Virgin Australia Financials 2019/20

[ozfflyer]

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.

VA used to fly daily LAX/SYD/LAX. When did that end ?

 

[Melburnian1]

VA used to fly daily LAX/SYD/LAX. When did that end ?

I should have inserted the word 'all' instead of 'the' before 'three.' Apologies.

 

[ozfflyer]

so am no accountant, but operating loss is not that big, it's the right down in value of assets, that are big apparently.

Wonder what will happen with all the airbuses in the fleet ? Could the A330s be going ?

 

[traceyy]

all i need is for someone to assure this girl that knows nothing about nothing to do with how airlines work that my xmas flights will not be cancelled by a airline going bust and ill be able to use the velocity points im working so hard to collect with va for the next holiday somewhere....

 

[Must...Fly!]

all i need is for someone to assure this girl that knows nothing about nothing to do with how airlines work that my xmas flights will not be cancelled by a airline going bust and ill be able to use the velocity points im working so hard to collect with va for the next holiday somewhere....

Nothing is guaranteed. But VA are a long way from going bust in my opinion. I have no concerns about that's I am more concerned about the things we will lose as passengers as the airline repositions itself.

 

[ash.1111]

VA needs to focus on creating a simple yet enjoyable premium-lite product for its domestic services and price accordingly.

They definitely took a huge jump in expenditure to take on QF as fast as possible, instead of growing organically and taking on costs smartly. They also lost all of their character extremely quickly, much of which was the Virgin Blue difference and why it was so successful (imo).

I reckon they should take a look at how the US airlines operate (the goods ones). Jazz it up, keep it fun. And enjoyable. You don't need to cram people in and become Ryanair, but perhaps forego the excessive catering, newspapers, free Wifi etc. We don't need meals uploaded for a 1.5 hour flight. A can of soft drink and a packet of nuts. Done.

They forgot the KISS method... Keep it simple, stupid.

 

[trippin_the_rift]

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.

VA clearly isn't benefiting from premium traffic of SQ/EY/DL/HX top-tier members. Alliances have restrictions on the type of contracts that can be done outside of an alliance, and those contracts fundamentally mean it's not attractive for frequent flyers of those airlines to put their business with VA. Cost aside - it's my opinion that VA would benefit significantly from joining Star. They would need to re-align Velocity slightly so that deep discount economy passengers are not penalised (like they currently are).

Overall, it wouldn't cost VA that much. Downguage and shrink the network - that lowers ASKs which lowers the alliance fees. Focus on ports where there is a strong Star lounge presence, which will drive up FFP penetration from non-AU pax, which will drive a premium. Similar to what Qantas does with Oneworld.

Joining an alliance also gives Velocity the chance to negotiate UP the cost per points to banks as the points utility massively increases, and would be more valuable than QF points. This would drive a very real change in spend behavior with Australian consumers that want FF points.

I hope VA can recover. But losing 30% of the Corp HQ workforce means there will be a revenue impact on the airline. You can't kill off 750 jobs and maintain the same revenue.

 

[ozfflyer]

Nothing is guaranteed. But VA are a long way from going bust in my opinion. I have no concerns about that's I am more concerned about the things we will lose as passengers as the airline repositions itself.

Think Virgin might become an all boeing outfit soon, apart from ATRs. Think those A330s might be going, but don't forget 750 staff gone will save them somewhere between $50 & $100m a year alone + the office space they took up etc. etc. Think everyone at VA might be working a little bit harder from tomorrow, to make sure they are not next. Sickies might reduce dramatically. (am sure before letting someone go, they look at things like how many sick days they have had)

 

[HS-TQE]

VA clearly isn't benefiting from premium traffic of SQ/EY/DL/HX top-tier members. Alliances have restrictions on the type of contracts that can be done outside of an alliance, and those contracts fundamentally mean it's not attractive for frequent flyers of those airlines to put their business with VA. Cost aside - it's my opinion that VA would benefit significantly from joining Star. They would need to re-align Velocity slightly so that deep discount economy passengers are not penalised (like they currently are).

