Virgin Australia to be sold to Bain Capital

[AustraliaPoochie]

How long more before next VAver1 creditors meeting, 2 or 3 more weeks?
If Covid 19 didn't happen, or wasn't this serious, would PS (as in VA's CEO), put VA into VA (voiluntary admin)?
Would VA have gone into liquidation?
We have no choice but to now wait and see.
Edit:

Suspect VA2 will fall over completely and QF will either be partially or completely re-nationalised, in line with other government actions around the world to preserve their flag carriers.

AJ would be so pleased, even if QF was nationalised, he would be so pleased, I am sure.

 

[jakeseven7]

AJ would be so pleased, even if QF was nationalised, he would be so pleased, I am sure.

I know some people seem to think AJ is the devil incarnate... but I have to disagree, who on earth would be pleased with 8000 people out of work (directly) and all the misery that would come with that. Think that's a pretty low brow call myself.

 

[AIRwin]

How long more before next VAver1 creditors meeting, 2 or 3 more weeks?

26 August - my nephew's birthday!

 

[jakeseven7]

Landlord left in the lurch as Virgin vacates HQ


The ASX-listed owner of Virgin Australia's headquarters in Brisbane has been left in the lurch as the failed airline drastically downsizes and vacates its premises six years before the end of its lease.

Landlord left in the lurch as Virgin vacates HQ

Virgin Australia vacating its headquarters in Brisbane shows how COVID-19 can have a far-reaching impact on the office market.

www.afr.com

 

[dajop]

Landlord left in the lurch as Virgin vacates HQ


The ASX-listed owner of Virgin Australia's headquarters in Brisbane has been left in the lurch as the failed airline vacates its premises six years before the end of its lease.

Landlord left in the lurch as Virgin vacates HQ

Virgin Australia vacating its headquarters in Brisbane shows how COVID-19 can have a far-reaching impact on the office market.

www.afr.com

I'm sure they're not the only business "left in the lurch" when VA went into administration.

 

[RAM]

This article on the leasing (including breaking Sydney lease) is not behind a paywall.

Virgin Lands at Flight Centre HQ

Virgin Australia has circled in on a new Brisbane office moving to Flight Centre’s corporate headquarters at the Southpoint building...

theurbandeveloper.com

For VA II the cash flow issues are bad, but NOT so much for Bain - much more so for all creditors especially unsecured:

• +ve cash flow from expanded destination schedule massively reduced for high volume SYD QLD pairs, likely see flights cancelled 2/3rds or more & cash have to be refunded (at least that option given).
• plane values likely dropped another 10-15% since values as at 31 May = lessors getting their planes handed back looking at 'true' loss of 40% of outstanding plane value NOT the sum of all lease payments through to lease end (loss on bank mortgage is not the sum of all repayments but difference in mortgage outstanding balance & price house/unit sold at).
• unsecured creditors facing perhaps 1/2 what they were a month ago, so now likely 3-4 cents in the dollar at best.
• raising finance for any airline now MUCH harder than it was 2 months ago UNLESS Govt underwritten = unsecured creditors 'proposal' may not now get presented at all. Bain big enough to have finance locked in.

However, the deteriorating world outlook actually provides a number of benefits for Bain (unless they've already signed contracts on the proviso they're void if the DOCA is not successful) in re-negotiating everything. Even, down the track, buying new planes from Boeing. Cash flow is king for every company now.

Re-running the cash flow (guesstimates) based on what Q has released to the ASX suggests that:

• Q has (virtually) no assets left to use as security for any further loans & security on existing loans is below the outstanding loan balances in many cases (aka borrowers will be seeking more security at a time when nothing left in the barrel to scrape).
• Fuel hedge losses rising due to much lower 'rebound' flying than initially expected.
• Write downs for this financial year will most likely have to be either 'flagged' before or written down more by 31 December half.
• Just about to be enacted Qld closure to Greater Sydney will see cash having to be returned to ticket holders of cancelled flights

 

[Denali]

Did anyone else just get a text that VA have suspended flights and partner services?

 

[Bell21]

26 August can't come quickly enough, albeit an 'interesting journey' to date --- I just utilised almost all our travel credits for future VA fights, so will be very interested to see what transpires in late August, and how the current eastern states border shut-down feeds into final outcomes.

 

[jakeseven7]

Did anyone else just get a text that VA have suspended flights an partner services?

