Virgin Australia to be sold to Bain Capital

[HokitikaGold]

I just want to pause and say thank you Bain for taking the leap of faith in the current climate to save VA.

I must say, that in my ignorance of all these financial dealings, I was slightly amazed that anyone would step in..

But I assume Bain, as any heavyweight investor, have had a bloody good look at things, have absolutely no loyalty or care factor for anyone but themselves, and yet think they stand a sufficiently good chance of making a dollar or two that they did this. Shining Knight they are not...

But even given their immense knowledge and expertise, I still think half the world has not yet realised just how messed up global and even national travel will be for quite some years.

 

[AustraliaPoochie]

In the end, we don't know what Bain's final end game is.
Making they have an end gate of 5 years, go as some muse, to gut VA2.
Who knows.
On the other hand, they might indeed look at it as a 10 year plan, or 15 year plan, or 20 year plan.
Its a cash cow if you can keep your expenses in check, and charge for every little bit on the flight, that was once free or at low cost.
They might decide to up the inflight refreshment costs, ie, a kitkat might be $6, or a coffee at $6, or a pair deal for $11 instead of say, $10 in VA1.
Think of it like a lot of privatisations, as I mentioned in the past, for public transport, or non core activities in a lot of businesses, lots of places have outsourced their cleaning services. etc.
If they (Bain) bring back VFF into the VA2 fold, they might charge a smallish annual fee.
They might decide to get rid of the FB linkage.
They might decide to do a lot of things, that will still have money going to them.
$3.2bn can be recouped easily, over a mid length of time, maybe 5/10 years, (if you are a tight cough in your spendings, and increase revenue at every level).
Maybe they might tighten the entry under VFF PS from from 2 visits to 1, or increase entry from $65 to $75 for pay on entry to the lounges on domestic flights, if you don't have access or have used up all your free ones, or you might want to bring a guest/guests into the lounges.
They might get rid of the "buildup VAi quasi lounge" at BNE int terminal.
Yes, Aust might still keep its 2 "national" airlines, but at what cost.
I will expect to see some things (fees) go up, from now, in relation to ancillary charges in relation to VA2, whether they be food on board, or maybe, smallish increase in booking fees, or somethings like that.
(EDIT)

Article on the VA "Global Alliance" dillemma.

The paragraph on Star Alliance speaks of VA facing the past veto block from NZ (due to the well publicised spat between former CEOs Luxon and Borghetti), along with the current potential veto block from UA (due to the long-standing Delta Air Lines partnership).

Edit: In other words, the DL partnership has "gotta go" for UA to remove their "veto".

Source: Virgin Australia's global alliance dilemma - Point Hacks

VA2 might decide to go the Skyteam way.
Plus keep their bespoke alliance with part of the *A team, (apart from (Air)NZ and UA).

 

[moa999]

VA2 fully owns VFF so it's in the fold.

Bain will do whatever they feel maximises their IRR. In general this means early distributions and a relatively quick flip. Not many PE investments go beyond 5 years (also the funds typically have a 5-7yr life)

The interesting period will be the near term assuming we get back to some normality of domestic travel.

VA2 seemingly has greater flexibility from lessors to bring back aircraft overtime without significant penalty, so I suspect will be focussed on profitable operation.

Whereas Qantas has objectives to get all it's aircraft and people back flying, so long as it's less loss making than present.
And Rex quite possibly is trying to gain market share and make a name for itself.

 

[HokitikaGold]

...
$3.2bn can be recouped easily, over a mid length of time, maybe 5/10 years, ...

You have a far more optimistic outlook on aviation than I do. I would have called this as optimistic before the Covid thing..

 

[jakeseven7]

In the end, we don't know what Bain's final end game is.

Sure we do, to sell VA2 in X years for a far higher price than they paid. That’s it.

And to extract said higher price they will craft a P&L to look as shiny as possible to that point of sale and then after that whatever. It won’t be a P&L/Balance sheet bred for any other purpose

What we don’t know, us plebs anyway is what X=???

Wonder if it is worth paging back our learned consultant now to AFF... surely he’s wrapped the project now

 

[AustraliaPoochie]

ANsett mark2 lasted just 6 months after Sept 2001, into 2002, and with no FF program after Sept 2001.
At least with VA2, we still have the chance to use up VFF balances, and not put any more points into it.
Unlike ANsett mark2, where no chance existed.
Any company buying Bain's version of VA/VA2 down the track, if your perception is right, say a 5 year plan, must be a (no sleigh intended to the colleague with that handle), a Muppet.

 

[p--and--t]

I'm far too cynical for this thread. My view is the reason for purchase was to strip what they can, tuck in the loose bits put some lipstick on the books and flog in 3-5 yrs to the first patsy they can find. Isn't that the standard modus operandi of these firms?

 

[Major]

I'm far too cynical for this thread. My view is the reason for purchase was to strip what they can, tuck in the loose bits put some lipstick on the books and flog in 3-5 yrs to the first patsy they can find. Isn't that the standard modus operandi of these firms?

