Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Melburnian1]

Agreed.

From recent performance, I would expect the most Canberra would do is to fiddle with ownership or foreign investment rules around the edges to alleviate a potential collapse as long as they didn't have to spend a dime..

When politicians give financial assistance to failing companies, it often doesn't work out well. The fruit company in Victoria SPC received a bailout. Some time later. Coca Cola Amatil put in on the block for a very low price, and its future may still be up in the air.

Oz car manufacturing was another good example, and airlines overseas like the failed ones in India wouldn't have survived if they received bailouts.

 

[p--and--t]

When politicians give financial assistance to failing companies, it often doesn't work out well. The fruit company in Victoria SPC received a bailout. Some time later. Coca Cola Amatil put in on the block for a very low price, and its future may still be up in the air.

Oz car manufacturing was another good example, and airlines overseas like the failed ones in India wouldn't have survived if they received bailouts.

& if COVID causes major economic upheaval, the queue for a handout could be very long indeed. (it already is actually from the fires)

 

[jase05]

As we discussed a while back, doesn't this depend on the attitude of its lenders?

I wouldn't like to have any financial exposure to VA. Despite the 'cost cutting', even if the bad news of the virus was eliminated tomorrow, there just doesn't appear to be any prospect of the organisation - in total - becoming profitable, and there's the small matter of billions in accumulated losses.

VA also has $1bn in the bank and without the virus situation there were many experts who had predicted that they would be turning a profit in the later half of this year. Obviously this current unforeseen drama has punched a hole in those prospects but if VA can ride the short term pain out I think they can prosper in the long term.

 

[p--and--t]

VA also has $1bn in the bank and without the virus situation there were many experts who had predicted that they would be turning a profit in the later half of this year. Obviously this current unforeseen drama has punched a hole in those prospects but if VA can ride the short term pain out I think they can prosper in the long term.

They will need to be in the black for several years to make up for the last 8.

Possibly it might be prudent for PS to allocate a few hours each day to instilling public/investor confidence, (besides the essential under the covers work) so there is no flight away from forward bookings and Velocity which would result in a death spiral.

 

[dajop]

I do wonder if SQ are "waiting" for the worst case scenario,, e.g VA "falling over" to pick off the "assets" (e.g 737s, SYD/MEL slots or the 4 owned 77Ws).
SQ are no stranger to investment failures: NZ/AN (bankruptcy debacle), VS (sold at a loss) and now VA.

I think the biggest “asset” for SQ is VA’s Velocity. membership base. I don’t think SQ made the investment to make big money out of it, probably would be happy if VA were to just make a little bit of money (or just not lose money) and use the velocity membership base to feed SQ’s many services to Australia.

 

[Bagpuss]

A reasonable guide might be what occurred with Ansett Australia. You'd be an unsecured creditor, but IIRC would not receive any fares back as staff and the ATO would rank ahead of you.

From the recent results, there were comments about favourable legacy contracts.
If they start eating through some cash, they could essentially bring in the administrators.
This would allow them to escape legacy and unfavourable contracts and then be "re-purchased" privately by the current shareholders.
It has its risks, but it's an option.

 

[jakeseven7]

& if COVID causes major economic upheaval, the queue for a handout could be very long indeed. (it already is actually from the fires)

Yes and Tourism Australia is busy advertising overseas that Australia is 'open for business' as people are cancelling non-critical travel left right and centre. What a waste of money. Wait until corona has calmed down a bit at least! Sorry that is off topic.

I agree though, any potential direct government support to a failing VA would be unlikely (and most probably not required anyway in my opinion)

 

[jakeseven7]

Possibly it might be prudent for PS to allocate a few hours each day to instilling public/investor confidence, (besides the essential under the covers work) so there is no flight away from forward bookings and Velocity which would result in a death spiral.

I agree. Australians will support an underdog to a degree. But if they get wind that underdog might not be around in the future (real threat or media hyperbole) then they are FINISHED.

PS doesn't seem very meda savvy or comfortable (or his PR team have been cut back in the rolling redundancies!) so maybe they need to get an agency on this stat!

 

[HS-TQE]

I think the biggest “asset” for SQ is VA’s Velocity. membership base. I don’t think SQ made the investment to make big money out of it, probably would be happy if VA were to just make a little bit of money (or just not lose money) and use the velocity membership base to feed SQ’s many services to Australia.

Which probably comes to the question, why didn't SQ offer to buy into Velocity in the first place? as opposed to the airline itself.

This is based on the assumption that one of SQ's main (if not the primary) aim to gain access to VA's domestic FF base. I mean another scenario in a "if worse comes to worse" situation for VA is that SQ buys Velocity and integrates that into KF.