No..... but they just cancelled a bunch of BNE / SYD flights (unsurprisingly)

 

[RAM]

Slight tangent but a useful datapoint coming from one of the world's largest aircraft storage, maintenance, stripping & scrapping operators (possibly the biggest) with multiple sites. Suggests PR from airlines VERY different to contracts they're signing for long term storage.


Some aircraft are returning to service having been parked for several months. Are you seeing this across your storage sites?
Yes but a lot less than we expected. Usually, around three-quarters of the aircraft we receive are redelivered back into the fleet--so around 75% to 80%. This year we have received 150 aircraft and only around 70 of these have gone back into operation. Maybe 80% of the aircraft were coming in for short-term parking, which is defined as a period of less than three months. Before, we estimated that around half of these will move into long-term storage, but it will actually be more than that, with 80% of these aircraft moving into long-term storage. Some aircraft arriving now just go straight into long-term storage.

The time period covered was from early March through to now - so around 5 months.

Long term storage is much more expensive as it requires a lengthy contract duration & much bigger up front costs, and often 'prepayment/commitment' for effectively re-certification maintenance in addition to required periodic maintenance (ranging from moving the plane so the tyres don't develop permanent flat spots/deform to parts replacement, fuel put in, engines run, fuel syphoned out etc).

Given previously that aircraft storage companies often had in their physical possession an airframe worth more than the long term contract - then they mostly never required additional 'financial' security. That's all changed now since 2nd hand airframe prices 'officially' (via the 3 or 4 recognised valuation companies) have fallen close to 40% for many models. Unofficially 4+ yr old A380s have a zero value. I have not been able to find a single 2nd hand A380 engine sale for example (ever). Normally the engines are the most valuable part for scrapping.

So, it seems nearly all airlines are being asked for cash collateral or bank guarantees to back their long term storage contracts.
Not a major -ve for VA who have telegraphed giving back around half by number, and more by value of their fleet, quite bad for Q with roughly half of its fleet by number and 2/3rds to 3/4 by value dedicated to international. A decent chunk of that value is what they're carrying the A380s on their books for...

This probably explains why a number of airlines have announced scrapping their A380s, B747s etc as they then do not have to pay any ongoing maintenance costs - just the cost of the planes being scrapped (on the QT). A fraction of the cost, so a much smaller cash collateral/bank guarantee. Would make you suspect that Q's contracts have 6 A380s in long term storage & 6 to be scrapped - given it looks as if Q has zero collateral left, & despite the Fed Gov paying the bulk of it wages cost - a worse cash burn per airframe than Singapore Airlines with no wage subsidy. Curious.

So expect Bain's plans will have their former (version 37?) business case now stretched out from 3 years say to 6 years.

Or I could be totally off the mark.

 

[AustraliaPoochie]

Hopefully, (if) we find out that Bain is successful, after 26 Aug, that they will announce in detail, from the start, what they have plans for the airline.

 

[RAM]

Hopefully, (if) we find out that Bain is successful, after 26 Aug, that they will announce in detail, from the start, what they have plans for the airline.

Most likely what they'll reveal will be for PR purposes:

• We're proud to announce that this great Australian airline has a future....
• Most of our great staff will continue to serve Australia...
• Over the next few years we will be continuously improving the already award-winning service...
• As negotiations are finalised we will be announcing a large number of additional partners for Velocity Frequent Fliers - stay tuned...
• Our future would be impossible without all the wonderful customers we've had the privilege to serve & that's why we're honouring in full every ticket or voucher issued previously & without any charge for re-booking or changing those tickets...
• Some of our operations have & will have to adapt due to the world post-CV....
• The future due to the continuing influence of CV is uncertain but what is certain is that VA will always put customer safety first....
• Lastly we want to thank once again all our staff & customers who have given us so much support over this trying period, together we'll make the future....

Sometimes I think I am just too cynical, but then I come back to reality and realise I've seen it all before...

 

[AustraliaPoochie]

Looking at fares though, and also flights eg ADL - PER, some days in Oct this year, there are no directs, and have to traipse to MEL/SYD and then onto PER, adding a lot of time and $ spent.Look like price gouging by the current VA, or the administrators, or who ever sets the fares.
Edit; and yes, I did see that Vic is into hard lockdown again, so how is a person supposed to transit MEL T3 dom, so have to go via SYD, what happens if NSW also goes into lockdown, and then QLD?
Weekends, ie, one Sat, I am looking at, no direct flights, 6am flight ADL - SYD, get to SYD at 8.15am, then onto PER after 1pm or so.
Who ever sets the fares or current schedules, certainly have no sccuples.
OT, not only VAver1, but also QF, ADL - SYD - PER on QF in subclass of J, ie, 3 flights, asking for Aud$5600!
This pandemic is surely making some groups very rich.
Ok, waffly turned off for now.

