Virgin Australia Financially Secure? [Now in Voluntary Administration]

[CaptJCool]

I am still both old and young enough to remember Compass. If my memory serves me correctly you could once get 2 for 1 seat prices. Seemed like a good idea at the time.

Does anyone have pics of that J only Ozjet?

Ozjet

You may have seen the two OzJet aircraft parked at Perth Airport? (Now there is only one!) They have been there since May 2009. Originally there were three aircraft parked where the Virgin Terminal...

www.737-200.com.au

 

[jase05]

Fair enough, I suppose I should qualify by saying if the allegations are true and the evidence Virgin has is proven to be accurate, then throw the kitchen sink at them.

Reality is that even if proven guilty QF will only be lashed with a NP wet lettuce leaf

 

[Dee#]

Just tried to ring Had an email today to say my fully refundable -including for cash fare for 28 May Perth to Darwin has been put in travelbank. I want the cash! Message says 'due to unforseen circumstances - unavailable' Is this the end for Virgin? Was ringing from Perth late at night to try to avoid long queue.
What is this credit card cashback? I paid with platinum visa which I think covers you for insurance for your accom and airfares for holidays.

 

[AustraliaPoochie]

I can see a (light at the end of the tunnel, if VA were to somehow survive), would be another levy coming.
An airline levy, as we had with AN to pay out staff entitlements.
An airline user levy, would cover 3 major players of the airline companies in Aust.
The Aust govt sold out of everything, Telecom, airlines, etc, and the state govt of Aust sold out of the power side of things, ie, parts of the electricity networks.
Only way I can see is that the Aust govt sets a levy to get the travelling public to repay any "help" provided to the airlines.

 

[Must...Fly!]

Reality is that even if proven guilty QF will only be lashed with a NP wet lettuce leaf

I know, but the appearance of the guilt itself would be worse than any financial penalty.

 

[PaulllM]

I can see a (light at the end of the tunnel, if VA were to somehow survive), would be another levy coming.
An airline levy, as we had with AN to pay out staff entitlements.
An airline user levy, would cover 3 major players of the airline companies in Aust.
The Aust govt sold out of everything, Telecom, airlines, etc, and the state govt of Aust sold out of the power side of things, ie, parts of the electricity networks.
Only way I can see is that the Aust govt sets a levy to get the travelling public to repay any "help" provided to the airlines.

With the amount of public debt we are going to have dont be suprised if we have a debt "levy" on our income taxes once the economy recovers.

Neo-liberalism within an economy of 25 million doesn't work, in the US yes but here government intervention is required within the market and both parties need to wake up to their old roots and realise it doesn't hurt to have some stake in essential services and in sectors where the market isn't really free/competitive. A minority stake in VA, Rex and QF is not the end of the world especially when they are a crucial part in the viability of a major economic sector.

 

[Bell21]

Just tried to ring Had an email today to say my fully refundable -including for cash fare for 28 May Perth to Darwin has been put in travelbank. I want the cash! Message says 'due to unforseen circumstances - unavailable' Is this the end for Virgin? Was ringing from Perth late at night to try to avoid long queue.
What is this credit card cashback? I paid with platinum visa which I think covers you for insurance for your accom and airfares for holidays.

I recall there's another thread dedicated to your question - but weirdly I got through twice to VA today within 5 minutes (!) - and yes, they are sticking with the 'travel credit' line - the credit card route is disputing the fee or you could consider your card's travel insurance, which will likely have an excess.

 

[Must...Fly!]

Today's AFR has some sobering information.

The federal government is likely to facilitate the entry of a new carrier into the domestic market, rather than bail out Virgin Australia, should the struggling airline not survive the coronavirus crisis.

While the government would prefer that Virgin survived the economic crisis, it has no intention of acceding to the airline's request for a $1.4 billion loan.

Senior government sources told The Australian Financial Review that when the government insisted repeatedly that Australia must still have two strong airlines on the other side of the coronavirus catastrophe, that did not necessarily include Virgin.

It would not grant Virgin's wish for a $1.4 billion loan because it did not want to be saddled with an equity stake in a business that was already doing it tough before the virus crisis.

Neither did it want to create a precedent by stepping in to save a specific business.

"That is not our role,'' said a source.

"Do we want two strong airlines at the end of this? Yes, we do.

"But support can't be specific for one business. It must be systemic.

"There comes a time when the government can't run every business around the country.''

Should Virgin fail, the government would facilitate the entry of another carrier.