Overall, it wouldn't cost VA that much. Downguage and shrink the network - that lowers ASKs which lowers the alliance fees. Focus on ports where there is a strong Star lounge presence, which will drive up FFP penetration from non-AU pax, which will drive a premium. Similar to what Qantas does with Oneworld.

VA joining Star isn't going to happen. As pointed out previously NZ and UA will use their veto to block any (unlikely) VA application. In addition, SQ has had enough and isn't likely to sponsor their application either.

In addition, during the boardroom spat before NZ quit VA, NZ (and by extension UA) were allegedly of the belief that VA should only a domestic feeder for NZ and Star in general and to dump all non Star partners. In which all other shareholders strongly disagreed leaving NZ with no choice but to move on from VA.

SkyTeam is VA's only alliance choice available to them considering VA's alliances with DL, AZ, VS and the interline partnership with GA. If VA were to revert to primarily a domestic carrier, the closest they're going to get is probably under a potential DL ownership with their only international being LAX and New Zealand (AKL/CHC & BNE-WLG)

 

[juddles]

VA joining Star isn't going to happen. ....

I have arrived late to this robust discussion. I only heard the news of VA's financials on the car radio late today. But just to chip in with my two cents worth (and I suspect it is worth less than two cents as I admit my own ignorance of many airline industry things) :

I have always held the belief that Australia is simply too small for a pair of "large" domestic/international airlines. I think there is enough desire amongst aussies to support two domestic outfits, in the interest of fairness and to have an option when you get the sh_ts with one of the carriers. But Virgin has failed to really become a financially stable competitor to QF. I have never flown Virgin, but I can assure you that if I was a user, I would deem any FF points or similar about as safe as a bitcoin investment - ie absolute zero confidence.

I have also always felt that in the modern era, FF programs are a huge driver of consumer decision-making. Hence VA's lack of being in a global alliance is a severe handicap, perhaps a fatal one. I can only speak from my own perspective, but the lack of an alliance is the number one reason I have never even considered joining them. I have been a heavy traveler and predominantly in premium cabins - this is where I believe a lot of the real money is for many airlines. And I think perhaps that most frequent international travelers such as me really value alliance benefits. So to a high-value (ie profitable) pax the Virgin situation is just unappealing.

@HS-TQE says that VA joining Star Alliance is not going to happen. I understand that there are many barriers, from financial to "political" ones in doing this. But I am not privvy to the specifics so cannot comment on that. But what I can say is that I fear we will all have to get used to the idea of a near future where Australia only has one real airline.

 

[ozfflyer]

I have arrived late to this robust discussion. I only heard the news of VA's financials on the car radio late today. But just to chip in with my two cents worth (and I suspect it is worth less than two cents as I admit my own ignorance of many airline industry things) :

I have always held the belief that Australia is simply too small for a pair of "large" domestic/international airlines. I think there is enough desire amongst aussies to support two domestic outfits, in the interest of fairness and to have an option when you get the sh_ts with one of the carriers. But Virgin has failed to really become a financially stable competitor to QF. I have never flown Virgin, but I can assure you that if I was a user, I would deem any FF points or similar about as safe as a bitcoin investment - ie absolute zero confidence.

I have also always felt that in the modern era, FF programs are a huge driver of consumer decision-making. Hence VA's lack of being in a global alliance is a severe handicap, perhaps a fatal one. I can only speak from my own perspective, but the lack of an alliance is the number one reason I have never even considered joining them. I have been a heavy traveler and predominantly in premium cabins - this is where I believe a lot of the real money is for many airlines. And I think perhaps that most frequent international travelers such as me really value alliance benefits. So to a high-value (ie profitable) pax the Virgin situation is just unappealing.

@HS-TQE says that VA joining Star Alliance is not going to happen. I understand that there are many barriers, from financial to "political" ones in doing this. But I am not privvy to the specifics so cannot comment on that. But what I can say is that I fear we will all have to get used to the idea of a near future where Australia only has one real airline.

you can use virgin pts on likes of Delta(huge), Etihad(pretty big) etc.

