Virgin Australia to be sold to Bain Capital

[Melburnian1]

40% of domestic passengers were related to international flights. Gone.

Business flying. About 20%. Gone at the moment, but probably massively reduced long term.

Melbourne-Brisbane-Sydney would probably represented something in the order of 60% of all pre CV flying. Basically gone too.

None of the other potential routes could possibly keep QF or Virgin going.

Future...TBA, but I don’t see it including any of the current players.

In the calendar year to 31 December 2019 - pre-COVID-19 - there were 61.28 million passenger journeys made in total on the regular public transport (air) routes measured by BITRE of the Australian Govt.

Of these, 9.18 million were on the Melbourne - Sydney route - so roughly 4.6 million each way; 4.82 million were BNE - SYD or SYD - BNE while 3.61 million were BNE - MEL/MEL-BNE.

So in total that's 17.61 million out of 61.28 million total journeys on the 'golden triangle', or 28.7 per cent of the total.

It would be higher had not the airlines gradually introduced more nonstop routes (such as MEL to PPP) in the last 20 years, or where they already had nonstops flying 'over BNE', increased the frequency of these.

Similarly, 30 years ago I doubt if I looked up printed timetables from then (which I have - but haven't cast an eye over) there would not have been any nonstop HBA up to SYD flights.

Also 30 years ago there would not have been as many FIFO workers engaged at mine sites in Pilbara/NW of WA. Where these routes are 'competitive' - two or more carriers - they're typically counted in the stats.

I am a little more optimistic than our aviator above re business travel as there remains a strong need for people to meet face-to-face but our man is correct that there'll be a downturn in such journeys.

If volumes decrease, airlines may be less willing (or unable profitably) to run so many point-to-point flights, so that may (counter-intuitively) result in a higher percentage of passengers using the 'golden triangle' routes and changing at such hubs more often to their destination.

 

[Melburnian1]

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

So does Patrick Hatch in 'The Age'/'SMH' online, so in those papers tomorrow morning, but it doesn't tell us much. A small extract:

'...Unions representing Virgin's workers have at various times braced for 40 to 50 per cent of the workforce being made redundant under the relaunch plan put together by Virgin's management and Bain. Virgin's administrator, Deloitte, entered a sale deed with Bain in late June and creditors will vote on a Deed of Company Arrangement at the end of the month.

Wednesday's announcement will reveal job numbers, sources said, and other key details that Bain and Virgin have remained tight-lipped about, including where it positions itself in the market against Qantas and Jetstar...'

I reckon it's madness for Bain to continue with this purchase.

Liquidation ought occur, but Bain has access to a lot more information than us.

Bain must have a lot of supreme optimists who love throwing money down the drain...

 

[jase05]

Creditor vote pushed back a week to September 4th now

 

[AustraliaPoochie]

Pity.
Longer having to wait to find out if VA will survive this or cark it.
The Corona virus is one thing that is hard enough, now we have this creditors meeting forwarded from Aug to Sep.

 

[BNEFlyer]

Here's the ASX release: https://www.asx.com.au/asxpdf/20200805/pdf/44l6hmj7fsgdg4.pdf

Going to 737 only (for now, until international ops can resume); retaining 6,000 staff; consolidating offices to Brisbane; Tigerair officially gone.

 

[HS-TQE]

Official Press Release via VA website: Virgin Australia Group announces plan to focus on core strengths, re-establishing itself as an iconic Australian airline

Also VARA will be kept for now, so it's basially a all-737 mainline fleet with VARA's F100 continuing under a separate subsidiary/VARA AOC.

HQ will be moving to the Flight Centre building at 275 Grey Street, South Bank.

 

[TheInsider]

Official Press Release via VA website: Virgin Australia Group announces plan to focus on core strengths, re-establishing itself as an iconic Australian airline

Also VARA will be kept for now, so it's basially a all-737 mainline fleet with VARA's F100 continuing under a separate subsidiary/VARA AOC.

HQ will be moving to the Flight Centre building at 275 Grey Street, South Bank.

So what has actually changed, it doesn't really seem like too much and nothing ground breaking TBH. Seems like business as usual in a way.

 

[Melburnian1]

So what has actually changed, it doesn't really seem like too much and nothing ground breaking TBH. Seems like business as usual in a way.

We must wait for the creditors' meeting.

No certainty that VA 2.0 will 'fly.'

 

[antycbr]

We must wait for the creditors' meeting.

No certainty that VA 2.0 will 'fly.'

Came here for your comment Melburnian1, I see nothing has changed.

There's almost no certainty that QF will fly either. If the deal was going down today's ASX announcement would not have happened.

On a more serious note, this looks to make business sense. Most of these changes are things we have foreshadowed on this forum. Removing the ATRs and A320s was underway, this just completes the process. I found it interesting that they are keeping the Tiger AOC active rather than shutting it down.

VARA could potentially be sold off to Alliance perhaps if they're reviewing options there. If they can form a tight partnership with someone like Alliance that makes sense. However, the mining flights are probably one of the few parts of VA likely to make serious money in the next 12 months.

Providing certainty around flight credits and Velocity was essential to keep the majority of the VA loyal customers loyal. There is no way they could "stiff" the customers and expect to have any new ones.

