Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Doctore1003]

Stuff Ryanair. This could be SQ's golden chance to own a domestic carrier that ties into the Star Alliance network. Maybe not by taking over Virgin but rather waiting for it to collapse and maybe buying some key assets. It's what we've all been waiting for!

 

[Must...Fly!]

Don't fall for the trap - one poorly managed business does not mean all businesses are in the same predicament. There are planty of people / businesses chock - full of cash.

Take a look at this. Jeez, if the thing falls a little further - I could buy it

Qantas could be taken over by cashed-up Wesfarmers, Macquarie says

The investment bank's analysts unveiled a laundry list of companies the retailing conglomerate could target after its Coles sell-down this week - and the nation's biggest airline is one of them.

www.smh.com.au

Yes but how many wish to expose themselves to an aviation sector riddled with corpses, especially given they would almost certainly have zero expertise in the industry?

Stuff Ryanair. This could be SQ's golden chance to own a domestic carrier that ties into the Star Alliance network. Maybe not by taking over Virgin but rather waiting for it to collapse and maybe buying some key assets. It's what we've all been waiting for!

Paging @HS-TQE your order is ready for collection

 

[amaroo]

Yes but how many wish to expose themselves to an aviation sector riddled with corpses, especially given they would almost certainly have zero expertise in the industry?

IMO every interested party, including government will let it fail, then pick the meat from the carcass. Its the way these things work.

 

[HS-TQE]

Stuff Ryanair. This could be SQ's golden chance to own a domestic carrier that ties into the Star Alliance network. Maybe not by taking over Virgin but rather waiting for it to collapse and maybe buying some key assets. It's what we've all been waiting for!

Judging by SQ's previous failures in the Australian Market (Air New Zealand/Ansett Australia and Tiger Airways Australia), plus the previous 100000+ "SQ to the rescue" articles over the past 5 years which all fizzled out.. There are only two words to this reply.

"Fake News"

--

On another note: Singapore Airlines just got a bailout by their government parent Tesamek, and their main priority for using their bailout funds is 'survival' during the COVID-19 crisis. They won't be buying anything or anyone until that passes.

Source: Singapore Airlines latest to get massive bailout amid coronavirus crisis

 

[dajop]

Mods, maybe we need a Wiki at the top of thread With instructions to read the wiki before posting then we might stop this SQ is the saviour stuff that is very repetitive. At the least HS-TQE could just respond ... please read the wiki!

 

[p--and--t]

Mods, maybe we need a Wiki at the top of thread With instructions to read the wiki before posting then we might stop this SQ is the saviour stuff that is very repetitive. At the least HS-TQE could just respond ... please read the wiki!

.....is wishful thinking more infectious amongst VA patriots than Covid-19?

 

[odysseus]

Don't fall for the trap - one poorly managed business does not mean all businesses are in the same predicament. There are planty of people / businesses chock - full of cash.

Take a look at this. Jeez, if the thing falls a little further - I could buy it

Qantas could be taken over by cashed-up Wesfarmers, Macquarie says

The investment bank's analysts unveiled a laundry list of companies the retailing conglomerate could target after its Coles sell-down this week - and the nation's biggest airline is one of them.

www.smh.com.au

Just because they have the cash doesn't mean they're willing to use it. Airlines are a capital intensive business, they can readily see the returns in VA's history and regulatory hurdles - oh, and Joyce's obstructionism - and the travel outlook is bleak in the near term.

There are also a chock full selection of opportunities to use that cash; VA isn't the only listed entity which has had a price plunge. I'd say it's very unlikely anyone would find it enticing - let alone Ryanair lol!

 

[bulldog88]

I don't think Australian taxpayers should be bailing out other wealthy governments (who could be argued to control VA's shareholders SQ, Etihad, etc).

I'm betting that, unless Covid is resolved within the coming months, VA will go into administration - perhaps with Government assistance to keep a barebones operation running - with Singapore bidding against cashed-up US Private Equity firms for the assets (of which Velocity FF will be key).

If Private Equity takes control I expect VA will become a pure low cost carrier, like Southwest , Ryanair , Wizzair .. why not relaunch as "Velocity AIr" and stop paying royalties to Billionaire Branson ?

 

[bcworld]

If Private Equity takes control I expect VA will become a pure low cost carrier, like Southwest , Ryanair , Wizzair ..

I really struggle to consider Southwest low cost...they're certainly not in the same league as the others you mentioned. 2 free checked bags, complimentary drinks & snacks, no change fees on the cheapest fares, a frequent flyer program, checking in at the kerb for a couple of bucks.

 

[pauly7]

Scurrah makes an excellent point. Where on earth is the investment/seed money going to come from in a post-COVID world to set up a second carrier quickly? And be able to absorb losses? Alan Joyce would be all too aware of this I am sure.

It’s an excellent PR point for the press and media to swallow, and for certain government ministers as well

But let me assure you that there are investment firms, VCs, PEs, capital groups etc with billions and billions of dollars ready to go to snap up faltering companies with reasonable chances of becoming successful again.

