Virgin Australia Financially Secure? [Now in Voluntary Administration]

[glasszon]

There was also an article in The Australian talking about the bond holders who were happy to take an 8% return but are now complaining about not having some form of bailout and that their retirement savings are at risk. I would have thought that the advisory firm that recommended VA bonds to retail 'mums and dad' investors should be deregistered.

It's an unfortunate side effect of a low interest rate environment. Retail investors can't get a decent return anywhere so they go off investing in high risk investments to chase the return, and can easily get burned due to the lack of financial knowledge to understand the financial product.

Some might have thought VA is a well established name and hence is at no risk of default, contrary to the implied default risk from the credit rating assigned to VA's bond notes at the time.

 

[antycbr]

It's an unfortunate side effect of a low interest rate environment. Retail investors can't get a decent return anywhere so they go off investing in high risk investments to chase the return, and can easily get burned due to the lack of financial knowledge to understand the financial product.

Some might have thought VA is a well established name and hence is at no risk of default, contrary to the implied default risk from the credit rating assigned to VA's bond notes at the time.

Totally agree. It appears there is an advisory firm, Morgans, who were pushing these hard and they were based in Queensland so there's lots of local investors losing their shirt in Brisbane at the moment. I would love to see what advice Morgans provided investors.

 

[RAM]

The articles in today's AFR & Australian suggest that Qantas received (& will receive) about 6x the support (aka Taxpayers' money) that Virgin did. Do we now have a value for the complementary Chairman's Lounge memberships given to MPs and senior bureaucrats?

Wonder if the Canberra Chairman's Lounge will be 'enhanced', in the best way of course, shortly?

"The federal government has poured $800 million into sustaining Qantas through the coronavirus pandemic, The AFR reports. About $490 million was sunk into JobKeeper payments for 25,000 staff members, and $75 million for repatriation flights and one-off return-trips to cities like Johannesburg, Mumbai, and Wuhan. Qantas also collected $128 million to support its domestic services. The federal government is on pace to hand the nation’s largest carrier almost six times the financial assistance its beleaguered rival Virgin Australia received in the same period, The Australian writes. "
Source LinkedIn

If correct it seems the tax payer is on the hook for nearly as much of Q's 'cash burn' ($31m) per week as Qantas itself (AJ saying $40m/week within next week). So on average between late June & end September the tax payer will be paying 44% of Q's costs.

I am making the HUGE risk of assuming the $40m/wk cash burn that AJ is talking about is the Q share on top of what the Fed Govt is contributing. It would be incredible (scandalous?) if the Fed Govt was paying $31m out of $40m total costs for Q would it not?

If paid at the same rate that the Fed Govt is/was paying VA (adjusted for previous mkt share, loading etc), then Q would only be receiving $8m/wk & Q's cash burn would avg $63m/week.

Of course, there is nothing that a Federal ICAC (if it existed) would want to look into over this.

One interesting stat from the AFR article on REX's good (Govt) fortunes....

"The Financial Review has previously reported support for Regional Express is worth 21.3 per cent of the company’s annual revenues or the equivalent of giving Virgin $1.2 billion and Qantas $3.8 billion."

Good to know a level playing field exists in theory.

 

[antycbr]

The articles in today's AFR & Australian suggest that Qantas received (& will receive) about 6x the support (aka Taxpayers' money) that Virgin did. Do we now have a value for the complementary Chairman's Lounge memberships given to MPs and senior bureaucrats?

Wonder if the Canberra Chairman's Lounge will be 'enhanced', in the best way of course, shortly?

"The federal government has poured $800 million into sustaining Qantas through the coronavirus pandemic, The AFR reports. About $490 million was sunk into JobKeeper payments for 25,000 staff members, and $75 million for repatriation flights and one-off return-trips to cities like Johannesburg, Mumbai, and Wuhan. Qantas also collected $128 million to support its domestic services. The federal government is on pace to hand the nation’s largest carrier almost six times the financial assistance its beleaguered rival Virgin Australia received in the same period, The Australian writes. "
Source LinkedIn

If correct it seems the tax payer is on the hook for nearly as much of Q's 'cash burn' ($31m) per week as Qantas itself (AJ saying $40m/week within next week). So on average between late June & end September the tax payer will be paying 44% of Q's costs.

I am making the HUGE risk of assuming the $40m/wk cash burn that AJ is talking about is the Q share on top of what the Fed Govt is contributing. It would be incredible (scandalous?) if the Fed Govt was paying $31m out of $40m total costs for Q would it not?

If paid at the same rate that the Fed Govt is/was paying VA (adjusted for previous mkt share, loading etc), then Q would only be receiving $8m/wk & Q's cash burn would avg $63m/week.

Of course, there is nothing that a Federal ICAC (if it existed) would want to look into over this.

One interesting stat from the AFR article on REX's good (Govt) fortunes....