I think you have hit the nail on the head. Bain is in this purely for a profit on their investment and will sell as soon as they can

 

[jase05]

Just hurry and open the lounges up!
Got a heap of flights to book for October and although I’m still undecided exactly to where there will be at least 2x return ADL-BNE and probably a CNS and DRW thrown in aswell

 

[oz_mark]

I'm far too cynical for this thread. My view is the reason for purchase was to strip what they can, tuck in the loose bits put some lipstick on the books and flog in 3-5 yrs to the first patsy they can find. Isn't that the standard modus operandi of these firms?

Not really cynical - more a realist interpretation. But what choice did they have? There weren't a lot of options left.

Mind you, it's not just PE that does that, I'd say there's been a lot of asset stripping and lipstick applications going on at another airline in Australia over the last few years.....

 

[Oneworldplus2]

I'm far too cynical for this thread. My view is the reason for purchase was to strip what they can, tuck in the loose bits put some lipstick on the books and flog in 3-5 yrs to the first patsy they can find. Isn't that the standard modus operandi of these firms?

You hit the nail on the head. This is exactly what they do.

I've worked for a few companies over the years who have been taken over by investment companies.

All profits go back to the owners, no money is reinvested back into the company, make it look good on paper and flip it for a profit. Workers get shafted.

They do this within a 2 - 4 year period and sell said company.

I think Virgin is headed down this path.

 

[RooFlyer]

I'm far too cynical for this thread. My view is the reason for purchase was to strip what they can, tuck in the loose bits put some lipstick on the books and flog in 3-5 yrs to the first patsy they can find. Isn't that the standard modus operandi of these firms?

Yes, as I posted on the previous page:

I'm with @jakeseven7 . Private equity aren't in it to be warm and cuddly - to get their required Rate of Return on investment there will be slashing and burning one way or another before the float or trade sale in 3-5 years.

Although PE firms like the large & prominent ones like Bain can't just rape and pillage as they please. If they had done that in the last airline or similar deal they did, Deloittes would have had a lot of trouble having them in the tent as the unions (staff creditors) would have been up in arms.

 

[RAM]

Let’s be able to fly to all state capitals before we get too excited about global alliances...

SPOIL SPORT!

I want to run!

 

[AFF Editor]

Posts about the 20% Velocity transfer bonus announced today have been moved to a new thread, please continue discussion there - Velocity 20% transfer bonus (7-20 September 2020)

 

[dajop]

More likely a new one between VA and SQ (minus the KF/Velocity point swapping), with possibilities from NH and DL.

Who knows what the post-COVID world will look like, but if it even returns to 1/3 of 2019 levels, without VA flights to the US DL might not be the best partner. UA who had 5 city pairs operating pre-COVID and AC who had 3 city pairs, might be better partners if VA metal is not operating (just bilaterally, not star alliance). I guess it depends on what 2022 and beyond looks like. In 2021, international partners are probably not that important

 

[AustraliaPoochie]

If you don't like DL or UA, you could try NZ again and feel the Kiaora loving... (our **friends** across the ditch) airline.
They do have PE on most of their 777 aircrafts.
Assuming borders are opened by then (granted its a bit soon), or you can get an exemption to/for that travel.
Other than that, go with QF or go with SQ by backtracking to SIN.
Can't say, not sure if HA will continue its liaison with VA2 either.
Edit: RAM,

I want to run!

don't you mean you want to fly.
I am currently getting my kicks by watching other people's Youtube channels about taking off, and going back to my window pics of the flights I have taken in the past, mesmerizing, they can be.

 

[BNEFlyer]

If you don't like DL or UA, you could try NZ again and feel the Kiaora loving... (our **friends** across the ditch) airline.
They do have PE on most of their 777 aircrafts.

They have PE on all 777 and 787 aircraft, though NZ have indicated that they may not bring back the 777 when travel resumes.

 

[RAM]

Edit: RAM,

don't you mean you want to fly.
I am currently getting my kicks by watching other people's Youtube channels about taking off, and going back to my window pics of the flights I have taken in the past, mesmerizing, they can be.

Nearly there, partial (cryptic) re-phrasing of saying about having to walk before you can run.....

 

[AustraliaPoochie]

Still feel that PS (Paul S) did a winkie, using Corona virus as a way out.
What if Corona didn't happen, I muse, what would he have done, still put VA into VA.
But I guess what's done is done now, can't say if he did the right thing.
As other have mentioned, I too am keeping most of my points in FB, only transferring 2000 FB to VFF to keep my VFF account alive.
Edit: just had a look at the MCC codes for VGW earn, looks like its quite a tight group of MCC that will earn VGW points, ergo VFF points.
Wonder if Bain will tighten this too.

 

[HS-TQE]

VA / DL partnership will be temporarily suspended/scaled back until VA returns on TransPac runs in at least 2 years time. DL has been watching VA's administration proceedings and has been in regular contact.

The VA/DL codeshare on SYD-LAX (operated by DL) will remain and points will be redeemable.

Also won't be good news for the "Star Alliance fanboys" and/or UA flyers wanting VA to drop the DL partnership to join Star Alliance. Safe to say that VA joining any global alliance will be off the table for at least 12 months - 2 years, as UA will block/veto any (unlikely) *A application had VA kept DL as a partner.

Virgin Australia, Delta partnership comes to an end

This weekend sees Virgin Australia bring down the curtain on its 11 year relationship with Delta Air Lines.

www.executivetraveller.com