two. REMOTE chance to June 30. Feds already tossed them a couple $100 million in fee waivers etc in recent days, which has not touched the sides.

The entire company is not even worth $500m today - they will chew that kind of money up in weeks - the stockmarket has spoken, whether Frequent flyers want to listen or not - 20c to 5c sends a very clear message - Qantas is one third the price of a year back, but Virgin is a QUARTER -

10,000 staff drawing wages, (say $50 million a month) with only a small % of normal flights flying to bring in $$s, and plane leases in newly super costly $US, ticking away daily, is a recipe for bankruptcy FAST, for a business that was not great fiscally even in the good times. Indeed Virgin limped to an $A88.6 million loss for the six months ended December 31. BEFORE this massive mess unfolded.

Feds will barely have a penny left spare by June after the almost 2 lavish hand out packages already announced - first one was $5 billion cash to pensioners and welfare recipients, and almost no-one noticed that one. No strings attached. Pay it off your mortgage, or bank it, or gamble it, if you prefer. Really helps retail sales, that ill-conceived idea.

Plus Gawd knows what other goodies they feel inclined to frantically toss around to one and all, day after day, going forward for MONTHS - to placate the masses, and get good headlines. Rent and wage assistance for business and employees etc, and huge one-off cash payments seems on the cards today. Another $50 billion or so for sure.

Yes Government need to do something of course, but like the Labor Pink Batts fiasco, and other past airhead schemes devised in panic on the run, just tossing about money does not always work.

Many seem to believe this Government was in surplus BEFORE this horrible mess! Vastly fewer $$$ Royalty receipts for mineral exports, and near zero inbound tourism etc, and masses more entering the Welfare Net already, will blow the Budget apart totally - into smithereens, so it has been moved back 7 months today, to delay the inevitable shock to all.

The Feds will not be buying 2 airlines to make that black hole deeper and darker - IMHO. Scomo made that clear above.

Sadly QF will always be the First Born Child if someone has to be propped up by Feds. Not ideal, but remotely affordable in the short term. I can hear Scomo now "We feel sure a strong competitor will emerge fast, to fill the shoes left by Virgin's sad demise" Compass Mark 3 perhaps? Yeah right.

Velocity is a stand alone prospect if they survive, as they are theoretically a somewhat different animal financially from Virgin.

So in THEORY they are of some value, but to whom and for what, and at WHAT price? Use a Lufthansa Credit card to get Velocity Australia points? Apply for a Bank of Barbados Visa card and get Velocity Australia points? Don't think so.

The planet will be awash with broken and stripped flyer schemes by June 30. Sellers many - buyers none.

SQ do not need it, except at a fire sale price -- over 10% of all passengers into Australia they fly already, and have that passenger data of who they need. Virgin had nothing like that %.

If Velocity do survive, point usage will be massively devalued for those that stay active. No Virgin flights for starters. 250,000 miles for that shiny Sunbeam Toaster. 500,000 gets you a new Briefcase etc. Hence the large amount of transfers taking place now. The PROGRAM writes all the rules, and can change them at any time. Not the members.