 

[HS-TQE]

Being reported in Nine Co/FairFax media rags that the VA fleet remaining under Bain will be largely the (owned) 737s, alongside VARA's F100s and Airbus A320s.

777s will be offloaded (As the 777s are owned, the question is whether to the desert whilst on sale or to the scrappers), with the A330s, ATRs and TigerAir A320s assumed returned to lessors.

Source: Virgin Australia to axe 3000 jobs, sell long-haul jets in relaunch

Virgin said it will strip its fleet of 132 aircraft back to just its Boeing 737s, of which it has 79, and its regional and charter Fokker 100s and Airbus A320s. It will offload its long-haul Boeing 777s and Airbus A330s, Tigerair A320 and ATR turboprops.

 

[HappyFlyerFamily]

So no new news....except maybe creditor meeting moved back.

 

[antycbr]

So no new news....except maybe creditor meeting moved back.

It's hard news now and means that the formal consultation with unions about redundancies (voluntary and compulsory) and directions to aircraft leasing companies can now start. Is any of it a surprise? Not really.

 

[SeaWolf]

Providing certainty around flight credits and Velocity was essential to keep the majority of the VA loyal customers loyal.

Really good length of expiry too, overall I'm happy with the outcome.

 

[antycbr]

Really good length of expiry too, overall I'm happy with the outcome.

Given the way our borders internally are opening and closing, we may need every one of those months...

 

[jb747]

I don’t think that it is anywhere near long enough.....

 

[melb78]

say good bye to the business have to say to me it was one of the best j class flying around. so really when International flights start to fly they will lease some 787 as the 777 are being withdrawn. sad in a way but prob be the cheapest way instead of storing them for the long term.

 

[jakeseven7]

So what has actually changed, it doesn't really seem like too much and nothing ground breaking TBH. Seems like business as usual in a way.

They aren't going to release anything interesting whatsoever until they have VA2 shackled down and in their pocket.

They also can't announce bigger job cuts because they need the votes!

So another 4 more weeks.

 

[jakeseven7]

It's hard news now and means that the formal consultation with unions about redundancies (voluntary and compulsory) and directions to aircraft leasing companies can now start. Is any of it a surprise? Not really.

Reading some of the analysts point of view - they think that more hard news is actually coming, they were expecting many more job cuts, even though PS had already swung an axe through VA1 prior to covid.....

So there could well be more to come, but Bain don't want people knowing until post September....

 

[RAM]

To put today's announcements in context.

Do you remember what the price put on JUST the VFF scheme was last November?

It was $2 billion.

How much is Bain effectively now valuing ALL of VA for? Including all owned planes, systems etc etc & VFF scheme?

It is a bit like the 1980s Demtel adverts, 'Not only do you get this set of steak knives for $39.95 but you get an entire airline as well.'

Airlines pretty much (globally) make as much as if not more from their loyalty schemes than flying. If you look at a rolling 5 year period then that is the case for nearly all major airlines overseas except in a few cases such as EzyJet & RyanAir. In most cases the loyalty scheme (gold mines) were the only profitable parts.

Having an airline to associate with the loyalty scheme is a bit of a necessary evil unfortunately - so unless your view (even I am not this pessimistic) is that State borders will become permanently reinstated & controlled then Bain will buy & run VA II through until 2025 or so. Vaccine or no vaccine.

BTW - has anyone noticed how Alan Joyce has been muzzled for a few weeks now?

Given that Q is possibly 'trading while insolvent' due to recent falls in aircraft value (possibly requiring cash collateral) then perhaps he has become a monk?

A couple of his own statements have painted him into a very small corner - with perhaps another write-off coming shortly (pre-Dec half) that could place them in breach of many loan covenants. Cash burn is far worse as % of fleet for Q than VA even with latest closures announced, & looking at SIA's results - seem worse than SIA's operation which is pretty much 100% international only. Or I could be wrong.

A betting person may suggest we'll see a further increase in intra-state flights like VA did in Qld some weeks back.

FIFO operations were dealt a blow (in WA) by a BHP worker who lied & did not quarantine but went straight to work in a mine when finally located by police.

If you have not had a look at how many flights are involved each day in WA (B737s included) - have a look on Flightradar24 (search for it) & zero in on WA.

 

[jakeseven7]

To put today's announcements in context.

Do you remember what the price put on JUST the VFF scheme was last November?

It was $2 billion.

How much is Bain effectively now valuing ALL of VA for? Including all owned planes, systems etc etc & VFF scheme?

It is a bit like the 1980s Demtel adverts, 'Not only do you get this set of steak knives for $39.95 but you get an entire airline as well.'

Airlines pretty much (globally) make as much as if not more from their loyalty schemes than flying. If you look at a rolling 5 year period then that is the casy for all but EzyJet & RyanAir. In most cases the loyalty scheme (gold mines) were the only profitable parts.

Having an airline to associate with the loyalty scheme is a bit of a necessary evil unfortunately - so unless your view (even I am not this pessimistic) is that State borders will become permanently reinstated & controlled then Bain will buy & run VA II through until 2025 or so. Vaccine or no vaccine.

Still no news on when Velocity will start operating either (as a store)....