Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Supersonic Swinger]

Where did the money go?

I always recall friends saying VA's trans-con service to be leaps and bounds ahead of QF's in terms of food and beverage, with QF seemingly never interested in lifting its game. Is this an example of an area they over-spent to gain marketshare? Is it things like that?

Purchasing or leasing aircraft at the top of the market (A330s)
Fleet planning (ATR72-500, ATR72-600, E170 and E190s) were all bought on to fleet then parked - enough to run another airline
Paying Alliance to fly services for you when it’s 20 percent QF owned
Route planning - HKG plus all the odd V AUS destinations
Tiger
Busting up with NZ on the tasman
Poor cost control
Lack of strategy to make partnerships really work
That’s off the top of my head...

None of this is the fault of the frontline staff.

It comes down to the reason Alan Joyce was selected over John Borghetti. AJ came from an LCC background with the focus on cost management, whereas JB's last job at QF was designing and kitting out the First Class and Chairman's Lounges and launching the A380. I've heard it said that he never met a cost he couldn't incur.

He came into Virgin looking to replicate what he wanted to do at QF and overspent doing it - antycbr has listed a lot of them above, I'd add overspending on lounges, inflight premium amenities - all of which despite the fact that Virgin has never had the share of the corporate market which might justify those expenses.

The first sign of trouble was in 2014 when one way of plugging the hole in the dike was to sell off 30% of Velocity - what should be a reliable money generator and then needed to be repurchased for twice the price with money VA didn't have.

Air NZ sensibly walked away in 2016 after they issued JB with an ultimatum that "it was time to start making money" but failed to oust him from the CEO role. They took a significant loss on their investment but the decision to exit looks to have been vindicated now.

 

[melb78]

Well this will make it easer now for airlines that has the cash to purchase VA. it is very disappointed that SQ has basically given up on the airline as it was one of the first airlines that brought shares in VA. Just think if SQ had control of VA QF would be shaking

 

[serfty]

Hi guys, I was wondering if I would be able to redeem Singapore Airlines flights with velocity. I know they have disabled transfers to the Krisflyer Program.

Have you tried?

Personally, I would not be putting any $$$ even in $+++ to VA even for an award at the moment.

 

[samh004]

Yeah, I’m probably the opposite of you as I wasn’t a huge fan of Virgin Blue but love VA.

Don't get me wrong, there were things I didn't like... the silly cabin announcements for example but their attitude was really laidback and when things were tough they were great at looking after me (as Gold then).

It comes down to the reason Alan Joyce was selected over John Borghetti. AJ came from an LCC background with the focus on cost management, whereas JB's last job at QF was designing and kitting out the First Class and Chairman's Lounges and launching the A380. I've heard it said that he never met a cost he couldn't incur.

Thanks for the back story, didn't know that about JB.

 

[knagelli]

Sorry, probably not what you were after: Holders of travel credits will be 'unsecured creditors'.

Duties of voluntary administrators

The case of Macks v Viscariello [2017] SASCFC 172 considers a number of important issues relating to duties of voluntary administrators. The Full Court’s decision finalises a long-running saga invo…

australianinsolvencylaw.com

Assuming it is not on priority of liquidators , it would be Interesting to see how credit card companies treat the charge backs resulting out of this sudden development.

 

[samh004]

Well this will make it easer now for airlines that has the cash to purchase VA. it is very disappointed that SQ has basically given up on the airline as it was one of the first airlines that brought shares in VA. Just think if SQ had control of VA QF would be shaking

Perhaps they're waiting for the fat to be carved off and then they'll swoop in.

 

[Mogul]

I would not like to be in AJ's shoes at the moment.

 

[jakeseven7]

I don’t know if anyone was watching 7:30 but they reported VA would go into administration tomorrow.

 

[HS-TQE]

Perhaps they're waiting for the fat to be carved off and then they'll swoop in.

SQ is a bit like "Rudd". All talk when it comes to outside their own backyard, but mostly "fail" outside their own backyard (aka Tiger Airways Australia, Virgin Atlantic, Air New Zealand (Ansett)) and lose a coughton of money when it actually matters.

SQ were also more content with investing more in their Indian JV (Vistara) and was starting to make money before COVID-19 hit. That suggested VA was NOT (or less of) a priority for SIA whatsoever.

