Virgin Australia Financials 2019/20

[jakeseven7]

passenger numbers up, total revenue up, cash in the bank, looks to me they are making money and profit except......

$315Mil paid to investors, Looks like AN all over again, parent companies ripping off.....As you can't pay dividends from losses, you tend to see other kinds of payments to key shareholders as an expense.

https://www.asx.com.au/asxpdf/20190828/pdf/447xy1qkstp4xn.pdf

They are however losing market share in two key markets: Corporate and SME.
That is where the money is.

 

[Melburnian1]

Yes - lots of duplication and corporate overheads to be trimmed by Scurragh. The whole group is too complex and needs urgent simplification...

3b. Mainline VA domestic - seems to make money flying B738s around - don't fly wing-to-wing against QF - offer choice and different options...

The rest of yours, as usual, is terrific advice but as VA has a smaller fleet than QF, it's possible that when QF knows VA will fly from (say) CBR to MEL at time xx_X, QF simply timetables one of its aircraft within 10 minutes.

Reminds one of the good ol' Ansett/ TAA days...

 

[Denali]

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

Im not panicing but just transferred a heap of points to KF and redeemed J flights. There wasnt availability last week but it was there today so this thread spurred me to look again.

 

[Must...Fly!]

Seriously QF can't even make international work for them properly, what chance in hell does VA have with SIN and HKG. This is a continually persistent pipe dream that will not work. They don't need alliances (waste of money) or more partnerships (they already have enough), they need to make money on the routes they are currently on.

Domestic market is flat. Alliances are needed to drive traffic to VA mainline domestic as well as international. This is a reality than can not be ignored as long as Virgin is competing with Qantas as an airline. This has been a consistent problem for Virgin which they do not have an answer for.

Once again, the TT routes have a lot of competition, if VA can't get it right now, then time to pull out of these routes and make money elsewhere.

As above really. Domestic feeds NZ and NZ feeds domestic. Their non committal approach to NZ other than AKL, flight times that are a bit crazy and focus on flights out of BNE that is inconvenient as a connection point is hurting the business. As is from what I observe to be a general lack of competitive pricing for connecting passengers from other eastern capitals.

 

[andyhui01]

Im not panicing but just transferred a heap of points to KF and redeemed J flights. There wasnt availability last week but it was there today so this thread spurred me to look again.

I would have done that immediately if it wasn't for the 24 month expiry

 

[HS-TQE]

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.

The ship for VA joining 'any' alliance in general has pretty much well and truly passed. Joining any of the major alliance costs money including membership fees and ongoing expenses, money that VA does not have lying around.

In addition, while at SkyTeam only the founders have veto, Star Alliance requires all full members to unanimously vote in any potential new members (in other words, all the full *A members have veto rights). A hostile NZ alongside UA is not likely to give any (unlikely) VA application the tick.

In addition SQ aren't expected to help VA either, as per earlier posts even SQ has had enough. Only keeping their stake to maintain domestic feed to their own flights to SIN and beyond.

As for the alliances in general, SkyTeam is VA's only option available to them. As VA does have partnerships with DL and AZ, and interlines with GA.

Oneworld is out of the question, and the Star Alliance chances has sailed with the spat with NZ, and a hostile UA (competitor of VA's partner DL).

 

[jakeseven7]

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...

Did you not also read that QF is growing its share of corporate and SME's / VA losing here as well, massively distracted by all the other loss making JB thought bubbles still thrashing around

What is to stop a re-engineered slimmed down VA, free from distractions from re calibrating their domestic operation to take some corporate and SME share from QF? Just because the market is flat doesn't mean they have to keep losing share in it.

 

[jakeseven7]

The rest of yours, as usual, is terrific advice but as VA has a smaller fleet than QF, it's possible that when QF knows VA will fly from (say) CBR to MEL at time xx_X, QF simply timetables one of its aircraft within 10 minutes.

Reminds one of the good ol' Ansett/ TAA days...

And this is exactly how QF have slaughtered them in the BFOD business market.

Look at the golden triangle, SYD-MEL. QF are every 15 mins, often in peak with a few A330's chucked in for good measure to make cheaper seats avail. The 15min increment QF flights are ALWAYS priced lower than their 30min increment VA flights, so anyone on BFOD can easily choose QF by flying 15 mins earlier or later than the VA flight.