Not so long ago, Qantas were in trouble. I still don't think Qantas are making any money internationally, but how would anyone know for sure, with a bit of creative accounting. Qantas domestic does very well, which keeps the whole Qantas group afloat. Virgin only seems to have a small minority of the business market domestically. Business types pay a fortune to fly last minute, often 3-5 times or even more, than leisure travellers that book ahead, FOR THE SAME SEATS !!!

 

[ozfflyer]

I have arrived late to this robust discussion. I only heard the news of VA's financials on the car radio late today. But just to chip in with my two cents worth (and I suspect it is worth less than two cents as I admit my own ignorance of many airline industry things) :

I have always held the belief that Australia is simply too small for a pair of "large" domestic/international airlines. I think there is enough desire amongst aussies to support two domestic outfits, in the interest of fairness and to have an option when you get the sh_ts with one of the carriers. But Virgin has failed to really become a financially stable competitor to QF. I have never flown Virgin, but I can assure you that if I was a user, I would deem any FF points or similar about as safe as a bitcoin investment - ie absolute zero confidence.

I have also always felt that in the modern era, FF programs are a huge driver of consumer decision-making. Hence VA's lack of being in a global alliance is a severe handicap, perhaps a fatal one. I can only speak from my own perspective, but the lack of an alliance is the number one reason I have never even considered joining them. I have been a heavy traveler and predominantly in premium cabins - this is where I believe a lot of the real money is for many airlines. And I think perhaps that most frequent international travelers such as me really value alliance benefits. So to a high-value (ie profitable) pax the Virgin situation is just unappealing.

@HS-TQE says that VA joining Star Alliance is not going to happen. I understand that there are many barriers, from financial to "political" ones in doing this. But I am not privvy to the specifics so cannot comment on that. But what I can say is that I fear we will all have to get used to the idea of a near future where Australia only has one real airline.

What you may not realise, is that if Virgin did disappear in the next decade, which I feel is very unlikely, Air NZ could fly domestically here. They could do it right now without any special permission. Have been told, it's actually much easier for a NZ airline to fly domestically in Australia, than an Australian airline, due to our extra layers of bureaucracy. NZ airlines would basically fly in Australia, under NZ rules.

 

[juddles]

What you may not realise, is that if Virgin did disappear in the next decade, which I feel is very unlikely, Air NZ could fly domestically here. They could do it right now without any special permission. Have been told, it's actually much easier for a NZ airline to fly domestically in Australia, than an Australian airline, due to our extra layers of bureaucracy. NZ airlines would basically fly in Australia, under NZ rules.

Interesting. And I must say, probably not a bad outcome. It solves a couple of problems. We get back to two solid carriers. With perhaps the biggest real differences in philosophy/culture/product that we could hope for to give us as consumers the best choices. And NZ with their Star Alliance membership would make them a far more attractive option to someone like me.

I was once a member of the NZ FF program, but I gave that up as it seemed too convoluted and uninspiring for me. If I could fly them domestically within Australia, maybe that view point would change.

 

[The-Aviator]

Agree that Tiger is toxic, it needs to rebrand or it needs to go.

In terms of VA operations unbundling makes sense and lets VA maintain a low headline price. I'm thinking something along the lines of NZ's seats to suit.

Shame the HKG flights haven't worked. Can't think of any alternative Intl destinations for the A330s, maybe bring them back to Aus.

Had my doubts at first but I've grown to like Paul Scurrah. He has a plan and I'm confident he can turn my favourite airline around.

 

[ozfflyer]

Interesting. And I must say, probably not a bad outcome. It solves a couple of problems. We get back to two solid carriers. With perhaps the biggest real differences in philosophy/culture/product that we could hope for to give us as consumers the best choices. And NZ with their Star Alliance membership would make them a far more attractive option to someone like me.