 

[jakeseven7]

Hopefully, (if) we find out that Bain is successful, after 26 Aug, that they will announce in detail, from the start, what they have plans for the airline.

They are probably more likely to announce where they are parking their planes for the next year or so sadly and how much money they are prepared to lose per week

 

[Alyopsis]

Bridget Carter in The Oz had this story on 30.07 so maybe hear something early this week.

Fears mount before Bain updates business plan for Virgin Australia

"Virgin Australia employees and the Queensland state government face an anxious wait in the coming days to learn more details about Bain Capital’s business plan for the airline.

An update is expected on the management plan for the airline in the days ahead.

It comes with fears mounting that its original strategy could be recut due to a second spike of COVID-19 cases in Victoria, which has shut its borders and also flowed on to some travel restrictions for NSW due to community outbreaks in the state.

Bain or Virgin Australia management are yet to disclose exact details of the business plan under private equity ownership or the amount that will be paid out to the bond holders, owed about $2bn.

But the view of some is that Bain, which has already injected about $125m into the airline after winning a sales process run through Virgin Australia’s voluntary administrator Deloitte, could adjust its original strategy due to the current travel environment.

Two areas that are expected to come under close focus will be the extent to which Bain services regional routes and the position it takes on offering airline lounges to customers.

The Queensland government, advised by Jefferies, will no doubt be taking a keen interest, given that it had earlier offered the Brisbane-based Virgin Australia $200m worth of government assistance.

Bain is due to make its formal DOCA proposal to the administrator on August 12 which should include details of how much it proposes to give to the bondholders.

But the bondholders were not set to learn how much they will get until they are given a formal report by the administrators, schedule to be delivered on August 19, ahead of their meeting on August 26.

The Australian reported in June that Bain’s plan was to relaunch Virgin as a hybrid airline with a low cost base but offering a business class, airport lounges, a more integrated Velocity frequent flyer program and regional, domestic and eventually, international services.

Virgin was also to return to the skies with about 40 Boeing 737 planes in the air, with scope to expand closer to 70 as travel demand returns to normal after the COVID pandemic.

Before the onset of COVID-19, the Virgin 2.0 management plan involved cutting 3000 staff, so it will be interesting to see if more jobs are shed.

Virgin Australia was placed in voluntary administration in April after it made unsuccessful requests to secure a $1.4 billion loan from the Commonwealth to help it through the coronavirus pandemic.

The Australian last month reported that the Virgin 2.0 management plan to resurrect the airline championed by chief executive Paul Scurrah involved what some had described as “nips and tucks” to the carrier, but Bain wanted a big restructure of the airline to help it thrive."

 

[eastwest101]

Looking at fares though, and also flights eg ADL - PER, some days in Oct this year, there are no directs, and have to traipse to MEL/SYD and then onto PER, adding a lot of time and $ spent.Look like price gouging by the current VA, or the administrators, or who ever sets the fares.
Edit; and yes, I did see that Vic is into hard lockdown again, so how is a person supposed to transit MEL T3 dom, so have to go via SYD, what happens if NSW also goes into lockdown, and then QLD?
Weekends, ie, one Sat, I am looking at, no direct flights, 6am flight ADL - SYD, get to SYD at 8.15am, then onto PER after 1pm or so.
Who ever sets the fares or current schedules, certainly have no sccuples.
OT, not only VAver1, but also QF, ADL - SYD - PER on QF in subclass of J, ie, 3 flights, asking for Aud$5600!
This pandemic is surely making some groups very rich.
Ok, waffly turned off for now.

Yep - at the moment it looks like the airline schedules are designed to transmit Covid-19 as widely as possible to parts of the country that don't have a problem, their schedules are designed to feed as many people through Covid-19 "hotspots" such as MEL and SYD into aircraft that were already cramped and difficult to maintain social distancing in (and make pax transit and/or overnight in "hotspots" due to lack of frequency).

