Virgin Australia Financially Secure? [Now in Voluntary Administration]

[woodborer]

I don't think most people would bat an eyelid on the grounds of customer interest, the company being Australian based, as Holden was, and the impacts on tourism and the whole supply chain. Its not unreasonable for the country to provide support when essentially the government has stopped them doing business.

Also its not the tax payer coughing up, it'll be borrowed at next to zero rates then secured against equity.

Saw yesterday Labor were backing a security which adds more pressure. This should be a no brainer, as it has been with other airlines around the world.

More than one person on this forum is hung up about its ownership structure. Although, if they do manage to restructure, I suspect it will have a very different ownership structure.

 

[jakeseven7]

AFR

Virgin threatens to call in the administrators as it fights to survive

The Morrison government is maintaining a hard line against support for the embattled airline despite its pleas for a bailout.

www.afr.com

It makes sense, they won't give VA anything (specifically) until they have absolutely no other option.

I suspect the government would let the administrators come in, they probably would be easier and more impartial to deal with than VA management as well.

 

[Standby]

The not so subtle sad bit is the 1 month deadline aligns with the time the Stood down VA staff were to return to work ahead of the June flight resumptions

 

[TheInsider]

The not so subtle sad bit is the 1 month deadline aligns with the time the Stood down VA staff were to return to work ahead of the June flight resumptions

Honestly think it would be known well before then as to what's going to happen with VA. Maybe tomorrow people will know some more information. Not really good for staff to not have any form of 'closure' so to speak and being left in limbo for days on end. But obviously their staff are the least of their priorities at the moment.

 

[hydrabyss]

Virgin Group are the only ones to say maybe to a possible equity injection with the others pulling out.

So what next.

https://www.afr.com/street-talk/virgin-shareholders-pass-up-deal-search-moves-to-white-knights-20200415-p54jwg

 

[TheInsider]

Virgin Group are the only ones to say maybe to a possible equity injection with the others pulling out.

So what next.

https://www.afr.com/street-talk/virgin-shareholders-pass-up-deal-search-moves-to-white-knights-20200415-p54jwg

Any non paywalled versions?!

 

[p--and--t]

I have nothing against Virgin as a company (and its CURRENT management) and have no allegiance to QAN.

I feel sad for all their staff, and the QAN staff, currently stressed out about their future.

However as a non-invested observer (I don't hold "status" with either airline and don't listen to conspiracy theories about CL and such utter unsubstantiated rubbish) , my thoughts are why would the gov jump in to throw money that may be needed for a lot of other programs at trying to retain 2 airlines at current capacity when the country will probably require less than 25% of current capacity over the next 12 months and no more than 50% of current capacity for maybe 18-24 months.

At the very least they should be waiting until every single non-gov avenue has been fully exhausted for both companies before making any moves, for either airline, if they make a move.

All those avenues are yet to be played out.

 

[Bagpuss]

Any non paywalled versions?!

Just Google "Virgin Australia" and click on the link.

 

[dajop]

Any non paywalled versions?!

Google the headline. It should yield a viewable result.

 

[Cubiscus]

However as a non-invested observer (I don't hold "status" with either airline and don't listen to conspiracy theories about CL and such utter unsubstantiated rubbish) , my thoughts are why would the gov jump in to throw money that may be needed for a lot of other programs at trying to retain 2 airlines at current capacity when the country will probably require less than 25% of current capacity over the next 12 months and no more than 50% of current capacity for maybe 18-24 months.

1. It'll take much, much longer to rebuild what VA have now than 24 months. The government should be looking further than that.
2. VA support a massive supply chain and the tourism industry, which is on its knees at the moment.
3. A monopoly situation is bad news for anyone not Qantas or their investors. Its in customers interests.
4. The money would likely be a secured investment. If its not paid back then its converted to equity.
5. Unlike the GFC having stopped them doing business the government has a moral obligation to support the industry.

 

[TheInsider]

Google the headline. It should yield a viewable result.

Thanks!

 

[p--and--t]

1. It'll take much, much longer to rebuild what VA have now than 24 months. The government should be looking further than that.
2. VA support a massive supply chain and the tourism industry, which is on its knees at the moment.
3. A monopoly situation is bad news for anyone not Qantas or their investors. Its in customers interests.
4. The money would likely be a secured investment. If its not paid back then its converted to equity.
5. Unlike the GFC having stopped them doing business the government has a moral obligation to support the industry.