I was once a member of the NZ FF program, but I gave that up as it seemed too convoluted and uninspiring for me. If I could fly them domestically within Australia, maybe that view point would change.

what you may have also forgotten is Air NZ has been bailed out by the NZ govt. Although a lot of kiwis living in OZ, many australians won't fly air nz. Also think you are overplaying the frequent flyer programme thing. Many people have both qantas & virgin ff accounts. Probably millions.

 

[juddles]

you can use virgin pts on likes of Delta(huge), Etihad(pretty big) etc.

Not so long ago, Qantas were in trouble. I still don't think Qantas are making any money internationally, but how would anyone know for sure, with a bit of creative accounting. Qantas domestic does very well, which keeps the whole Qantas group afloat. Virgin only seems to have a small minority of the business market domestically. Business types pay a fortune to fly last minute, often 3-5 times or even more, than leisure travellers that book ahead, FOR THE SAME SEATS !!!

I understand that Virgin has some minor alliances, but it is paltry compared to something like One World membership.

I agree that QF was struggling, but they have in the past couple of years made a huge change. Creative accounting occurs in any publicly-listed company, but I think the truth is that QF have managed to turn around the QFi part quite dramatically. I do not have at my fingertips the breakdown of the various Qantas business units, but you fail to mention their FF program, which I understand is extremely profitable.

The fact that business travelers pay a lot more for flights is not really a new point. Anyone that has even a rudimentary knowledge of the airline market knows that for most (non-LCC) airlines, that that is where the profit is. Economy seat sales are just a way of minimizing the losses of the part of the plane that cannot be filled with premium pax.

 

[oz_mark]

To some extent, it is also in the interests of a new CEO to make figures look bad. Makes their turnaround of the financials look better....

 

[Must...Fly!]

Think Virgin might become an all boeing outfit soon, apart from ATRs. Think those A330s might be going, but don't forget 750 staff gone will save them somewhere between $50 & $100m a year alone + the office space they took up etc. etc. Think everyone at VA might be working a little bit harder from tomorrow, to make sure they are not next. Sickies might reduce dramatically. (am sure before letting someone go, they look at things like how many sick days they have had)

The group has too many A320s to become all Boeing. The F100s are also required. Charter makes money, as would XCH/CCK. The A320s are quite useful for PER-ADL but it's hard have the right amount to schedule for RPT while also having a flexible charter operation.

 

[Must...Fly!]

To some extent, it is also in the interests of a new CEO to make figures look bad. Makes their turnaround of the financials look better....

The interview posted earlier in the thread was a bit interesting, I must say.

This is a multi-year strategy, of that there is little doubt - taking hedging in to 2021 cannot be a coincidence. The books have to look good by then, as that's when the MAX jets will come up for purchase & associated capital outlay. I'm confident they will be, but at what cost is really the question.

I don't feel like this is quite at the level Qantas was down in the doldrums (more upsides for QF at the time vs VA now), however VA market cap is below their cash on hand (but don't forget the upcoming maturing of bond in USD)

 

[pauly7]

you can use virgin pts on likes of Delta(huge), Etihad(pretty big) etc.

Not so long ago, Qantas were in trouble. I still don't think Qantas are making any money internationally, but how would anyone know for sure, with a bit of creative accounting. Qantas domestic does very well, which keeps the whole Qantas group afloat. Virgin only seems to have a small minority of the business market domestically. Business types pay a fortune to fly last minute, often 3-5 times or even more, than leisure travellers that book ahead, FOR THE SAME SEATS !!!

Sigh, here we go again. Fact check, use google and in .05 seconds yes you will see QFi is profitable.

You honestly think a heavily scrutinised highly publicised company like QF which is audited and listed can ‘creatively account’ years of financial books to magic up a few hundred million worth of profit? That’s a rhetorical question.

Qantas domestic is a heavy lifter but so also is Qantas loyalty. And many would argue QFi is a very important contributor to the QFd business as overseas pax usually take a few domestic flights as well.