Virgin Australia Financially Secure? [Now in Voluntary Administration]

[jakeseven7]

If they are wanting these new wide body jets "before 2024" its not going to be the 777x

A350 or A330neo (welcome both very good machines)

However A350 would too way to big for cross country if they are wanting to maintain that domestic wide body.

Where on earth are VA going to use a widebody apart from the US and some random trans con flying with some bits of weekend Fiji/NZ work chucked in....

 

[docjames]

However A350 would too way to big for cross country if they are wanting to maintain that domestic wide body.

At one stage the plan was purported to be lie-flat or semi-recliner type J seating in the 737MAX’s (akin to US trans-con F/J seating) - may still be the plan but it’s been kicked down the road due to deferment.

Agree A350 way too big for trans-con.

 

[Saab34]

Hopefully not the 787. Not a great machine for Economy pax.

 

[AIRwin]

Hopefully not the 787.

JQ has a surplus of them...

 

[dajop]

Hopefully not the 787. Not a great machine for Economy pax.

But economically, a mix of 787-800s and 900s probably would be a great replacement for current fleet ...covering the 330 and 777 routes.

 

[Bagpuss]

Where on earth are VA going to use a widebody apart from the US and some random trans con flying with some bits of weekend Fiji/NZ work chucked in....

The presentation today states "Widebody fleet review –significant cost savings available from next generation aircraft " as part of fleet simplication

https://www.asx.com.au/asxpdf/20200226/pdf/44fg7xd2j6xdf0.pdf - Page 7

Widebody = B777 and A330. As they didn't specify B777 or A330 and used the term widebody, it means they are revieweing both.

Therefore, the aircraft would be used to the US (obviously).

 

[Saab34]

Might be issues with the 787-8 range wise fully loaded including freight? Specifically Melbourne?

 

[andrewpf]

As much as I don't like it as a passenger, I would imagine that the 787-9 is the best fit for their network. It is a step down in size from the 777 (reducing load risk), while maintaining similar range. I don't know what its economics are short/medium-haul, but presumably better than the current A330-200 or even A330-800. It would also mean they would be largely an all Boeing outfit (which may or may not carry some cost savings?)

 

[Saab34]

There would also be some good negotiating room with the MAX order if they want to spend more cash with Boeing. Essentially I imagine they would want to push it out more for capex reasons.

I would say they would also want another one or two year delay to that MAX10 order when taking into account their current financial position. Considering just over 12 months before the first MAX10 lands.

Boeing would also be able to assist in disposing of the 77W fleet. The A330s just go back the lessor that’s the easy one. Selling off the 777s which are majority owned might be a challenge.

Plus PS has had dealings with them in the past, Airbus not so much. So Boeing is a pretty safe bet. Under John they most certainly would have gone A350.

 

[amaroo]

I know it's 12 or so years ago, but WOW that QF board decision was absolutely correct.

Light years between Joyce and Borghetti

 

[pauly7]

The presentation today states "Widebody fleet review –significant cost savings available from next generation aircraft " as part of fleet simplication

https://www.asx.com.au/asxpdf/20200226/pdf/44fg7xd2j6xdf0.pdf - Page 7

Widebody = B777 and A330. As they didn't specify B777 or A330 and used the term widebody, it means they are revieweing both.

Therefore, the aircraft would be used to the US (obviously).

VA need to start thinking smarter about their US business I fear.

Qantas are flying more efficient aircraft / seat and have started ‘secondary’ destinations and routes outside of LAX including from VA’s home base of Brisbane. With the refurbs completing on the A380, they also have better product.

Less people funneling through LAX, and experiencing SFO, DFW, ORD and some are talking the addition of Seattle down the line as well which with Alaska now coming online as full OW partner looks interesting.

I suspect QF are nipping away at VAs US customer base with all these new routes.

Further to this I heard that profitability on the LAX route is falling for VA - but that was just a couple of internal comments and I didn’t see anything in their results highlighting that.

Just a feeling I have.

I also have a sneaking feeling Japan might actually be postponed.

 

[PDF]

Another report here: UPDATE 3-Virgin Australia to cut capacity, fleet as coronavirus erodes demand

and there is an article on One Mile At A Time speculating it will either be an A350 or B787

 

[jase05]

With the refurbs completing on the A380, they also have better product.

