Virgin Australia Financials 2019/20

[HS-TQE]

The A330s are all leased til 2024-2025 if I recall correctly.

Whilst a A330 will be able to make AKL-LAX, it would be heavily weight restricted, which is one of many many reasons making AKL-LAX unviable for VA (The incumbent and home carrier NZ has this market sewn up, in addition to the seasonal competition on the AKL-LAX route from UA and AA).

VA's partner DL is more suited for the AKL-LAX with timed VA flights into AKL. But at the same is DL even willing to enter the LAX-AKL route? SEA-AKL or even ATL-AKL is a more viable option for DL with timed VA connections into AKL.

 

[TheInsider]

What's the point of going daily to LAX, when the travel market ex Australia is crashing due to the weak dollar. Seems like more wasted money to go daily.

 

[Silvia]

I really wonder whether VA's international routing can survive. HK has clearly failed, it does seem that LAX gets some traffic, but with such inconsistencies in their international network, it clearly puts me off from giving them some love.
Time for VA to get realistic if they really want to survive long term...

 

[Wrapcity]

should we be considering moving velocity points over to SQ ?

 

[TheInsider]

I really wonder whether VA's international routing can survive. HK has clearly failed, it does seem that LAX gets some traffic, but with such inconsistencies in their international network, it clearly puts me off from giving them some love.
Time for VA to get realistic if they really want to survive long term...

The capacity war that they couldn't afford, really shot themselves in the foot. I guess you can blame EY, and SQ for that though.

 

[dajop]

What's the point of going daily to LAX, when the travel market ex Australia is crashing due to the weak dollar. Seems like more wasted money to go daily.

At the moment, LAX does seem to be the shining light in the international network (at least in terms of load factors, which admittedly says nothing about yields), and VA are a proxy for DL to allow them to compete with AA/QF and UA which have much more services than DL's single daily. But agreed that at this point in time, expanding services would seem to be waste of money (and doing things like routing A330s via AKL or NAN to get there, suicide).

 

[AustraliaPoochie]

I can't remember all the fine detail of 20 years ago, but my memory is that the closure of AN came as a shock to almost all Australians, including many with high Golden Wing points balances. More through good luck than foresightedness, I never allowed mine to get high, redeeming relatively quickly.

Can AFFers foresee VA going into administration and not being bought out? Hard to see any profits on the horizon. Will banks and other financiers support such a company into the foreseeable future?

I see Virgin Blue at that time and VA earlier on, as too ambitious.
They didn't have to fly their own aircrafts to HKG but could have gone into alliances instead.
Its going to be bad.
Money saved, but service wise... It will go downhill.
Maybe we expect too much of them, VA that is, too.

 

[Bodie]

As covered previously over the last few years- if no single entity wants (or can afford) to buy the airline - the only alternative is to join alliance. Merge Tiger into Virgin- international - still fly to lax but maybe alternate days between Brisbane and Melbourne and daily Sydney- drop Hong Kong- domestically - just do main routes - but cut down number of flights - 4-5 per day between sydney/melborne/brisbane- maybe 2-3 flights day to other centres ie adelaide darwin hobart townsville - 1-2 east coast to perth.

 

[TheInsider]

They didn't have to fly their own aircrafts to HKG but could have gone into alliances instead.

Here we go with the Alliance thing again. You do know if they were in an 'Alliance' (which they are SQ, EY, DL, HX - NZ in the past), they only get a small piece of revenue if not on their own metal. They clearly don't work for VA AND it costs money to be in one. It's failed.

 

[esseeeayeenn]

If 750 positions can be abolished, this begs the question: what were they all doing previously?

Currently VA, VA Regional and TIgerair all have independent management structures.
These will be merged.

 

[dajop]

Here we go with the Alliance thing again. You do know if they were in an 'Alliance' (which they are SQ, EY, DL, HX - NZ in the past), they only get a small piece of revenue if not on their own metal. They clearly don't work for VA AND it costs money to be in one. It's failed.