"The Financial Review has previously reported support for Regional Express is worth 21.3 per cent of the company’s annual revenues or the equivalent of giving Virgin $1.2 billion and Qantas $3.8 billion."

Good to know a level playing field exists in theory.

The Chairmans Lounge amazes me. As a government employee I can't accept a cup of coffee without filling in a gifts and benefits disclosure form and yet here we are with QF offering thousands of dollars of implicit value per CL member. Federal politicians are one thing but senior public servants is a clear breach of government impartiality.

I also note that Rex have walked back most of their proposed RexJet model - using Government funding to start up a competitor to two existing commercial airlines was beyond what anyone could spin.

I'll be interested to see if Senator Tony Sheldon takes this up in the Senate Estimates hearings. He's been pretty interested in this and now that most of the rest of the Covid-19 news is dying down this sort of stuff is getting more airtime.

 

[RAM]

Totally agree. It appears there is an advisory firm, Morgans, who were pushing these hard and they were based in Queensland so there's lots of local investors losing their shirt in Brisbane at the moment. I would love to see what advice Morgans provided investors.

The list of 'High Returns, nice & safe' Australian companies seeing non-professional investors lose the lot (after inflation & tax) is very long since the late 1980s. Some liquidations saw the liquidators get over 2000x the payout that unsecured investors got after nearly 19 years. Bond Corp, Bell Resources, Fairfax, HIH, OneTel, & Qintex to name just a few.

Almost as long as the list of financial advisers who put them into these offerings, too many of which exist today. It appears that historically too many have no real understanding of how fixed interest securities work.

One of the greatest textbook cases of not believing advertising is Estate Mortgage which ran adverts extensively including on the sides of State Govt buses Australia-wide emblazoned with 'High returns, nice and safe'. This is one area where Self Managed Super Funds can really ruin someone's life unfortunately, as reportedly a large proportion of the VFF unsecured funding went that way.

BTW - 'professional' investors bought over USD 1.2bn of VA unsecured bonds (from a quick scan) since 2015. If you see some of my earlier posts - I've detailed their similar price declines from issue to March 2020. The writing was well & truly on the wall as their respective price graphs showed, culminating in early 2020 becoming seller, no buyer.

 

[p--and--t]

Its interesting in a thread supposedly related to Virgin that the free benefits of "the club" are never mentioned but chairman's lounge is sniped at repeatedly? No agendas at all.

 

[antycbr]

Its interesting in a thread supposedly related to Virgin that the free benefits of "the club" are never mentioned but chairman's lounge is sniped at repeatedly? No agendas at all.

I have a problem with both of them (the QF CL and VA Club) as public servants including politicians are supposed to be beyond reproach when it comes to decision making and the look of having such facilities leads to conversations like the one upthread where there is a perceived bias.

I don't think the VA Club will be returning in the new model somehow.

 

[moa999]

yet here we are with QF offering thousands of dollars of implicit value per CL member. Federal politicians are one thing but senior public servants is a clear breach of government impartiality.

I'm sure it's disclosed.
In any event I doubt the 'value' of it is questionable. Some probably barely use it.
And is it much more valuable than the cheap government rate on a Qantas Club membership.

And per the prior post, VA has history done the same thing.

 

[suze2000]

Its interesting in a thread supposedly related to Virgin that the free benefits of "the club" are never mentioned but chairman's lounge is sniped at repeatedly? No agendas at all.

It's hardly the same thing though as really how many pollies and senior public servants actually choose to fly Virgin if QF is on the same route?

 

[p--and--t]

I have a problem with both of them (the QF CL and VA Club) as public servants including politicians are supposed to be beyond reproach when it comes to decision making and the look of having such facilities leads to conversations like the one upthread where there is a perceived bias.

I don't think the VA Club will be returning in the new model somehow.

Probably not, but we will see.

The discussion on perceived QF "extra" funding is also all without any background whatsoever on who had the most suitable aircraft for the proposed retrievals, who had landing rights already, who was ready to respond when requested, what the comparative price offered for the retrieval was, who actually responded to requests to supply services, who already operates services to the airports where basic services are required (i.e the reason why REX also got proportionately more funding than VA). All a lot of talk in a vacuum of a clear picture of all of the operational facts.

 

[p--and--t]

It's hardly the same thing though as really how many pollies and senior public servants actually choose to fly Virgin if QF is on the same route?

You could also ask the same question of the general public -*who don't have access to the CL*. For the general public, why would they pay more to travel of QF than SQ. To draw that conclusion is far too simplistic.

 

[antycbr]

I'm sure it's disclosed.
In any event I doubt the 'value' of it is questionable. Some probably barely use it.
And is it much more valuable than the cheap government rate on a Qantas Club membership.

And per the prior post, VA has history done the same thing.

Doesn't matter about disclosure in my opinion. I have to actively return any gifts or benefits or not create a situation where I can be offered them in the first place. Working in IT we get all sorts of vendor "freebies" that I have to diligently post back to the company secretary of each company along with a letter telling them not to do it again. Then again I guess I work in an ICAC audited entity in NSW.

