Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Must...Fly!]

Hard to imagine if the branding is kept that they reset everyone to zero. But it could happen.

 

[jakeseven7]

Things are moving quickly
According to latest reporting in the Australian,
"The scheme would shut Tiger airlines, the international division"

Said every AFF member for the last 2 years, maybe we all should be VA execs

Post automatically merged: Apr 17, 2020

If Velocity members were left with nothing a good way to guarantee failure of a new venture. Way to really p#ss off your target customer base. The gold and platinum members would almost be the airlines biggest asset (vs starting a new airline afresh).

But that doesn’t mean it won’t happen.

But it might not be 'Virgin' that emerges from this whole mess I guess. Might be something else entirely....

 

[Mr Pumblechook]

Yes I can't imagine Virgin Australia is a viable brand if it's associated with wiping everybody's Velocity (and more importantly for me, travel bank) values. It'd have to look like something else entirely (even if under the skin it was the same).

 

[Mattg]

If unsecured creditors get nothing, that will also affect all of those people with large Travel Bank credits that they didn't really want due to Virgin's questionable decision not to refund for cancelled flights.

 

[jakeseven7]

If unsecured creditors get nothing, that will also affect all of those people with large Travel Bank credits that they didn't really want due to Virgin's questionable decision not to refund for cancelled flights.

If Virgin write off all the travel banks that will impact a lot of our AFF members here, some who have staggering balances stuck there. Hope not.

 

[SydneySwan]

If Virgin write off all the travel banks that will impact a lot of our AFF members here, some who have staggering balances stuck there. Hope not.

It will also be a stupid move. If you have a travel bank you are committing to fly with VA in the future to use it and most will probably retain some loyalty to VA. If VA wipe out travel banks as part of a restructure many will probably boycott VA. That is the last thing VA need.

 

[Bagpuss]

Yes I can't imagine Virgin Australia is a viable brand if it's associated with wiping everybody's Velocity (and more importantly for me, travel bank) values. It'd have to look like something else entirely (even if under the skin it was the same).

If the government loaned/bailed them out. What makes you think the Travel Bank, points etc wouldn't be wiped out or devalued?

 

[Mr Pumblechook]

If the government loaned/bailed them out. What makes you think the Travel Bank, points etc wouldn't be wiped out or devalued?

I don't believe I said they wouldn't.

 

[jakeseven7]

Private equity sharks circling....?

A highly regarded member of our AFF community here did tease this a few weeks ago!

I wonder if private equity got ahold of VA what they would do... I reckon they could take VA back to DJ days and maybe for the better!

'Let's come together and link arms': Virgin Australia's last-ditch bid to prevent collapse

The airline's chief executive Paul Scurrah calls for "rivalry" to be put aside and for the Federal Government and the community to step in and back Virgin in the national interest.

www.abc.net.au

 

[jase05]

Private equity sharks circling....?

A highly regarded member of our AFF community here did tease this a few weeks ago!

I wonder if private equity got ahold of VA what they would do... I reckon they could take VA back to DJ days and maybe for the better!

'Let's come together and link arms': Virgin Australia's last-ditch bid to prevent collapse

The airline's chief executive Paul Scurrah calls for "rivalry" to be put aside and for the Federal Government and the community to step in and back Virgin in the national interest.

www.abc.net.au

I will be happy for the employees no matter what sort of form a revamped airline takes but they would probably lose my business if they went down that path which is sad as I do love flying with them

 

[RAM]

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.

Yes, spot-on Q is facing the worst future due to the size of its international operations, which IMHO is why Q is keen for no Govt deals currently. If VA was to shut down then I suspect AJ would schedule special Q flights to Canberra from all mainland capitals so the politicians could once again savour the Chairman's Club on their way to debate providing a package for Q. No conflict of interest there of course.

VA has a cashflow issue before the domestic market restarts on a non-lockdown phase WHILST an international lockdown remains. Slowly building up the profitable pairs whilst maintaining low volume operations on the thin routes would see massive positive cashflow generation, if VA continue to play the smart way (seen so far) then that would be coupled with a PR campaign encouraging people to support them to ensure travellers don't return to the bad old monopoly pricing days...

Q in that scenario has over 100+ planes that serve the international routes parked (at a cost), requiring maintenance (at a cost), paying the leases on their international terminals (sold off & leased back since 2013) indefinitely as well as their overseas leases. The impact of their NZ lower cost operations providing planes & crews for the trans-Tasman routes also grounded but not in the Australian public view could prove troubling if an 'ANZAC' deal is not arranged to open up the Tasman routes. First whispers of this ANZAC arrangement started last week but NZ is reportedly playing hardball demanding quid-pro-quo on welfare payments & deportations. Ah politics.

Due to the over 30% Q share buy-back since 2013 - Q is on thin ice and possibly would be forced by its auditors to make some large provisions against their international fleet. Depending on the size this could wipe out net tangible value entirely due to the unearned income from international ticket sales they're keenly (just like VA) issuing credit vouchers for. Subtracting the cash theoretically to back this liability leaves a lot of intangible assets and very little actual realisable assets that are unencumbered following their latest financing.

VA has the ability to operate its B777s as hybrid cargo planes relatively lucratively. Economics of a passenger B777 used as is for cargo (taking passenger cargo & other cargo) has a much lower (40% lower vs A380, 22% lower vs B747) break-even and potentially a lucrative cashflow source for VA in an international passenger lockdown. VA already operates a lucrative 'other cargo' business based on its B777 flights to/from the US.