The other way of looking at an alliance, and the poor alternative that the VA alliance is, is about Velocity and domestic revenue generation, not the incremental revenue from the actual flights on the alliance themselves. The whole oneworld thing is something that hooks people into QF, makes them strive to earn points and often find creative ways to circumvent employer BFOD rules to pay premiums to fly QF, so they can get those alliance wide benefits, that VA don't and can't offer.

VA's alliances are pretty coughpy. As an SQ gold, there's absolutely no incentive for me to fly VA trans tasman, for example. When NZ was in the fold, I flew NZ code on VA, but even though SQ are an alliance partner of both VA and NZ, I couldn't access a lounge at AKL because of VA's "claytons" alliance.

 

[amaroo]

Ouch! 7 years of losses and $1.9b down the gurgler .... glad all our points/miles are banked with QF / SQ / AMEX

 

[harvyk]

<snip>
If 750 positions can be abolished, this begs the question: what were they all doing previously?
<snip>

It's amazing how often after a massive round of lay-offs result in most of those people be brought back as (high paid) contractors because the work still needs to be done. But that's ok and good business management because that comes from a different bucket of money.

 

[Pcoder]

The other way of looking at an alliance, and the poor alternative that the VA alliance is, is about Velocity and domestic revenue generation, not the incremental revenue from the actual flights on the alliance themselves. The whole oneworld thing is something that hooks people into QF, makes them strive to earn points and often find creative ways to circumvent employer BFOD rules to pay premiums to fly QF, so they can get those alliance wide benefits, that VA don't and can't offer.

VA's alliances are pretty coughpy. As an SQ gold, there's absolutely no incentive for me to fly VA trans tasman, for example. When NZ was in the fold, I flew NZ code on VA, but even though SQ are an alliance partner of both VA and NZ, I couldn't access a lounge at AKL because of VA's "claytons" alliance.

Yeah, the fact is that in the last 7 years, they've failed to bring in a profit for the full year.

Now if there "Clayton's" alliance was giving them a profitable business, then the request from people like us to be in a proper alliance wouldn't be justified, but the problem is that there current situation needs some changes to be a more viable carrier.

The big benefit that alliance membership brings is it papers over the many cracks that is the international network, which won't be at any size to complete with Qantas. Now you might say Qantas international doesn't do well, but you have to look at the loyalty division, which gains most of its appeal and profits from the services of the international division. If tomorrow Qantas frequent flyer separated from its international side, the value of the program would plummet.

 

[eastwest101]

Currently VA, VA Regional and TIgerair all have independent management structures.
These will be merged.

Yes - lots of duplication and corporate overheads to be trimmed by Scurrah. The whole group is too complex and needs urgent simplification, lack of action could result in Australia becoming a Qanta/Jetstar duopoly which would be really bad for all concerned.

I find it interesting that Paul Scurrah is taking action on the many problems that many people on here have identified years and years ago, and repeated very often.

Needs to break it down to address each problem area, probably by fleet as thats what they are essentially stuck with:

1. Overly complex & expensive corporate structure? Tick.

2. Diverse and unsupportive shareholding structure with too many contradictory demands? Only solution to this is make profits and hope that some go away and some stay to provide more stability, talk to SQ and explain how difficult it will be to get back into the Australian market if the only competitor to Qantas vanishes.

3a. Tigerair - the easiest of all to potentially kill off, toxic brand, nightmare fleet, massive problems that consume a lot of management time. Rebrand or destroy asap.
3b. Mainline VA domestic - seems to make money flying B738s around - don't fly wing-to-wing against QF - offer choice and different options
3c. VAi Longhaul - best use of B777s is probably still Transpacific, need to co-operate more with Delta, A330s need a purpose - Asia makes sense but HGK and mainland China may not make sense anymore, think Korea/Japan/India/Taiwan as well as some transcon to keep Qantas on their toes.
3d. VAi Shorthaul - review and rationalize - seems silly to be competing in NZ, lots of competition in the Bali-Australia market
3e. VA regional - limited amount of ATRs and reliance on using Alliance F100s problematic, get more FIFO charter work

4. Loyalty Scheme - use it to drive revenue its one of the few levers besides yield management that can offer a point of difference/competitive tension.