It is generally accepted that unless it secured extra capital, Virgin could burn through its cash reserves in three months. Rival Qantas could last for up to 11 months.

The government believed initial responsibility lay with two of Virgin's sovereign-backed co-owners, Singapore Airlines and Etihad.

So far, the government has announced about $1 billion in general support for the aviation industry, which largely involves waiving of fees and taxes, some of which, such as fuel excise, they are not incurring because they are hardly flying.

It also said Virgin could draw on the $1500-per-fortnight wage subsidies announced this week for workers who have either been stood down or who are still clinging on to their jobs at struggling companies.

As of 5pm on Wednesday, 452,236 businesses had applied for the subsidies under the $130 billion JobKeeper program. Parliament will sit on Wednesday next week to pass legislation for the program following an agreement struck between Scott Morrison and Anthony Albanese.


Virgin's cash position would improve with the JobKeeper allowance, and it was also seeking to improve liquidity by pushing for rent relief from landlords.

Virgin's listed retail bonds, issued late last year to fund the partial buy-back of its loyalty division, are trading close to levels investors say are equivalent to a recovery rate if they were to default.

But should the airline fail, "steps will be taken to get another carrier to enter the market'', a government source said. "Barriers would be lowered.''

Australia already has one of the most liberal markets in the world when it comes to allowing foreign competitors in.

An entrant would have access to Virgin's infrastructure such as hangars and terminals. There would be a ready-made workforce from which to draw upon and it would be guaranteed take-off and landing slots.

Federal government approvals would be largely regulatory, said an industry source.

The source said that if Virgin did go under, a likely entrant would be British budget carrier Ryanair.

In recent days, Finance Minister Mathias Cormann and Trade and Tourism Minister Simon Birmingham have stressed the need for Australia to have two strong domestic airlines once the coronavirus crisis abated.

On top of the general measures announced so far, Senator Cormann signalled more industry help that may or may not save Virgin but he specifically ruled out a loan or other specific support.

"We do not take sides. We make judgments on an economy-wide and industry-wide basis. We do not pick winners,'' he said.

"We make judgments based on what is good policy. That is what we will continue to do here. We do want competition between two strong and viable airline businesses on the other side.

"What that will look like on the way through, we will have to see how that plays out.

"It is not our plan to take equity in an aviation business. But we are continuing to assess what appropriate supports, in a competitively neutral basis might be able to be provided moving forward."

Senator Birmingham has stated previously that "not having airlines in Australia is not negotiable for a country like us and would cripple our recovery''.

Virgin could be allowed to crash for new airline

The government has ruled out a bailout of the airline, and is likely to facilitate the entry of a new carrier into the domestic market if Virgin collapses.

www.afr.com

Nothing more sobering than claiming Ryanair will be our second airline group. Holy hell, I think even Alan Joyce would start campaigning for a VA bailout if that was the alternative coming for him...

I think around half of VA's 737 fleet is owned, and four of the 777s. Surely the 777s could be worth around $25-30m each to a bank for some extra money if required. Lessors might be encouraged to take a haircut on repayments instead of having the airline collapse, which is clearly not in their interest.

Not sure on the claim in the article that VA's cash on hand will only last 3 months though. With the latest government subsidy, I'd say six months at the very least. Velocity still has value, if they could find a way to restore lost consumer confidence they can go to the banks with big numbers of points or free flights at low prices to bring in further income. Obviously this may be a liability later but of little concern in the fight to survive, I would think.

EDIT: Some further info from yesterday which I'm not sure was posted.

Chief executive Paul Scurrah, who is working from Brisbane and conducts most of the conversations with government by telephone, is racing against the clock to either raise more capital from the government or other investors, or negotiate better terms from the airline's various lenders, landlords and suppliers.

Mr Scurrah is also seeking relief from airports, its landlords and plane lessors.

The Australian Financial Review understands AMP Capital, which owns the 7 Macquarie Place building in Sydney's Circular Quay, is preparing to cut Virgin a deal offering a halt or flexible arrangements on rent payments.

 

[Bell21]

Today's AFR has some sobering information.

Virgin could be allowed to crash for new airline

The government has ruled out a bailout of the airline, and is likely to facilitate the entry of a new carrier into the domestic market if Virgin collapses.

www.afr.com

Nothing more sobering than claiming Ryanair will be our second airline group. Holy hell, I think even Alan Joyce would start campaigning for a VA bailout if that was the alternative coming for him...