That’s why the government has slammed the breaks on foreign investment - everything goes under the ruler now, regardless of $ involved.

People on here also seem to be absolutely obsessed with the idea another airline would buy VA / or what remains of VA. I think it would be far more likely a non airline group would recapitalise VA in my personal opinion

 

[pauly7]

Can we page @pauly7 our resident expert consultant back to this thread to share any 'observations'

Hi, I’m monitoring sporadically Working also in healthcare - that is understandably taking up more of my time at the moment.

Now the situation with VA has progressed significantly it’s beginning to stray into the area of potential conflict now for me so I’m posting lightly in due course and only giving personal opinions

 

[HS-TQE]

"Virgin Australia boss Paul Scurrah has rubbished claims a new entrant to the Australian market could buy his airline's infrastructure on the cheap and be up and running quickly in the event of a collapse."

"Virgin Australia CEO Paul Scurrah has dismissed suggestions that the struggling airline is seeking a federal government bailout. He argues that the $1.4 billion loan facility that Virgin is seeking would have to be repaid eventually. Scurrah also warns that Qantas could emerge with a long-term monopoly in the domestic market if Virgin collapses. The government would allow a new entrant to the market, but CAPA Centre for Aviation chairman Peter Harbison says regulatory approvals would take some time, which would further entrench Qantas’s market dominance"

Paywall Article: Virgin boss warns of Qantas monopoly in event of collapse

 

[hada88]

I would think it's more likely that a PE fund would acquire Virgin if it becomes distressed or even prior to this. Sharks are probably beginning to circle, but all of that becomes moot if PS can pull it off. I'm 60:40 to think he will.

I've seen (and worked on) many examples of distressed assets being purchased by PE funds. I'm sure this is one of the options PS is looking at dependent on whether its major stakeholders want to sell down (which would at least give some return of capital to EY, SQ, HNA etc).

 

[dajop]

If Private Equity takes control I expect VA will become a pure low cost carrier, like Southwest , Ryanair , Wizzair ..

Or go back to the circa 2007-8 "new world" carrier model of Virgin Blue. Whilst it didn't compete head to head with QF in the corporate market, it did in the budget concious (smaller?) business market, looking for value.

 

[HS-TQE]

Or go back to the circa 2007-8 "new world" carrier model of Virgin Blue. Whilst it didn't compete head to head with QF in the corporate market, it did in the budget concious (smaller?) business market, looking for value.

I personally call that the Godfrey 'Hybrid Model', where the front 2-3 rows were Euro-Business Class, or really "Premium Economy" with Extra Legroom and the middle seat empty.

That also allowed DJ to remove the middle seat block when the aircraft gets rotated from a trunk route to a leisure route such as MEL-MCY or BNE-TSV to name example. Thus, quickly reconfiguring back to a all-Y layout for the leisure markets with extra legroom rows.

 

[woodborer]

My guess is that they will engineer something to keep Virgin alive. No idea what, but I am sure they are working through a range of options.

 

[UP4014]

There is already a 2nd airline and it's a discount one at that. Virgin tried to position themselves between them and 10 years later that hasn't worked from a earnings side. Maybe tweaking routes (cutting some) but then you need the feeder traffic as well.

I would think an equity fund is already talking to Virgin's current stake holders, it will be a matter of if they want to ride it out or cut and run.

 

[jase05]

Unfortunately it looks like we won’t get to see how this would’ve played out

Fitch analyst Kelly Amato said it would like to see Virgin raise additional funding over the next three months. “(Coronavirus) has come just as they were making headwinds in terms of getting a new structure in place, taking costs out of the business, reducing debt levels and making Virgin a viable airline,” Ms Amato said.

“We did see them on the path to becoming profitable, and the way they’ve responded to this pandemic shows they are really committed to making the airline survive.”

 

[Bagpuss]

"Virgin Australia boss Paul Scurrah has rubbished claims a new entrant to the Australian market could buy his airline's infrastructure on the cheap and be up and running quickly in the event of a collapse."

Well he IS the CEO and the CEO would want to maintain the company to exist.
However, I think it's more likely to go into administration, exit bad debt and re-emerge.

 

[eastwest101]

There is already a 2nd airline and it's a discount one at that. Virgin tried to position themselves between them and 10 years later that hasn't worked from a earnings side. Maybe tweaking routes (cutting some) but then you need the feeder traffic as well.

I would think an equity fund is already talking to Virgin's current stake holders, it will be a matter of if they want to ride it out or cut and run.

There is a second airline - but its owned by Qantas and is actually a high fare low service airline, that has never really satisfactorily explained itself in balance sheets or profitability as to where its parent ends and the subsidiary begins. I reckon it would still be a live option that should VA fail, and not be restructured and flying again as a domestic competitor that a forced divestment/separation of Jetstar could be a long-shot option that the government and the ACCC would consider. That would be somewhat "karmic" given the history of Qantas' CEO.