I also suspect QF are very cleverly pricing hard in those areas because even their own 30 min increment flights are very competitive with VA and come within the usual % tolerance allowed for on BFOD policy.

 

[Saab34]

A near $50m charge for the parked E190s in the states and all the ATRs in NZ is quite disturbing. Considering the near monopoly in regional Oz is hard to imagine them not putting them to good use

Loss seems to be Tiger and Kiwi related. Hong Kong is only 2 flights a day they have ten fold this across the ditch daily filing only mid 60s odd seats.

 

[eastwest101]

The ship for VA joining 'any' alliance in general has pretty much well and truly passed. Joining any of the major alliance costs money including membership fees and ongoing expenses, money that VA does not have lying around.

In addition, while at SkyTeam only the founders have veto, Star Alliance requires all full members to unanimously vote in any potential new members (in other words, all the full *A members have veto rights). A hostile NZ alongside UA is not likely to give any (unlikely) VA application the tick.

In addition SQ aren't expected to help VA either, as per earlier posts even SQ has had enough. Only keeping their stake to maintain domestic feed to their own flights to SIN and beyond.

As for the alliances in general, SkyTeam is VA's only option available to them. As VA does have partnerships with DL and AZ, and interlines with GA.

Oneworld is out of the question, and the Star Alliance chances has sailed with the spat with NZ, and a hostile UA (competitor of VA's partner DL).

I agree with that - its either Skyteam (which hasn't been tried yet) or a DIY collection of random partners (whicn seems to have proven to be a failure although its difficult to separate and quantify this due to the other failures in the business). Star Alliance is out of the question, until something radical happens there, and OneWorld same story - out of the question as long as QF is in OW.

There's no doubt that the OneWorld alliance helps out QF and especially its QFF division, any suggestion of QF leaving OneWorld would be seen as a suicide note and would wipe many $$ off the value of Qantas and especially its QFF division. By the same logic - VA have already wiped out and have foregone/lost any potential value and extra revenue by not being in an alliance for the last 7 years, and could potentially add value to VA and to Velocity by joining an alliance. Thats just my opinion though.

I think some people exaggerate the effect of alliance joining fees, sure they cost money, but the extra revenue from partners must nearly always surpass the fees - otherwise Qantas would have left OneWorld ages ago, they had the perfect window of timing with VA not being in an alliance but Qantas has always seen value in remaining in OneWorld...

As for some of the other comments - sure the local Australian economy is a bit flat - but I say all the more reason not to have a bloated duplicated/triplicated management structure and corporate overheads! As I have said numerous times - the A330s to HGK is right idea but at the wrong time, and they were a bit unlucky with the whole democracy protest thing, no-one expected that.

Agree with other peoples comments, VA shouldn't be trying to be a "mini-Qantas" - it should aim to be something different and play to its own strengths, and target Qantas's weaknesses. The Stephen Bartholomeusz article does provide a good summary, Scurrah needs to cut costs, and a lot of them, the trick is to hide those cost cuts from the customer.....

 

[Must...Fly!]

There is nothing in the way of easy answers here for Virgin as far as I am concerned, except abolishing Tiger. Personally thought I've been against this before, I think that taking the VA positioning down one notch with a basic economy fare choice and ensuring that status members don't see a difference in inclusions between that base fare and what they get now is a realistic option of creating some growth in domestic that can be some good news. and leveraged against other parts of the business.

E.g. Keep free economy X for platinum on those basic fares, give anyone Silver and above a free soft drink, juice, etc on board.

Virgin's other issue is a lack of equipment to improve their transcon operation. MAX aircraft now out of the question for several years. 738s too small. A330s (apparently) too big. And they haven't got enough 737s to improve frequency and capacity transcon if that is an option. Well, not without cuts on the east coast or NZ.

But we have this discussion almost every year the results come out. Should we redeem points, throw to KF, be worried about future bookings, etc. There are quite a few upsides but the distractions away from mainline VA are not helping and need to be dealt with.

 

[ozfflyer]

so maybe VA could run a low cost operation AKL/LAX using A330s ?

Air Transat have something like 363 seats(2 class) in some of their A330s (economy is 3-3-3 in some of their A330s)

Think Cebu Pacific have 436 all Y class in their A330s I think.