Yes that was rather sobering reading --- I don't know much about Ryanair, other than it being a budget carrier, but I hope that VA holds it together --- I'm not surprised by the government's apparent stance though, as it appears consistent with Aust governments' general approach over the long haul

 

[Must...Fly!]

And on the other side of the media fence we have The Australian claiming the opposite to the AFR...unfortunately while the AFR article was accessible without an account for some reason, The Australian article is not so I only have the opening lines.

Ansett bolsters Virgin Australia's case for bailout

Expectations are mounting that Virgin Australia will receive government assistance to stave off collapse, with suggestions key decision-makers have long memories about the windfall reaped by Qantas after Ansett Australia collapsed in 2001.

NoCookies | The Australian

www.theaustralian.com.au

 

[PaulllM]

And on the other side of the media fence we have The Australian claiming the opposite to the AFR...unfortunately while the AFR article was accessible without an account for some reason, The Australian article is not so I only have the opening lines.

NoCookies | The Australian

www.theaustralian.com.au

Goes against what the ACCC is saying about the need two full service airlines in Aus. Ryanair is a full blown budget airline that makes Tiger look good and while it would do well for the bogans and tightarses in Aus it would basically monopolise business travellers to Qantas along with anyone that likes a full service carrier or the little bit of class left in air travel

 

[amaroo]

AFR has a pretty negative article today.

Virgin could be allowed to crash for new airline

The government has ruled out a bailout of the airline, and is likely to facilitate the entry of a new carrier into the domestic market if Virgin collapses.

www.afr.com

 

[jase05]

AFR has a pretty negative article today.

Virgin could be allowed to crash for new airline

The government has ruled out a bailout of the airline, and is likely to facilitate the entry of a new carrier into the domestic market if Virgin collapses.

www.afr.com

Yeah was posted above.
Seems a lot of guess work going on with 2 very conflicting reports. Just the thought of Ryanair sends me shudders, what a truly horrible airline but hey just think of those $29 domestic flights or the $69 specials to Bali

 

[glasszon]

Rather than focusing on media stories, the market clearly believes VA won't survive this crisis: VA's retail bond price is trading around 50 cents per dollar, that clearly indicates the company is in great distress and most likely won't survive without outside help that involves some type of debt restructure.

 

[hydrabyss]

Yeah was posted above.
Seems a lot of guess work going on with 2 very conflicting reports. Just the thought of Ryanair sends me shudders, what a truly horrible airline but hey just think of those $29 domestic flights or the $69 specials to Bali

All these stories remind me of the property market. In one day you will see stories with interest rates dropping while others say they will increase. Property prices about to burst while others mention otherwise.

As it stands I can't see how any one would know what is going to happen until we know when restrictions will be lifted.

 

[dajop]

it would basically monopolise business travellers to Qantas along with anyone that likes a full service carrier or the little bit of class left in air travel

If you take BA short haul as an example, don't bet it on it ("full service carrier" "little bit of class"). They have become decidedly LCC as well.

 

[clarkkent]

Virgin wants a $1.4 billion bailout. Here's how that could work

Coronavirus has seen a nation of travellers grounded and Virgin is asking for help to the tune of $1.4 billion. And if the Government obliges, Qantas wants an even bigger piece of the pie.

www.abc.net.au

Another take (or rather various takes from various commentators). The US comparisons are interesting.

 

[Alyopsis]

And on the other side of the media fence we have The Australian claiming the opposite to the AFR...unfortunately while the AFR article was accessible without an account for some reason, The Australian article is not so I only have the opening lines.

NoCookies | The Australian

www.theaustralian.com.au

Here's a screenshot of that article for those of you who decline to have a subscription

 

[MarcB]

Here's a screenshot of that article for those of you who decline to have a subscription

Thanks. Wow. I don't even know where to start with that "article". Why would a government offer money to bailout any company if an existing shareholder was willing (SIA in this case) to stump up cash? There are no restrictions on VAH's share register re international ownership - although SIA would need approval to increase above the existing 20% (as any company would under the ownership 'creep' provisions). Further, how is Qantas "government backed" such that it needs protection from "foreign owned" SIA? If the government was so inclined, then why didn't they put the same 50% foreign ownership provision on VAH back in 2014 - the lack of such restriction being a big part of the reason that QF asked for assistance.

 

[Doctore1003]

I can understand why the government may want to let Virgin crash. Why risk owning an airline that’s performed so poorly and racked up $5 billion in debt when you can let existing stock and bond holders wear the cost, with the expectation that a new carrier would enter the market quickly. There are risks and costs either way, but the latter seems ’cleaner’.