Virgin Australia Financials 2019/20

[ozfflyer]

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.

so QFd pick up some of QFi costs. How would anyone know, except a few people at QF. Lately QFi fares have come back to the field, whereas once they could charge a large premium & get away with it. Think those days are well & truly over. No one wants to be in charge of QFi these days as who wants to run a loss making business ?

 

[pauly7]

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.

Also joining late.

Totally predictable results.

I also think it’s more like robust agreement! No one is really arguing, it’s a dire situation.

The new CEO has basically laid out a starting strategy addressing issues that most on this forum have been ripping their hair out over the last few years. Blind Freddie saw all this coming.

Now the board/owners have run out of cash themselves, the game is up. Etihad is in the edge of disaster itself. SQ is being slam dunked. And the Chinese investors, well just google and make your own mind up...

I think most were expecting a bit more detail on action plans but give the new CEO some time, I think we can expect some pretty severe route trimming in the next few months as a start.

I think he has the right approach, let’s hope he has the balls to deliver it.

 

[pauly7]

so QFd pick up some of QFi costs. How would anyone know, except a few people at QF. Lately QFi fares have come back to the field, whereas once they could charge a large premium & get away with it. Think those days are well & truly over. No one wants to be in charge of QFi these days as who wants to run a loss making business ?

I’m sorry I don’t understand a word you are saying and you are factually incorrect. Leave you to it.

 

[ozfflyer]

Also joining late.

Totally predictable results.

I also think it’s more like robust agreement! No one is really arguing, it’s a dire situation.

The new CEO has basically laid out a starting strategy addressing issues that most on this forum have been ripping their hair out over the last few years. Blind Freddie saw all this coming.

Now the board/owners have run out of cash themselves, the game is up. Etihad is in the edge of disaster itself. SQ is being slam dunked. And the Chinese investors, well just google and make your own mind up...

I think most were expecting a bit more detail on action plans but give the new CEO some time, I think we can expect some pretty severe route trimming in the next few months as a start.

I think he has the right approach, let’s hope he has the balls to deliver it.

think you have misread. A lot of the loss is write downs. Listen to the audio. VA have plenty of cash, just way too many staff. The savings from getting rid of 750 staff are huge. Average cost would be somewhere between $50 & $100k each + all the one costs. Plus everyone at VA will now work harder. Can't see there being any strikes at VA ever, or at least not in the next 5 years & sickies will plummet. We have a huge recession to navigate.

 

[Bundy Bear]

Virgin do need to do a network overview.
First they need to work out the long range plan for Tiger is it going to work or should they just shut it down.
Work out what cities should they serve and ditch the under performing ones;
Places like Mildura; Alice Springs, Port Macquarie; Bundaberg, Emerald; some of these routes only just make the top 50, they need routes that can support a 737.
International New Zealand must be hurting; Auckland is always going to work but places like Dunedin; Queenstown; Christchurch and Wellington aren't going to work profitably.
By dropping the smaller routes this can offer some assistance to Rex and Fly Corporate and Fly Pelican to pick up some of these routes.
I think flying to LA gives them good international exposure and links them well with Delta.
Hong Kong is going to be bad for a while, do you hang on and hope the relationship with Virgin Atlantic can work or will Delta ditch that as well, Virgin are being guided more with Deltas input.
I actually don't mind Virgins 5 days a week service from Brisbane; some interesting flight times which I think can work well if they advertised them better a day flight from lax to Brisbane should have been packed.
Business class on Virgin Australia is good; the lounges are good; I think they have them about right, economy while do they try and serve a snack on the shorter flights, most overseas flights have got rid of food for shorter flights and just offer drinks, maybe you could continue to offer some beer or wine service for afternoon flights.
Do you start charging for bags for customers who don't have status, seems like they wanted to get away from that but if it costs money to offer that service better start charging for it.
Pity that the E jets didn't work; I had heard they cost almost the same to run as a 737. Surprised ATR hasn't worked so well.

 

[jakeseven7]

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.

With some hard hacking at the cost base, cutting unprofitable routes I honestly think they can do it. 2-3 years I reckon.

 

[jakeseven7]

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.

Agreed... I’m paranoid but the food in the lounges has been very average this week! Hope it’s not the start

 

[jakeseven7]

think you have misread. A lot of the loss is write downs. Listen to the audio. VA have plenty of cash, just way too many staff. The savings from getting rid of 750 staff are huge. Average cost would be somewhere between $50 & $100k each + all the one costs. Plus everyone at VA will now work harder. Can't see there being any strikes at VA ever, or at least not in the next 5 years & sickies will plummet. We have a huge recession to navigate.

Please don’t start your recession ramblings again here..... it’s off topic and there isn’t one here in AU yet.

And suggest you look at VA’s net free cashflow for the last, say 11 years. Hint it’s red.