5. Fix your go&^#mn web site and app interfaces - they are an embarrassment, and the front door to your shop and the public face of your business. Its failures drive customers to your call centres that aren't free to operate - they are an overhead.

6. Keep hold of your excellent staff in the air and on the ground, times are tough but keep them onside and listen to their suggestions to improve the business. Good qualified staff will be more and more difficult to find.


I know things look bad right now for Virgin Australia but I think they can turn it around, always darkest before the dawn etc

Remember how Qantas looked in 2011? They were lucky with a few things like fuel price movements and accounting tricks but they turned it around.

 

[esseeeayeenn]

5. Fix your go&^#mn web site and app interfaces - they are an embarrassment,

Remember when Virgin introduced a really great mobile app a few years ago?
Then sadly reverted to the current basic basic app which is essentially just a front end for a browser instance.
I suspect many users gave bad feedback on the very innovative app.

 

[jakeseven7]

Super disappointing (as usual), but of course not at all unexpected.

The 'QF-lite' strategy that VA has been chasing has been a utter failure. It needs to be buried, DEEP, wherever they left JB. He (and the board) were obsessed with taking QF on head to head (or as close as possible) and has almost destroyed the company in the process. What a legacy.

• They haven't been able to command any sort of premium for the huge increases to their cost base they have incurred, while QF has been driving significant efficiences into theirs through projects like the fleet optimization planning and sweating their assets harder
• Their brand is in nowhere land, even though the domestic hard product is reasonable its all the 'extras' that QF provide that get the $ from corporate and SME and VA just can't close that gap on this strategy
• Tiger is basically a write off, its brand is dead here, absolute poison
• Their international business basically needs to be cut in half and left for later
• Digital ecosystem and customer experience is second rate

Look - the silver lining (and there isn't much) is this - Paul S.
He reminds me a bit of AJ - he clearly sees the situation, recognizes the issues and seems prepared to act AND has board support to do so. How aggressively and fast he can act remains to be seen but for all our sakes I hope he moves VERY VERY quickly because more people will/are start losing confidence in this business.

 

[levelnine]

To all these armchair experts saying Virgin should dump HKG/TT and other international routes and focus on the domestic market.

You do know the domestic market is providing no growth due to the abysmal state of the Australian economy?

Did no one read the Qantas presentation to investors? Even Qantas admits that the corporate market is 'flat', 'SME market growth moderating' and 'weakness' in the leisure market (except premium): https://investor.qantas.com/DownloadFile.axd?file=/Report/ComNews/20190822/02136613.pdf

Hardly a route to profitability...

 

[Melburnian1]

This respected, experienced business commentator says 'VA needs to do more':

Flying low: Virgin Australia chief not wasting time as he tries to revive airline

Virgin’s latest loss only underscores the obvious reality that, whatever its merits as an airline, Virgin is – and has been for years - a very poor business.

www.watoday.com.au

Unfortunately I can see more redundancies. How many is the question.

 

[Melburnian1]

To all these armchair experts saying Virgin should dump HKG/TT and other international routes and focus on the domestic market.

You do know the domestic market is providing no growth due to the abysmal state of the Australian economy?

Did no one read the Qantas presentation to investors? Even Qantas admits that the corporate market is 'flat', 'SME market growth moderating' and 'weakness' in the leisure market (except premium): https://investor.qantas.com/DownloadFile.axd?file=/Report/ComNews/20190822/02136613.pdf

Hardly a route to profitability...

Economy is not doing well with disappointing construction industry figures out today adding to this.

I've previously commenced threads re BITRE figures showing MEL - SYD - MEL for instance in latest available month down 3.3 per cent in passenger numbers.

However ceasing some or all international routes is unfortunately necessary at VA as many of these are not duopolies like the Oz domestic air travel market is.