Virgin Australia posts underlying profit of $109M ($653M "loss" after writeoffs)

[oz_mark]

Found this article an interesting point I hadn’t considered when reading the other coverage today:

Virgin board clears the decks for John Borghetti's successor

Isn't the normal thing to do on becoming CEO is to take the big hit yourself in your first year, blame the predecessor, and move on?

 

[PineappleSkip]

Isn't the normal thing to do on becoming CEO is to take the big hit yourself in your first year, blame the predecessor, and move on?

I thought that was Governments, with the big hit inflicted on the punters

Cheers skip

 

[getluv]

Correct, its a bullshit Thread and Media Title. They did not finish in the RED. the EBITDA was pretty good.

if someone was buying shares in the business today, they couldnt give a stuff about past writedowns.

When a company's share price is down 90% from all time highs, I would give a stuff.

The media title may be bullshit but a healthy EBITDA can also be bullshit. As someone else mentioned, cash flow is the most important. In the airline industry, I would also add margins and CASM/CASK metrics as vitally important as well. However, looking at the financial statements, it looks like the their improved cash flow was probably achieved by hardly paying off any debt.

In a duopoly and perfect market conditions, I find it very difficult to understand why VA isn't in better shape. The numbers for VA International and Tiger are really difficult to digest.

EDIT: VA have taken on more debt.

 

[Must...Fly!]

There is little doubt it is a challenging airline to manage. That said, for an incoming CEO I think there is a lot of positive - the money has been spent, the lounges are there (well...most of them...), the aircraft are there...

A challenge lies in 5-8 years time when the domestic B738 fleet comes up for renewal (they seem keen on that with the MAX orders & deferral of some in to 2022 but taking MAX10 instead. Is it necessary?). The VARA F100 fleet will be needing replacement - I am not sure on their age, but most would be hitting 30 years old by then. The 777s will need to be looked at around then for replacement by the mid-late 2020s. There's a significant challenge to maintain growth and investment in the product while also trying to rustle up the funds for new aircraft IMO.

 

[HeavyElectricity]

Problem is that the usual two rumoured suspects mentioned as the "acquiring party" (aka SQ and DL) have not expressed their interest in taking over in the short to medium term.

Interesting news today:
Singapore Airlines said to be eyeing larger stake in Virgin Australia

 

[Bagpuss]

Interesting news today:
Singapore Airlines said to be eyeing larger stake in Virgin Australia

SQ have been keen to have a larger stake into VA for some time.

Apparently, they were furious at Air New Zealand when then they sold their stake as they were keen on it.

 

[tm.smile]

SQ have been keen to have a larger stake into VA for some time.

Apparently, they were furious at Air New Zealand when then they sold their stake as they were keen on it.

They weren't furious at NZ, but at VA who further diluted their stake when they sold additional shares to HNA. NZ sold their shares after HNA bought in. SQ were considering a takeover prior to the dilution.

I for one would welcome an SQ takeover.

 

[dajop]

SQ have been keen to have a larger stake into VA for some time.

Can understand why, with an average of 20 services a day to Australia (including Silkair, but excluding Scoot), they have plenty of seats to fill.

 

[HS-TQE]

They weren't furious at NZ, but at VA who further diluted their stake when they sold additional shares to HNA. NZ sold their shares after HNA bought in. SQ were considering a takeover prior to the dilution.

I for one would welcome an SQ takeover.

The HNA stake (via the issuing of new shares) came after NZ gradually sold their stake to Nanshan group from what I understand.

 

[tm.smile]

The HNA stake (via the issuing of new shares) came after NZ gradually sold their stake to Nanshan group from what I understand.

Nope, was announced before NZ had found a buyer:
"Air New Zealand's 26 per cent stake in Virgin will be diluted to 22.5 per cent by the deal. An analyst, who asked not to be named, said the strategic deal with NHA to fly in and out of China would make it hard for Air New Zealand to sell its Virgin shares, because potential buyers like China Southern could no longer be offered a similar arrangement.

Air New Zealand did not know about the HNA deal before it was announced to the public on Tuesday because CEO Christopher Luxon quit Virgin's board in March after failing to unseat Mr Borghetti."

Virgin Australia sells stake to China's HNA Aviation Group

 

[Melburnian1]

From the above discussion there doesn't seem to be consensus as to what angle one ought look at VA.

Its profitable domestic airline (but not TT or VAi) or the massive non-cash writedowns?

Does it have a future, or will it in time suffer the fate of Ansett Australia?

 

[Saab34]

They are growing profitable, not sure how they are going to end up like AN?

SQ would bail them out at any cost, even billions, there is absolute no chance in hell they would just handball the market over to QF and leave.

 

[juliusg]

Having just hit QF Plat and being a VA plat for the past 8 years, I am now flying around in the USA where Delta, AA, United and Canadian are all on my itinerary. We don't know how good we have it in Australia, VA and QF are a well functioning domestic duopoly albeit with some strange differences. One is the 'snack' on VF which compares poorly to the QF offer. The other is the two items of carry on for both yet VA's weight limit is half of QF (7kg v 14kg). But to my eyes the lack of one 777 frame to fix the AUST-LAX timetable is the biggest quirk at VA where 5 frames just don't work. VA is the BEST on the LAX run, QF are pretty darn good too. VA's Delta 'alliance' works for me as well as QF's AA network, as do the high status credit earns we get on domestic USA flights in 'First'. Where again, VA and QF absolutely eat the USA carriers for comfort and service.