 

[ozfflyer]

Virgin do need to do a network overview.
First they need to work out the long range plan for Tiger is it going to work or should they just shut it down.
Work out what cities should they serve and ditch the under performing ones;
Places like Mildura; Alice Springs, Port Macquarie; Bundaberg, Emerald; some of these routes only just make the top 50, they need routes that can support a 737.
International New Zealand must be hurting; Auckland is always going to work but places like Dunedin; Queenstown; Christchurch and Wellington aren't going to work profitably.
By dropping the smaller routes this can offer some assistance to Rex and Fly Corporate and Fly Pelican to pick up some of these routes.
I think flying to LA gives them good international exposure and links them well with Delta.
Hong Kong is going to be bad for a while, do you hang on and hope the relationship with Virgin Atlantic can work or will Delta ditch that as well, Virgin are being guided more with Deltas input.
I actually don't mind Virgins 5 days a week service from Brisbane; some interesting flight times which I think can work well if they advertised them better a day flight from lax to Brisbane should have been packed.
Business class on Virgin Australia is good; the lounges are good; I think they have them about right, economy while do they try and serve a snack on the shorter flights, most overseas flights have got rid of food for shorter flights and just offer drinks, maybe you could continue to offer some beer or wine service for afternoon flights.
Do you start charging for bags for customers who don't have status, seems like they wanted to get away from that but if it costs money to offer that service better start charging for it.
Pity that the E jets didn't work; I had heard they cost almost the same to run as a 737. Surprised ATR hasn't worked so well.

yes don't understand BNE/DUD or NTL/AKL (unless airports are subsidising those routes) but ZQN must provide a reasonable yield most of the year ? Maybe . Wonder how often aircraft get stuck at ZQN when weather closes the airport ?

When high cost QF does BNE/ZQN nonstop only twice a week can VA really justify up to 8/week ? With prices rising in ZQN, don't think as many Australians are heading there.

 

[jakeseven7]

Virgin do need to do a network overview.
First they need to work out the long range plan for Tiger is it going to work or should they just shut it down.
Work out what cities should they serve and ditch the under performing ones;
Places like Mildura; Alice Springs, Port Macquarie; Bundaberg, Emerald; some of these routes only just make the top 50, they need routes that can support a 737.
International New Zealand must be hurting; Auckland is always going to work but places like Dunedin; Queenstown; Christchurch and Wellington aren't going to work profitably.
By dropping the smaller routes this can offer some assistance to Rex and Fly Corporate and Fly Pelican to pick up some of these routes.
I think flying to LA gives them good international exposure and links them well with Delta.
Hong Kong is going to be bad for a while, do you hang on and hope the relationship with Virgin Atlantic can work or will Delta ditch that as well, Virgin are being guided more with Deltas input.
I actually don't mind Virgins 5 days a week service from Brisbane; some interesting flight times which I think can work well if they advertised them better a day flight from lax to Brisbane should have been packed.
Business class on Virgin Australia is good; the lounges are good; I think they have them about right, economy while do they try and serve a snack on the shorter flights, most overseas flights have got rid of food for shorter flights and just offer drinks, maybe you could continue to offer some beer or wine service for afternoon flights.
Do you start charging for bags for customers who don't have status, seems like they wanted to get away from that but if it costs money to offer that service better start charging for it.
Pity that the E jets didn't work; I had heard they cost almost the same to run as a 737. Surprised ATR hasn't worked so well.

I’m surprised too that they have them parked gathering dust and costing money doing nothing! Thought they had all gone.

Regional can be messy and distracting though, QF have a lot of experience here and have it sewn up.... VA also can’t really use Alliance more because they are basically paying QF to operate their flights now!

Ejets had enormous reliability issues and VA engineering just couldn’t figure them out.

 

[ozfflyer]

Please don’t start your recession ramblings again here..... it’s off topic and there isn’t one here in AU yet.

And suggest you look at VA’s net free cashflow for the last, say 11 years. Hint it’s red.

do you live in a bubble ?

The country is in a recession & it's a very long way to run. Media will always try to talk it up cos of the massive spend on advertising, from retail to real estate etc. Many airlines are in trouble, as discretionary spending plummets. It seems anyone who wasn't 18 in 1992 at last recession(ie 45 now), has no idea what a recession is.

It's going to get very very ugly. For a start what are those 750 people VA are flicking going to do, to pay off their mortgages ? Drive Ubers around ? Mow lawns ? Get a job at Maccas ?

 

[serfty]

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

True, the alliances VA have is not in the realm of oneworld, but I have found the Delta Alliance is very beneficial worldwide.

 

[agentgerko]

I question why they stick with Tigerair? As far as I am aware it's never made a profit as an Australian LCC. Perhaps VA should just accept that JQ has the LCC market covered and close or sell off Tiger. What's the point of having a loss making subsiduary just so you can say you've got a competitor to Jetstar?

 

[HS-TQE]

Some armchair suggestions that has come up of this morning.

It's been stated that the "so-called saviour" SQ has 'had enough' and is 'NOT' willing to invest any further in VA for obvious reasons, so here are a few scenarios

1. Let "mainline" fail and have a "investment company" pick up the Tigerair subsidiary (and rebrand the subsidiary accordingly to save $$ on licensing). Mainline assets (the owned 737s and the 4x 77Ws can go on "fire sale") with airlines local and abroad picking up the assets. The leased stuff (A330s and the leased 737s) are returned to their lessors.