It seems everyone wants cheap including business types, who once would fly business, now many are buying economy & trying to upgrade.

Maybe VA could do a VA express with their A330s & chuck a lot of seats in them & have a basic business class up front & of 20-30 seats & jam as many seats in down the back as they could. They could feed flights ex AKL out of BNE, OOL, SYD, MEL etc.

 

[Must...Fly!]

A high density A330?

The virgin brand is already ill defined in the eyes of passengers. No need to add to that with more distractions. Besides, if they really wanted a low cost NZ operation, they own a low cost carrier you know....

 

[ozfflyer]

A high density A330?

The virgin brand is already ill defined in the eyes of passengers. No need to add to that with more distractions. Besides, if they really wanted a low cost NZ operation, they own a low cost carrier you know....

the world economy is going down the toilet fast. Many looking to either fly cheap or not fly at all. Remember canada 3000, who were really the 1st low cost long haul. They had 340 Y on their A332s(they were launch airline) in 2-4-2, whereas air transat went 3-3-3 on some of their A330s. When they flew YVR/BNE direct twice weekly I think it was, they really opened up a new market, offering fares back in the late 90s of $700 return SYD & BNE to YVR which was incredibly cheap at the time. Heard their busiest day ever for bookings was 10 Sep 01.

Air transat went 2 class on their A330s which think was a better move.

The VA A330s - could they fly AKL/LAX/AKL or AKL/SFO/AKL or some other port on or near west coast of USA like OAK or even TIJ, with a big load like somewhere between 300 & 360 in 2 class configuration without weight any weight restriction ?

Wouldn't need to be daily. Twice weekly would work. They could call it something else, but wouldn't need another AOC.

Apart from being attractive to kiwis, they could feed it from BNE, OOL, SYD, MEL, using Tiger or Virgin or both.

Virgin could throw an occasional Tiger aircraft on AVV/AKL/AVV to connect at AKL. They could throw a few extra seats on Tiger aircraft, which I think have a 189 seats maximum capacity.

 

[Must...Fly!]

Sorry ozfflyer but you're spruiking a pipe dream. VAs A330s are also not equipped with a crew rest facility so that needs to be accounted for.

2 pages ago you were advocating more B777 purchases. How could higher capacity ex-AU ever work with your above proposal?

Capacity dumping is what got Virgin where they are in the first place.

 

[dajop]

Sorry ozfflyer but you're spruiking a pipe dream.

I was actually wondering if I had jumped to the humour thread.

 

[ozfflyer]

Sorry ozfflyer but you're spruiking a pipe dream. VAs A330s are also not equipped with a crew rest facility so that needs to be accounted for.

2 pages ago you were advocating more B777 purchases. How could higher capacity ex-AU ever work with your above proposal?

Capacity dumping is what got Virgin where they are in the first place.

they have to do something. Maybe think outside the box. Not having daily flights BNE & MEL to LAX is hurting VA. Another idea, they could probably lease 1 more B777 fairly cheaply now. Must be quite a few parked right now & more soon.

 

[ja1]

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...

Because it's been proven over and over again that the way to be profitable and have growth is a combination of international routes feeding domestic and vice versa. We simply don't have the population base (100M+ population) OR the geographic location (EU, US) to be purely domestic or purely international The devil in the detail has always been getting that combination correct rather than picking one over the other. Clearly it's a quick way to burn money if you get it wrong..

So VA doing LAX still makes sense (if they can keep yield up - which in turn is a function of their marketing plus product quality plus price) but I agree with the others - some of the other routes need some thinking about..

 

[Melburnian1]

...So VA doing LAX still makes sense (if they can keep yield up - which in turn is a function of their marketing plus product quality plus price) but I agree with the others - some of the other routes need some thinking about..

Lacking daily flights between the three Oz major east coast airports and LAX is a disincentive to not just business but some leisure travellers. I've flown VA TransPacific without a problem but daily flights gives that 'secure' perception.

 

[Melburnian1]

This Ross Greenwood interview with Virgin Oz CEO Scurrah has just been placed online:

Virgin Australia Group CEO Paul Scurrah on job cuts - Money News

omny.fm

Not sure if I share the optimism but time will tell.