 

[pauly7]

Found this article an interesting point I hadn’t considered when reading the other coverage today:

Virgin board clears the decks for John Borghetti's successor

Thanks for posting! Nothing hugely new in there except but a couple of interesting points:

- The rumoured reason for Thomas leaving VA is proposed to be a huge disagreement on fleet planning, if we are to believe this, he was staunchly opposed to the looming MAX experiment. All we know for sure is that there was a huge strategy disagreement, Thomas was brought in at huge expense with a mandate to get VA profitable, take over from JB and then departed very abruptly....

- The discussion on the MAX fleet renewal perhaps being a bit indulgent is interesting - but I thought they were going to install new seating, at least in J (flatbed) in these? The article seems to say that it’s same same product....

- The killer point (forgetting the disasters of VA International, Tiger and the strange weaker performance of the Velocity joint venture) is that they just can’t get a decent share of corporate travel which is killing their margins

 

[pauly7]

Interesting news today:
Singapore Airlines said to be eyeing larger stake in Virgin Australia

We’ve been down this road before. Hopefully it’s just not a PR blocking tactic... Singapore have had multiple opportunities to take on bigger stakes in VA but seem to have been caught on the back foot quite a lot. One can dream... perhaps they could smooth over the poor NZ and UA relationships and get them into Star

I’m not sure what the Chinese will have to say about it though! But there have been rumours of the Chinese selling out of VA due to performance of holding companies and government related interactions... have a google...

They are growing profitable, not sure how they are going to end up like AN?

SQ would bail them out at any cost, even billions, there is absolute no chance in hell they would just handball the market over to QF and leave.

SQ isn’t an endless well of money despite their somewhat interesting ownership structure. They also have their own problems being a hub operator when the future is arriving quickly in growth of point to point operations.

I don’t think VA will end up like AN, they had completely different issues and ownership structures. But the market has been good for QF and VA so it is a question to ask who is better equipped to survive a spike in fuel, downturn in economy etc...

 

[pauly7]

Related article, appears HNA are up for selling their stake so perhaps so change in the wind....

https://money.usnews.com/investing/...y-ceo-search-complicated-by-airline-investors

 

[HS-TQE]

We’ve been down this road before. Hopefully it’s just not a PR blocking tactic... Singapore have had multiple opportunities to take on bigger stakes in VA but seem to have been caught on the back foot quite a lot. One can dream... perhaps they could smooth over the poor NZ and UA relationships and get them into Star

I’m not sure what the Chinese will have to say about it though! But there have been rumours of the Chinese selling out of VA due to performance of holding companies and government related interactions... have a google...

I'd say also the fact that SQ are "hands-off" in the day to day running of VA, as opposed to SQ's more hands-on approach in AN back in the 90s (even though they didn't directly own them) says where SQ's priorities are atm.

There's also Etihad tip-toeing whether to sell their stake or not due to their own dire financial situation.

If the rumours are to be believed, NZ would want VA to eliminate their Intl'l services entirely and feed all traffic to them as one of the reasons behind the breakup of NZ and VA. It could be said that NZ and UA wants to get rid of a Trans-Pac competitor.
I can't see SQ or any other future owner pandering to their demands, considering SQ had wanted to maintain a Trans-Pac presence, and SQ and UA are not best buddies. So until then, NZ and UA will likely use their veto to block if SQ tried to sponsor or in the very least likely case of VA themselves applied for *A.

And then there's DL on their tail, considering the past articles of DL not ruling out a stake in VA "in the future".
If DL pulls off a "Bradbury" and emerges as the party to buy the HNA and/or Etihad stakes, that's pretty much the nail in the coffin for VA and *A.

 

[HS-TQE]

Breaking: ANA has emerged as one of the candidates for HNA's stake in VA. The "international adjustments" outlined in the article being HKG being swapped out for NRT/HND and/or KIX should ANA emerge as the buyer of HNA's stake

Also article mentions that SQ may rule themselves out yet again (surprise surprise) for the HNA stake and may be willing to work with ANA.

Article also points out that Etihad is still mulling whether to sell their own VA stake due to their own financial woes.

Is an ANA partnership with Virgin Australia – and an investment – on the cards? – Blue Swan Daily

 

[pauly7]

Breaking: ANA has emerged as one of the candidates for HNA's stake in VA. The "international adjustments" outlined in the article being HKG being swapped out for NRT/HND and/or KIX should ANA emerge as the buyer of HNA's stake

Also article mentions that SQ may rule themselves out yet again (surprise surprise) for the HNA stake and may be willing to work with ANA.

Article also points out that Etihad is still mulling whether to sell their own VA stake due to their own financial woes.

Is an ANA partnership with Virgin Australia – and an investment – on the cards? – Blue Swan Daily

Maybe the ‘stars’ will align and we will see ANA and SQ both on the register and push VA into star alliance

 

[Cool Cat Phil]

Breaking: ANA has emerged as one of the candidates for HNA's stake in VA. The "international adjustments" outlined in the article being HKG being swapped out for NRT/HND and/or KIX should ANA emerge as the buyer of HNA's stake

Also article mentions that SQ may rule themselves out yet again (surprise surprise) for the HNA stake and may be willing to work with ANA.

Article also points out that Etihad is still mulling whether to sell their own VA stake due to their own financial woes.

Is an ANA partnership with Virgin Australia – and an investment – on the cards? – Blue Swan Daily

Interesting Article, with the importance of the Aus <> Japan routes being clearly defined.

With the ever changing revolving door of shareholders in VA- ANA could well be the partner that VA really needs to get its international network out of fifth gear.