With regards to who got what business - the government should have at least called for bids and released those details transparently. Once again it is the lack of transparency that causes problems.

 

[RAM]

Its interesting in a thread supposedly related to Virgin that the free benefits of "the club" are never mentioned but chairman's lounge is sniped at repeatedly? No agendas at all.

No agendas, just ignorance of 'The Clubs' existence

Unlike in Q's Annual Reports where the Chairman's Lounge gets discussed, there is no mention of 'The Club' in VA's Annual Report. I obviously need to read more widely

The discussion on perceived QF "extra" funding is also all without any background whatsoever on who had the most suitable aircraft for the proposed retrievals, who had landing rights already, who was ready to respond when requested, what the comparative price offered for the retrieval was, who actually responded to requests to supply services, who already operates services to the airports where basic services are required (i.e the reason why REX also got proportionately more funding than VA). All a lot of talk in a vacuum of a clear picture of all of the operational facts.

Totally agree the public should know 'all of the operational facts' yet the Fed Govt is refusing to provide them.

Comparing REX to VA & Q is an apples & oranges matter - agreed. The point is that the public purse is providing over 20% of normal times TOTAL revenue - that is notable.

About 'perceived' extra funding - the amounts are now public record (in total) just no detail on how some were arrived at. For example with freight.

In my calculations I adjusted the amount Q is receiving for the relativity between Q and VA's normal operations (dug out from their respective annual reports for the two previous financial years) so it at least has some basis in reality. The relativity of their operations was not Q being 6x larger than VA.

If you over-adjust and subtract the total amount Q received for repatriation flights (note VA also got paid for repatriation flights) then Q still receives greater than 5x more than VA. I'd just like to see the details behind the amounts.

 

[jakeseven7]

No agendas, just ignorance of 'The Clubs' existence

Unlike in Q's Annual Reports where the Chairman's Lounge gets discussed, there is no mention of 'The Club' in VA's Annual Report. I obviously need to read more widely



Totally agree the public should know 'all of the operational facts' yet the Fed Govt is refusing to provide them.

Comparing REX to VA & Q is an apples & oranges matter - agreed. The point is that the public purse is providing over 20% of normal times TOTAL revenue - that is notable.

About 'perceived' extra funding - the amounts are now public record (in total) just no detail on how some were arrived at. For example with freight.

In my calculations I adjusted the amount Q is receiving for the relativity between Q and VA's normal operations (dug out from their respective annual reports for the two previous financial years) so it at least has some basis in reality. The relativity of their operations was not Q being 6x larger than VA.

If you over-adjust and subtract the total amount Q received for repatriation flights (note VA also got paid for repatriation flights) then Q still receives greater than 5x more than VA. I'd just like to see the details behind the amounts.

Perhaps not the thread to keep bringing this up over and over - perhaps start a new thread about this??

 

[p--and--t]

For those who are unaware. Includes free Platinum for secretaries, multiple free guests, anytime access, free membership for spouses, free upgrades, limo's.......

Quote from article link below

"...complimentary limousine transfers are offered to VIPs travelling on the airline’s east-west flights – that’s between Perth and either Sydney, Melbourne or Brisbane – with no mention of a minimum fare type.

That means a member of The Club could book a return economy Flexi fare from Sydney to Perth, redeem two of their eight free business class upgrades to cover the return trip, and then also nab free limousine airport transfers at each end: all for the price of an economy ticket.

Free chauffeur-driven cars are also offered when travelling internationally to Los Angeles and Abu Dhabi with Virgin Australia – again, with no mention of a minimum fare class – with the inclusive driving distances boosted to 100km in every city for both domestic and international bookings.

And if the member is connecting from a domestic to an international Virgin Australia flight (or vice versa) at an Australian airport – such when travelling from Perth to Los Angeles via Sydney – a private transfer is also offered between terminals in place of the regular bus or train."

Inside Virgin Australia’s invitation-only ‘Beyond’ airport lounges

Virgin seeks to close the gap against Qantas with exclusive VIP perks and an elite loyalty program.

www.executivetraveller.com

 

[Notyourbag]

Free chauffeur-driven cars are also offered when travelling internationally to Los Angeles and Abu Dhabi with Virgin Australia

That seems very outdated. VA haven't flown to AUH since 2016!

 

[p--and--t]

That seems very outdated. VA haven't flown to AUH since 2016!

Yes an old article, but the gist of the benefits are the same or better (before administration and covid).

 

[jakeseven7]

Is anyone ready to pick a winner?

Bain V Cyrus?

 

[clarkkent]

Did anyone correctly predict the final two?

 

[BNEFlyer]

Did anyone correctly predict the final two?

Yep (myself and a few others). Hoping, and feeling like it will be Cyrus who are successful.