Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Cubiscus]

Administration could be the best option longer term on the proviso that they honour existing Velocity and Travel Bank balances.

If they didn't they'd lose a lot of goodwill and customers very rapidly.

 

[Bundy Bear]

On the AFF podcast mentioned that Velocity was run as a separate company, so some chance the points can be saved.
If I lost the travel bank because of the cancel flights then that would piss those who wanted to fly with Virgin but don't would be enough for someone not to fly with them again.

West Sydney airport option isn't a bad idea; pity it so far west of Sydney and will take a few years for the market to increase.

 

[andrewpf]

West Sydney airport option isn't a bad idea; pity it so far west of Sydney and will take a few years for the market to increase.

Also it is currently a paddock, and won't exist as an airport for another 6 years (2026) ... assuming it is built on time!

 

[serfty]

Yes, but AFAIK HND needs to be use it or lose it.
As for the US - there will be very small demand for the foreseeable future.

Use or lose for Tokyo slots has been suspended.

 

[antycbr]

Yes, but AFAIK HND needs to be use it or lose it.
As for the US - there will be very small demand for the foreseeable future.

I think the days of VA(i) are over - for the next 10 years.

Use or lose for Tokyo slots has been suspended.

I think that HND is so far down the list right now for VA. If ANA invest, maybe. The A330 leases are crippling the company from all reports - so if those leases can't be renogitated for a sensible price and are terminated they'd need to either get new aircraft, fly the 773s there (huge capacity) or abandon it.

I don't think VA has the funds post administration for any overseas adventures.

My money is that VA (not VARA) will drop everything but the 777s and 737s. I think they'd be better to try and sign a codeshare or alliance with Rex to take over all smaller flying, including SYD-CBR.

There has to be a post administration first.

 

[oz_mark]

I think the days of VA(i) are over - for the next 10 years at least. For HKG I think they will finish the expansion

I think that HND is so far down the list right now for VA. If ANA invest, maybe. The A330 leases are crippling the company from all reports - so if those leases can't be renogitated for a sensible price and are terminated they'd need to either get new aircraft, fly the 773s there (huge capacity) or abandon it.

The plan before all this was to find a single (modern, fuel efficient) type to replace the A330s and the 777s. Not sure what they had in mind, but maybe a 787 could have filled the missions of those two. Anyway, perhaps the current process, whetever it ends up being, will help free them from the A330s.

 

[ethernet]

Hey we're coming to the end of the wet season.NT and FNQ make the majority of their tourism in the dry season which is just around the corner.So you can bet domestic flights will probably resume at the end of the dry season-ie September/October at earliest.

I stand corrected. Dry - but same result - no revenue, then the wet, no revenue. As for Qld,200mil. But why now - if next 4 weeks locked down. I just hope the load factors are published for all to see. A lot of qld politicians are hearing you have destroyed my business as six months of no cash flow is not survivable.

 

[ethernet]

Even if domestic travel restrictions are lifted, PRE-ANTIVIRAL and PRE-VACCINE I think its fair to assume demand will still be quite soft.

I think the government is letting VA go right to the edge and perhaps over it before they do anything, which is probably appropriate.

In a soft demand environment, there may actually only be enough to go around for one - default of course this will be QF.

And VA is simply not too big to fail.

I'm beginning to now come to terms with there is a very good chance VA will not come through this and the government is probably realizing now that perhaps for the next 2 years or so they don't actually need 2 carrier groups. So why shell out money propping up both? Supporting the stronger player with the largest domestic reach - and ability to crank up international when required, and leave a second player to enter in a few years might make sense...

I sense the government is going to let VA go the wall, and then decide what they want to do....

I like the logic. A phoenix operation on the operating entity will preserve tax losses, and fat fees for risky fresh capital. The unknown thing is is there a better return on capital by dumping Australia after other global airlines go under.

 

[_flyer]

Does anyone know what happens to forward bookings if Virgin files for administration?

If someone buys Virgin after administration will they honour the booking or refund the bookings if we still can’t travel by then? (I have 2 international bookings)

The bookings can be cancelled for a fee / but I’m hoping they would still be honoured if they were bought out (under an administration deal).

 

[moa999]

Would all depend on what happens in administration.
At present I'd think unlikely that Virgin or ant successor will be doing any international flying for a while, if ever.

 

[hydrabyss]

Part of me believes Virgin have on purpose made a possible bailout political with Queensland now responding to NSW's possible headquarters move to western Sydney.

With talks of Chinese airline involvement and now states possibly bidding against each other its turning into one of those auctions people get carried away with only to walk away thinking what did I just buy.