The other few anecdotes here of airlines price gouging, and charging exorbitant change fees in response to sudden arbitrary changes in state border restrictions also won't win them many friends either. The airlines have all this empty capacity sitting around rusting away, and a highly trained workforce sitting idle and very highly paid management whom seem content to throw their arms up in defeat and sit out job keeper/job seeker assistance, sink back into state ownership and government bail outs and federal handouts, rather than actually make an effort to reinvent/adjust their businesses to respond and survive this 'crisis' which, by definition must also must include some opportunities, that they have all so far not been able to find.

Other businesses/industries have adapted and found ways to adjust to working within Covid19 and with airlines its understood that the nature of the health problem and state travel restrictions do impose a larger burden on them, compared to other industries, but the knee jerk reaction of cutting services and costs dressed up as "health" reasons has been a bit disingenuous and shown up airline management as not so fantastic or even imaginative as they think that they were.

 

[jakeseven7]

Bridget Carter in The Oz had this story on 30.07 so maybe hear something early this week.

Fears mount before Bain updates business plan for Virgin Australia

"Virgin Australia employees and the Queensland state government face an anxious wait in the coming days to learn more details about Bain Capital’s business plan for the airline.

An update is expected on the management plan for the airline in the days ahead.

It comes with fears mounting that its original strategy could be recut due to a second spike of COVID-19 cases in Victoria, which has shut its borders and also flowed on to some travel restrictions for NSW due to community outbreaks in the state.

Bain or Virgin Australia management are yet to disclose exact details of the business plan under private equity ownership or the amount that will be paid out to the bond holders, owed about $2bn.

But the view of some is that Bain, which has already injected about $125m into the airline after winning a sales process run through Virgin Australia’s voluntary administrator Deloitte, could adjust its original strategy due to the current travel environment.

Two areas that are expected to come under close focus will be the extent to which Bain services regional routes and the position it takes on offering airline lounges to customers.

The Queensland government, advised by Jefferies, will no doubt be taking a keen interest, given that it had earlier offered the Brisbane-based Virgin Australia $200m worth of government assistance.

Bain is due to make its formal DOCA proposal to the administrator on August 12 which should include details of how much it proposes to give to the bondholders.

But the bondholders were not set to learn how much they will get until they are given a formal report by the administrators, schedule to be delivered on August 19, ahead of their meeting on August 26.

The Australian reported in June that Bain’s plan was to relaunch Virgin as a hybrid airline with a low cost base but offering a business class, airport lounges, a more integrated Velocity frequent flyer program and regional, domestic and eventually, international services.

Virgin was also to return to the skies with about 40 Boeing 737 planes in the air, with scope to expand closer to 70 as travel demand returns to normal after the COVID pandemic.

Before the onset of COVID-19, the Virgin 2.0 management plan involved cutting 3000 staff, so it will be interesting to see if more jobs are shed.

Virgin Australia was placed in voluntary administration in April after it made unsuccessful requests to secure a $1.4 billion loan from the Commonwealth to help it through the coronavirus pandemic.

The Australian last month reported that the Virgin 2.0 management plan to resurrect the airline championed by chief executive Paul Scurrah involved what some had described as “nips and tucks” to the carrier, but Bain wanted a big restructure of the airline to help it thrive."

Bain will have to recut their plans for VA2, massively - it is the responsible thing to do.

Hopefully their recut plan still sees them buying VA.

 

[Alyopsis]

Robyn Ironside has a fresh story on the Oz website saying Virgin will make an announcement to the market/media tomorrow (Wed) about what they plan to do with the airline

NoCookies | The Australian

www.theaustralian.com.au

 

[Rembrandt]

Bain will have to recut their plans for VA2, massively - it is the responsible thing to do.

Hopefully their recut plan still sees them buying VA.

International (apart from NZ) is out of the question for a long time. Hopefully, travel bubbles with the likes of Singapore, South Korea, Taiwan and Japan can occur sometime next year, if all those countries including Australia can eliminate the virus. I think VA2 really needs to concentrate on domestic for the next couple of years instead of international ambitions.

 

[HS-TQE]

Bain basically said they're doing anything within range of the 737 for the foreseeable future, and that was including Short Haul International (NZ/Pacific Islands).

Considering most long-haul destinations have some form of border restrictions, it'll be a long while off before VA (or QF for that matter) restart (non-subsidised) long-haul.

That's also if at all in VA's case - Bain has left open all options in regards to the owned 777s and will go with whatever maximises their return. The decision whether to return to TransPac operations by trading in the 777s for loaned 787s or to eventually sell off the 777s will probably be announced by Bain in 12 months at the earliest.