The recent change in rhetoric within Australia, the US & now the UK about how long realisitically before a 'hoped' for vaccine may be in widespread distribution is telling.

Over the last 4 or 5 days the timeframe discussed has been 15-18 months with 18 months getting much greater air play.

 

[jakeseven7]

I will be happy for the employees no matter what sort of form a revamped airline takes but they would probably lose my business if they went down that path which is sad as I do love flying with them

Hard call isn't it, though a DJ airline could be very well positioned in a post - Corona world.

No frills, take on Jetstar head on - maybe just have a bit more bundling than Jetstar for those who want to pay for internet, meals, seats, drinks etc?

 

[jakeseven7]

If the government loaned/bailed them out. What makes you think the Travel Bank, points etc wouldn't be wiped out or devalued?

It might not even be 'VA's' decision if it was an administrator / new owners scenario.

The new management team would make that call.

Hope it doesn't come to that.

 

[RAM]

Jetstar will be sold off. Neither QF nor Virgin will be around at the end.

Based on logic I somewhat agree but based on political expediancy - Scomo will keep Q's head above water regardless of the cost, quoting National interest etc.

If VA do succumb then quite likely Q 'split' off JetStar as new '2nd' competitor, load them up with debt and switch their fleet around somewhat to take the newer planes to Q's fleet & offload older Q planes to them.

Two domestic airlines, problem sorted. Project Competition anyone? The consultants are probably dusting off the BHP/South32 documents as we speak...

 

[jakeseven7]

If VA do succumb then quite likely Q 'split' off JetStar as new '2nd' competitor, load them up with debt and switch their fleet around somewhat to take the newer planes to Q's fleet & offload older Q planes to them.

Definitely a scenario thats been talked about a lot on here, VA goes under. QF divests JQ. Presto! Two airlines again.... And I wonder how many years before QF then launched JQ mark 2 to compete with the JQ mark 1?

Does anyone know if VA own their 777s?

 

[jase05]

Hard call isn't it, though a DJ airline could be very well positioned in a post - Corona world.

No frills, take on Jetstar head on - maybe just have a bit more bundling than Jetstar for those who want to pay for internet, meals, seats, drinks etc?

Possibly but in my instance I’m at the stage of my life where I have no interest in travelling in Y unless it’s absolutely unavoidable even on a 1hr flight so a DJ type scenario wouldn’t appeal to me at all.

 

[HS-TQE]

Definitely a scenario thats been talked about a lot on here, VA goes under. QF divests JQ. Presto! Two airlines again.... And I wonder how many years before QF then launched JQ mark 2 to compete with the JQ mark 1?

Does anyone know if VA own their 777s?

VA owns 4 of their 5 77Ws. The 4 owned 77Ws are registered to "VB Leasco Pty Ltd" (wholly owned subsidiary of VAH) based in Bowen Hills, Brisbane.

 

[jase05]

Definitely a scenario thats been talked about a lot on here, VA goes under. QF divests JQ. Presto! Two airlines again.... And I wonder how many years before QF then launched JQ mark 2 to compete with the JQ mark 1?

Does anyone know if VA own their 777s?

VA own 4 of their 777’s I believe

 

[SydneySwan]

VCs usually load up whatever they buy with tons of debt. Isn't VAs problem that it has too much debt already?

Disclaimer; I am not a financial whizz.

 

[RAM]

Sorry, but the govt support that VA asked for would not have resulted in any change to the company ownership, unless things continue to go wrong in the future. They asked for a govt loan to essentially allow them to continue to exist in their current form. It would only convert to equity if they can't repay it in a few years. In other words, the foreign owners get the upside if it the plan works, while the govt (or us taxpayers in reality) would end up owning a big chunk of a worthless company if it doesn't.

There are other scenarios under which the govt could get ownership now (in full or in part) and thus reduce or even entirely eliminate the level of foreign ownership. One of those scenarios might come to pass, but let's be clear, that is not what VA asked for. And AJ was responding to what VA was asking for, which could indeed have hugely benefited its foreign owners.

Post automatically merged: Apr 16, 2020

Yes I know. That doesn't change the point though - AJ is saying that whatever support is extended should be industry-wide, not company-specific.

VA's very cleverly crafted request was modelled on the NZ Govt bailout of ANZ which has paid off handsomely until Feb 2020.

The VA proposal (VAp) is not what Q would even consider because Q knows that they are in a worse position in 6, 12 & 18 months if VA still exists. VAp is offering an interest rate 3x what Q is paying currently, it also has the conditions of NO dividend payments, no share buybacks, no senior exec payrises nor bonuses UNTIL loans are paid out. If not paid out within 3 years then Govt would be issued with shares representing at least 70% of shares outstanding (more as price has dropped since proposed although not traded).

AJ & directors would NEVER sign up to the same terms, their remuneration would plummet massively and shareholders would vote them out at next AGM (no dividend like hell!).

That's why the anti-VA PR push is being pushed on nationalistic grounds rather than what has actually been proposed. The shareholders have paid more into the Australian economy through the losses over the last 9 years (effectively 100% taxation on their equity contributed) than Q has paid tax. Have a look in Q's Annual report and see where some of their subsidiaries are based, for some reason there are no Q flights to those small islands.