Regardless of all of your 1-5, all the plays that both companies can do to save themselves before government intervention have not been attempted. Also VA will not need what they have now.

Ironically from what I have read about the various reasons expounded in the media why VA has been in the doldrums, a technical receivership may deliver the company exactly what they need; removal of the influence of obstructive shareholders, the ability to shed burdensome contracts, the ability to reshape the company to something that can rise like a Phoenix from the ashes that could compete with QAN better than it ever has.

 

[Must...Fly!]

Either way the current shareholders are facing wipe out on their stakes.

Fact is few are able to lend Virgin the sort of money that it would need. If it could hold steady and restructure the problem leases over the short term, restructure the operation in the medium term then the long term outlook is very bright, and it would probably cost the government nothing at the end of it as long as they avoid total collapse.

 

[p--and--t]

Either way the current shareholders are facing wipe out on their stakes.

Fact is few are able to lend Virgin the sort of money that it would need. If it could hold steady and restructure the problem leases over the short term, restructure the operation in the medium term then the long term outlook is very bright, and it would probably cost the government nothing at the end of it as long as they avoid total collapse.

Unlike some on here, I don't have any visibility of VA assets particularly unsecured assets.

Given the big accumulated debt burden they have, wondering if there is much left to hock for some more cash and if they are planes then I suspect the value would have decreased quite a lot in the last 2 months.

Edit: the other problem for the gov is if they lend money to an operation that eventually fails anyway due to its structure and liabilities , then they have lost the lot as a gov shareholding in a bankrupt company with no realisable assets will be worthless.

 

[Cubiscus]

My view is regardless of the mismanagement of VA under the previous ownership the government has a moral responsibility to look after the sector given it has stopped them from operating (for good reason).

This isn't the winners or losers from capitalism, its the economy being put deliberately on hold.

 

[Doctore1003]

It’s not just the existing debt and current cash crunch that are the problem. Virgin faces years of future losses. Why would anyone invest now? The world isn’t going back to normal any time soon.

 

[jakeseven7]

the other problem for the gov is if they lend money to an operation that eventually fails anyway due to its structure and liabilities , then they have lost the lot as a gov shareholding in a bankrupt company with no realisable assets will be worthless.

Which is why I suspect government will most probably let VA go into administration first (if they can't sort themselves out) before sizing up options, but only after the administrators have had a crack. Government intervention will be the absolute last resort.

 

[p--and--t]

My view is regardless of the mismanagement of VA under the previous ownership the government has a moral responsibility to look after the sector given it has stopped them from operating (for good reason).

This isn't the winners or losers from capitalism, its the economy being put deliberately on hold.

But is that actually correct from the Feds perspective? [That's a question]

The Feds have stopped overseas travel, not domestic. The states have effectively stopped viable domestic aviation. The states actions have severely impacted both airlines.

If we ignore the financial state of each airline (which had nothing to do with government decision making) before Covid

• was not VA, except for 3? routes, a largely a domestic operation and minor international dabbles which were from reports, in the main, loss making.
• QAN (QF and JQ) both had a multitude of international destinations and passengers which have been killed by the Feds. Maybe 30% of their earnings.

Then hasn't the QAN group suffered more from Feds decisions than the VA group? [That's a question] The other actions by states to effectively close borders is another matter.

 

[hydrabyss]

But is that actually correct from the Feds perspective? [That's a question]

The Feds have stopped overseas travel, not domestic. The states have effectively stopped viable domestic aviation. The states actions have severely impacted both airlines.

As far as I know holiday travel is out domestically.

 

[antycbr]

But is that actually correct from the Feds perspective? [That's a question]

The Feds have stopped overseas travel, not domestic. The states have effectively stopped viable domestic aviation. The states actions have severely impacted both airlines.

Some (Anne Twomey) have argued that the restrictions (particularly WA) breach the constitution. No one is likely to go to court to test this, but I think it's unreasonable by government fiat to restrict your business to less than 1% of it's normal operations and then say "oh well you should have planned for this." You could further argue that if the government hadn't been negligent in performing quarantine (a Commonwealth responsibility) domestic travel may not needed to have been restricted to the same extent and that the loss of income is directly attributable to the negligence of Government.