2. The entire group "fails", is put into "Voluntary Administration" and the likes of NZ, SQ, DL, etc picks up the pieces.
E.g NZ and/or DL picks up the various VA group subsidiaries. E.g NZ and/or DL picks up pieces of VAd by purchasing a few 737s and starts a domestic subsidiarie(s) of their own. NZ are able to fly domestically using the "AU-NZ" open skies rights. SQ as another example picks up the 4x owned 77W from VAi for their own AU-LAX flights on a separate AOC. Rest of the equipment are either returned to lessors or the owned assets sold off.

3. A long shot and unlikely scenario. An outsider purchases the VA group, lock stock and barrel, and installs their own management team. Previous mentioned parties included NH (Japan), DL (Atlanta, USA) and TK (Istanbul, Turkey).

 

[SheikYerbouti]

Do you start charging for bags for customers who don't have status

Never. Better to increase fare cost by $5 than to quote $x for the fare then start adding on all these other things. Especially things that will cause tight-coughs to mess up the in-cabin environment.

 

[Must...Fly!]

The company needs restructuring, not destruction, which is exactly what the current management team are doing. I'm not sure I see the need for scenarios such as fire sales. There are upsides to the brand and the operation - the company needs to become leaner and meaner, starting with head office simplification and shortly followed by a comprehensive fleet review.

Any thoughts on the ATRs? VA must stop chartering Alliance aircraft in Queensland. It is literally shovelling money in to the hands of Qantas by doing this, it's a ridiculous scenario and if they can't make money doing it with their own aircraft, then unfortunately they should forget about it.

 

[pauly7]

Some armchair suggestions that has come up of this morning.

It's been stated that the "so-called saviour" SQ has 'had enough' and is 'NOT' willing to invest any further in VA for obvious reasons, so here are a few scenarios

1. Let "mainline" fail and have a "investment company" pick up the Tigerair subsidiary (and rebrand the subsidiary accordingly to save $$ on licensing). Mainline assets (the owned 737s and the 4x 77Ws can go on "fire sale") with airlines local and abroad picking up the assets. The leased stuff (A330s and the leased 737s) are returned to their lessors.

2. The entire group "fails", is put into "Voluntary Administration" and the likes of NZ, SQ, DL, etc picks up the pieces.
E.g NZ and/or DL picks up the various VA group subsidiaries. E.g NZ and/or DL picks up pieces of VAd by purchasing a few 737s and starts a domestic subsidiarie(s) of their own. NZ are able to fly domestically using the "AU-NZ" open skies rights. SQ as another example picks up the 4x owned 77W from VAi for their own AU-LAX flights on a separate AOC. Rest of the equipment are either returned to lessors or the owned assets sold off.

3. A long shot and unlikely scenario. An outsider purchases the VA group, lock stock and barrel, and installs their own management team. Previous mentioned parties included NH (Japan), DL (Atlanta, USA) and TK (Istanbul, Turkey).

Wow a little dramatic I would rule all three out. Come back to this thread in 3 years maybe!

I think PS has the right ideas, has the backing and now just needs to sharpen the knives and get going FAST before one of the owners either goes belly up themselves or exits creating more instability.

 

[moa999]

Interesting how all this negative sentiment plays into the supposed sale of Velocity by the private equity owner.

Certainly VAH seemingly can't afford to buy it back, and you've got to query the value of Velocity if there is a risk of VAH falling over

 

[HS-TQE]

Wow a little dramatic I would rule all three out. Come back to this thread in 3 years maybe!

I think PS has the right ideas, has the backing and now just needs to sharpen the knives and get going FAST before one of the owners either goes belly up themselves or exits creating more instability.

Either way, PS is on his own. As per the previous article, the shareholders/investors will not be providing any "income support". I would hope for his sake he at least spoke to the majors about the direction of the company.

For example if PS took VAd very close to it's LCC beginnings, some of the investor's J passengers may be tempted to switch to QF or fly on one of the oneworld Alliance rivals into AU and connect to QF (thus for example, losing the high yielding pax for both VA AND SQ).

Major Virgin shareholders Singapore Airlines, Etihad Airways, HNA Group, Nanshan Group and Richard Branson's Virgin Group have baulked at providing more capital, the sources said, and Scurrah has told staff the airline cannot rely on shareholder financing.

Turnaround may prove tricky for new Virgin Australia CEO Scurrah

 

[pauly7]

Either way, PS is on his own. As per the previous article, the shareholders/investors will not be providing any "income support". I would hope for his sake he at least spoke to the majors about the direction of the company.

On his own maybe in the sense that there is no more cash coming from the owners - yes you are probably right there.

But the board (who are repped by the owners) from a business process point of view would have had to be in majority support of everything he said in the media yesterday prior to it becoming public so he has their backing clearly on his strategy.