Very interesting, I’d love to hear feedback from people who have flown on both recently as the only feedback I’ve heard was from a work associate who has just come back from LAX with VA for the first time and he rated it far better than the trip over on the refurbished A380.
I definitely agree though that VA can’t sit idle on their product and need to refresh sooner rather than later. Hopefully it’s the A350 but I guess that’s up to the VA management to sort out

 

[jakeseven7]

Japan is going to hurt VA.

Travel restrictions are now formal to Japan, Italy, China, Hong Kong, Singapre and South Korea by a corporate crisis and travel provider/insurer which covers thousands of large corporations worldwide, including hundreds of Australian subsidarys. So the a lot of the corporate dollar isn't going to be there.

VA will have to rely on leisure travelers chancing the corona virus....

 

[Must...Fly!]

The rules around taking up the HND slot pair is critical. If they can put off the new route for a month or two without penalty, then they absolutely should. It's all but guaranteed they will be burning cash if the route begins as scheduled.

 

[Melburnian1]

I am not an accountant (did some at uni but never finished it), so apologies to those who are as you may know the answer in an instant.

Note 4 of the VAH financial statements released to the ASX shows an increase in (aircraft) lease liabilities from $23.2 million at 31 Dec 2018 to $1615.7m as at 31 Dec 2019. This is attributed to changed accounting standards - AASB 16 - but elsewhere, if I read it correctly, VA says it prepares accounts on an other than recognising AASB basis and so there's a large table showing the post and pre-AASB situation with adjustment amounts.

If I have the terminology correct, this lease recognition may be a 'non-cash' item.

Should investors (and travellers) be concerned at this apparent huge increase in 'lease liabilities?' Or (as a 'non-cash' item) is it merely a technical adjustment that doesn't alter the underlying financial position of Virgin Australia Holdings? (that as an outsider doesn't look impressive to me.)

I've said for a long time that the situation of VAH is precarious. Do we have another Ansett/Compass on our hands, or is that unduly pessimistic? The situation with Hainan is very unclear.

 

[adrenaln]

....

Should investors (and travellers) be concerned at this apparent huge increase in 'lease liabilities?' Or (as a 'non-cash' item) is it merely a technical adjustment that doesn't alter the underlying financial position of Virgin Australia Holdings? (that as an outsider doesn't look impressive to me.)
....

No need for concern, it's merely the new accounting standard that requires a lease's balance to appear as a liability on the balance sheet. Previously, only the lease expense appeared on the P&L with no reflection in liabilities.

 

[TheInsider]

The rules around taking up the HND slot pair is critical. If they can put off the new route for a month or two without penalty, then they absolutely should. It's all but guaranteed they will be burning cash if the route begins as scheduled.

Will be very interesting if the Olympics gets cancelled or postponed then! VA will be in all sorts of trouble, even moreso.

 

[Must...Fly!]

Will be very interesting if the Olympics gets cancelled or postponed then! VA will be in all sorts of trouble, even moreso.

Respectfully disagree. 3 months (probably less) of higher demand is not going to make this route a success or failure. The partnership with ANA is going to be the big carrot. We know the reasons why Hong Kong didn't work out - external issues forced their hand.

I'm likely to cancel my J flight to HND for mid-April. A real shame as I was so looking forward to it, bit there's just little point at the moment given the risks (and likely closures of various attractions)

 

[Melburnian1]

Will be very interesting if the Olympics gets cancelled or postponed then! VA will be in all sorts of trouble, even moreso.

Agree. While this blog can be hard to search, IIRC I suggested VA might lose '$20 million' on its HKG routes. Another AFFer criticised me and said '$10 million.'

However, its accounts for the half year ended 31 Dec 2019 disclose that it lost '$130 million' showing (a) how wrong I was and (b) how easy it is to lose squllions in airlines.

Mind you, if Olympics are cancelled QFi will also take a severe financial hit. My guess is QFi at present may be back to making losses, with the commentary by the Prime Minister, necessary and forward thinking as it was, yesterday cementing many locals' perception that they should either not travel or undertake the bare minimum. Insurers' views will also have a bearing on such decisions, particularly for corporates and their staff.