 

[jakeseven7]

VIRGIN URGED TO DITCH ITS ‘TROUBLED’ TIGERAIR CARRIER

Experts have launched a stunning attack on Virgin Australia’s funding in the low-cost carrier Tigerair, declaring there is no point ‘bothering’ with it.

No Cookies | The Courier Mail

No Cookies

www.couriermail.com.au

 

[p--and--t]

VIRGIN URGED TO DITCH ITS ‘TROUBLED’ TIGERAIR CARRIER

Experts have launched a stunning attack on Virgin Australia’s funding in the low-cost carrier Tigerair, declaring there is no point ‘bothering’ with it.

No Cookies | The Courier Mail

No Cookies

www.couriermail.com.au

Paywalled

 

[Must...Fly!]

Yes sadly not accessible but the headline is enough for me to click "Agree"!

Here's a question. Virgin's recent raising and re-purchase of 100% stake in Velocity. Now that this virus challenge has emerged - great idea or bad idea, in hindsight of course.

 

[Fortheloveofflying]

Not sure if this has been posted here before, but I came across this today

Virgin Australia shares fall below 10 cents, experts fear collapse

Virgin Australia shares are worth less than 10 cents. Credit ratings agency Standard & Poor's has warned the airline's debt problems were likely to worsen in light of the coronavirus.

www.dailymail.co.uk

 

[SeaWolf]

I don't think they're in as bad shape as everyone makes out. People just seem to be very 'jumpy' about Virgin potentially going under, probably because of the sorry tale of Ansett.
But it wasn't all that long ago that Qantas got into so much financial trouble it went to the Government with a begging bowl and yet it's still alive and kicking today and doing OK.

When Qantas posts losses or does badly people tend to just see it as part of the (often volatile) airline business, when Virgin does badly everyone starts talking about collapse.

 

[jakeseven7]

I don't think they're in as bad shape as everyone makes out. People just seem to be very 'jumpy' about Virgin potentially going under, probably because of the sorry tale of Ansett.
But it wasn't all that long ago that Qantas got into so much financial trouble it went to the Government with a begging bowl and yet it's still alive and kicking today and doing OK.

When Qantas posts losses or does badly people tend to just see it as part of the (often volatile) airline business, when Virgin does badly everyone starts talking about collapse.

I think you are over reacting, one person on here has mentioned a collapse. Who is talking about a collapse? Haven't seen that in the media either.

VA getting into severe difficulty though - absolutely. Collapse - don't think so.

 

[SeaWolf]

Who is talking about a collapse? Haven't seen that in the media either.

The post directly above mine has a link to a media article using the word Collapse in the headline.

 

[Harthagan]

The problem is that even if this isn't necessarily a death sentence for virgin it might end up just as fatal if stakeholders are concerned about the stability of the airline.

self funded travellers like myself, you would be pretty brave to book in any expensive international travel plans for the foreseeable future

 

[jakeseven7]

The post directly above mine has a link to a media article using the word Collapse in the headline.

One tabloid press article probably written by a casual 19 year old

I agree with you that the media shouldn't be dramatising VA's problems because it will undermine peoples confidence to fly them

 

[PaulllM]

The post directly above mine has a link to a media article using the word Collapse in the headline.

Lets make something very clear about stories floating around in the Australian media landscape. If the story is from The Australian, AFR and SMH/AGE it has some legitimacy as these papers understand business and economics and have editors with solid reputations.

If a story comes from the Daily Mail or News.com.au is it tabloid trash looking for cheap click bait headlines. The average Daily Mail/News.com.au reader knows more about the Kardashians or Married at First Sight than in the inner workings of a businesses let alone the aviation industry.

On the subject on the long term viability of VA, i don't see it VA falling over unless something big happens to the airline, all airlines will struggle with falling revenues due to the corona virus (and we will probably see some airlines park planes and make staff take LWOP like CX if things get worse), however VA still has large cash reserves, full control and ownership over a profitable reward program, it has a healthy percentage of the domestic market that can easily sustain 2 major airlines and their subsidiaries (with room to grow once the economy takes off again) and it has partner airlines with vested interests that would be hampered in offering domestic connections within Australia if VA fell over.

So everyone calm the f down as negative speculation that is spread around and understood as news by uninformed people does not help

 

[ja1]

Yes sadly not accessible but the headline is enough for me to click "Agree"!

Here's a question. Virgin's recent raising and re-purchase of 100% stake in Velocity. Now that this virus challenge has emerged - great idea or bad idea, in hindsight of course.

Great long term decision but perhaps the timing was not the best..

FF programs are the profit engine rooms of a modern airline. It's akin to the reality that actual airports need airlines only to supply the 'product' to drive their actual profit centers - car parking and airport services.

However it is what VA does with the FF program (looking at what QAN have achieved) that will provide whether this turns out to be a great or bad idea.