 

[travel_bug]

Assuming it is not on priority of liquidators , it would be Interesting to see how credit card companies treat the charge backs resulting out of this sudden development.

I agree it will be interesting, I found this from visa regarding Covid chargebacks, particularly question 8 in the FAQ. It makes me think to try my own chargeback (though I technically had to cancel the booking as VA moved my flights onto different dates, and note that VA is different to bankruptcy) https://usa.visa.com/dam/VCOM/global/support-legal/documents/managing-disputes-through-covid-19.pdf

 

[tomlee1986]

I would not like to be in AJ's shoes at the moment.

I disagree... QF is still earning money from other sources such as Qantas insurance and their points program... Qantas earns more money that way than its flying division for the last few years.. so I think AJ is more safe than JB now

 

[HS-TQE]

Well this will make it easer now for airlines that has the cash to purchase VA. it is very disappointed that SQ has basically given up on the airline as it was one of the first airlines that brought shares in VA. Just think if SQ had control of VA QF would be shaking

Not with SIA's previous dismal track record in the Australian domestic market with Air New Zealand (Ansett) and Tiger Airways Australia, both ended in failures.

 

[Bagpuss]

Chanel 7 news just said that Deloitte has now been appointed administrators.

It will be interesting to see if a secured creditor actually puts the company into receivership.
We will wait and see if that happens.
If it does, the playbook on this could slightly change because the receivers work in the best interests of the secured creditor(s). Though in reality I think the outcome remains for a sustainable airline,

Receivership, Administration & Liquidation Differences | ADS

Receivership, administration & liquidation refer to specific stages for companies that are in external administration. Find out the key differences.

australiandebtsolvers.com.au

I expect there to be very small drip of offical information. Many reports at least one airline is involved as part of recapitalisation. Who that airline is could make some massive differences.

I also believe, the end strategy could involve being part of an alliance. Now is probably a good time too and hurdles and costs removed etc.

PS. In these situations. Yes money does talk!

 

[futaris]

I don’t know if anyone was watching 7:30 but they reported VA would go into administration tomorrow.

7.30

Sarah Ferguson presents Australia's premier daily current affairs program, delivering agenda-setting public affairs journalism and interviews that hold the powerful to account. Plus political analysis from Laura Tingle.

iview.abc.net.au

 

[jakeseven7]

I disagree... QF is still earning money from other sources such as Qantas insurance and their points program... Qantas earns more money that way than its flying division for the last few years.. so I think AJ is more safe than JB now

Well technically JB himself is home and hosed, nice and comfy having bled VA to death. Probably smoking a cigar in one of his many houses somewhere chilling out

 

[Bagpuss]

I disagree... QF is still earning money from other sources such as Qantas insurance and their points program... Qantas earns more money that way than its flying division for the last few years.. so I think AJ is more safe than JB now

Insurance, credit cards have a wholesaler behind them. I doubt this income covers replacing a tire on an A380.
These scheme are pure marketing / branding.
I think AJ has a lot to worry about. If his comments damaged Virgin which is under ACCC investigation boy oh boy the outcome won’t be pretty.

 

[jase05]

Well technically JB himself is home and hosed, nice and comfy having bled VA to death. Probably smoking a cigar in one of his many houses somewhere chilling out

Unfortunately JB has joined the board of BNE, sorry all you banana benders

 

[Bagpuss]

Not with SIA's previous dismal track record in the Australian domestic market with Air New Zealand (Ansett) and Tiger Airways Australia, both ended in failures.

SIA always have been in this case. They only understand the Singapore hub model. Though thats all they need to know really.

 

[maccaisking]

Have you tried?

Personally, I would not be putting any $$$ even in $+++ to VA even for an award at the moment.

I'm currently booking LHR return for next year to finish off my points. I fugure I either:

a) Travel
b) If I don't travel or booking isn't ticketed I would have lost them anyway
c) if airline is still operating in 6 months have the option to cancel and reinstate points

and the cash component can be covered by a credit card chargeback. Other than possible cancellation fees it's a freroll for me

 

[HS-TQE]

Which is why I always laugh when fanboys say that "SQ operating an Australian airline" will make QF quiver in their boots.

QF knows of SIA's dismal failures the last time they attempted to operate domestically in Australia.