 

[Doctore1003]

An interesting, long-ish read on 'how it all went wrong' for VA

Behind Virgin Australia's crash landing

April 22 will mark the end of Virgin's nine-day trading suspension and hopefully deliver some clarity on the carrier's immediate future. For now, the big question is how it all went wrong.

www.afr.com

 

[Cubiscus]

Wasn't LAX profitable for them? If that was the case I could imagine them continuing that route with the 777s.

 

[pauly7]

Wasn't LAX profitable for them? If that was the case I could imagine them continuing that route with the 777s.

It used to be, but was coming under significant yield pressure as Qantas started opening up capacity in the secondary US cities (SFO), sucking away some of the premium LAX trunk traffic and combined with a plummeting AUD, ex AU traffic was dropping and becoming more reliant on ex US traffic. VA is barely known in the US and probably suffered disproportionately from this as the shift of traffic source happened.

There were unsubstantiated reports on the media LAX was becoming an issue for them towards the end, I don’t recall VA actually calling that out in their results but could be wrong.

 

[Bagpuss]

On the AFF podcast mentioned that Velocity was run as a separate company, so some chance the points can be saved.

I don't have a copy of the company structure. Usually a company will set up mulitple companies which usually have a head / master company which an associated ABN.
In administration usually the parent company goes under administration and takes all sub scompanies with it.
The question is which ABN is used for the majority of their debt / secured assets as that is really the only company which needs to go into administration.
Due to the recent bonds issued to buy back Velocity it will depends what is written into those bonds. If there is anything linked back to another company then likely it will have to go into administration.
I'm sure they will try and keep Velocity out of any administration process.

 

[dajop]

I'm sure they will try and keep Velocity out of any administration process.

If they don't, the chance of successfully emerging from administration as a viable, sustainable airline is surely diminished, as it would completely erode trust in the brand. But, if the aim is to re-align to a market segment below Jetstar, then maybe Velocity wouldn't be so important.

 

[Mr Pumblechook]

I think more important than Velocity will be the travel credits. There are people with thousands of dollars of travel credits with VA and some of them exist because VA was making it deliberately difficult to obtain a refund for a cancelled flight, even when the customer was entitled to one.

"Virgin Australia steals thousands from hard working Aussies" is a much more emotive headline in the current climate than "AFFers who milked the system to skip the queues and sip champagne in F lose their imaginary currency".

 

[Plutonus]

The question is which ABN is used for the majority of their debt / secured assets as that is really the only company which needs to go into administration.

An added layer of complexity is that Velocity Frequent Flyer is a trust. Virgin Australia owns the corporate trustee and presumably has fixed entitlement to all its profits, and makes it likely that the assets of the trust aren't available to Virgin Australia and thus aren't available in any administration process - they do not 'own' the assets held in trust.

 

[Bagpuss]

If they don't, the chance of successfully emerging from administration as a viable, sustainable airline is surely diminished, as it would completely erode trust in the brand.

Not really. I expect which ever parts of Virgin go into Administration will do so with a planned scenario outcomes. Such as Plan A, Plan B. I expect Plan A is a DOCA, though if they have interested investors then it's what that syndicate looks like and will most likely change.
They obviously will get bashed in the media by going into Administration and there are standard playbooks which will come into this, some of which are already in the news. Expect AJ/Qantas to not be so happy as lessors, airports are going to have to take a haircut and Qantas wont get that. There will be usual media tactics. Though they haven't done really wrong doing to end up in Administration as it has only come about now because of COVID (they haven't had a boardroom bust up or anything.)
Utimately from a Virgin side, they need to know what their correct business model is, how much money they need to survive and have a good robust plan.
If the company operates in DOCA is has to abide by set condiitons to its noteholders/shareholders. You may find that these groups pump money into the company, it's actually a loan at an agreed rate and term. Likely to me PKI's about profits etc.
Under DOCA, Virgin also couldn't sell any assets owned assets at the time of DOCA to obtain any additional funding down the track as any money raised would need to be handed back to the noteholders/shareholders.

 

[Bagpuss]

I think more important than Velocity will be the travel credits.

I expect that to go or be reducted. If the company goes into DOCA that's an existing liability.
The purpose of Administration is to remove liabilites.
The one main liability they will try to maintain is staff liabilites (accurred annual leave) etc.

What fundings the company has is dealt with any pre Administration liabilies and to "wind up" or recaptailise the company. Though with a DOCA, it's an injection of money for the company to operate. Once the DOCA is agreed, and they receive the money in their bank account is the second they are operating in DOCA and move forward.