Virgin Australia to be sold to Bain Capital

[Matt_01]

Can’t see any Chairman’s Lounge or Virgin Club cards in your pile??

Good reason for that, I am a BIS traveller and not important enough to be invited to CL or The Club. On occasion my P1 status has enabled access to the CL lounge and mainly due to QF lounge over crowding during major widespread delays.

 

[RooFlyer]

And what will happen to my VAH shares I bought in 2009 at $0.21?
I guess a statement will be be made they have no value, so I can then claim a CGT loss?

I owned shares in a small company that went into Administration a few years ago. I knew they were stuffed, so the accountant wrote off the value if the shares ( if they came good, the value would be written back in). Fast forward to a few months ago and I realised I hadn’t heard anything, so I contacted the Administrator.

Oh, they were put into Liquidation a year ago - there was a notice in the paper . They sent me a Declaration of nil expected return to shareholders, so the accountant will ditch them formally ( I guess same as selling at nil value). This Declaration was NOT automatically sent to shareholders, for a reason I couldnt find out. I don’t expEct that will happen with Virgin

 

[jakeseven7]

Bumpy landing ahead still...

—

Turbulence ahead as Bain steers Virgin’s recovery


Bain Capital will begin injecting $600m in cash and taking control of Virgin from Wednesday following a multi-billion-dollar deal struck last Friday which will see a slimmed-down airline come out of administration in September.

Redirect Notice

 

[jakeseven7]

So for some reason the old closed thread has reopened... so I’ll keep this short because my other post got moved across:

Will be very interesting to see what 4 corners shines a light on about the collapse of VA1 and whether it gives any more hints to what a resurrection under Bain may look like...

The program focuses on what lead to VA1’s collapse but also did hint that would be covering what VA2 should look like to succeed under Bain too. Doubt they got Bain on camera though but will be interesting to see commentary from others on the new VA2 under Bain.

So if you want to discuss anything around the VA1 collapse you have to comment in the old thread but if the comment is about what 4corners shows on what the new VA2 under Bain may look like - that comment has to be posted here.... Here is the old thread again:

Virgin Australia Financially Secure? [Now in Voluntary Administration]

I have to wonder about the timing of Joyce's QF announcement. I'm sure he could have delayed the dire news of his appreciation of the Australian aviation industry. I'm also sure he would take any opportunity to affect a potential competitor. I did think similar at the time, but when you're...

www.australianfrequentflyer.com.au

 

[azza_1992]

I often found the Virgin service to be quite forced ‘fake friendly’. I found out that they are mystery shopped on certain customer intervention points and it’s easy now to see what they are.

Which particular customer touch points have you noticed?

 

[davidj]

DJ1, VA2, DJ3?

 

[UP4014]

Whenever I think of the management style of Bain Capital, the name Frank Lorenzo and his airline people management style comes to mind.

Anyone remember good old Frank, an airline MD who insisted he be served unopened bottles of drink on his own airline for fear his employees would poison him.

Anyway, back to the topic.

 

[Melburnian1]

A brief excerpt from 'The Australian' (online) on Monday 29 June 2020 in the afternoon:

------------------
Aussie flying intentions sharply lower: JPM

A JP Morgan-commissioned survey of 500 Australians across age, gender and employment status has found nearly 50 per cent expect to fly less, both domestically and internationally after restrictions ease, and 68 per cent will not fly internationally without a vaccine.

“A driving holiday or staying at home were preferred to flying domestically or internationally for the next vacation,” says JPM Australia’s head of research, Jason Steed.

“We see these results as negative for air travel...

 

[Must...Fly!]

A brief excerpt from 'The Australian' (online) on Monday 29 June 2020 in the afternoon:

------------------
Aussie flying intentions sharply lower: JPM

A JP Morgan-commissioned survey of 500 Australians across age, gender and employment status has found nearly 50 per cent expect to fly less, both domestically and internationally after restrictions ease, and 68 per cent will not fly internationally without a vaccine.

“A driving holiday or staying at home were preferred to flying domestically or internationally for the next vacation,” says JPM Australia’s head of research, Jason Steed.

“We see these results as negative for air travel...

Not surprising, but "fly less" is a very very loose descriptor. How many of those flew once per year up to the Gold Coast or Cairns for a weeks holiday?

If we're talking weekly road warriors flying less or not at all going forward, then that is a complete paradigm shift. If it's just some holiday makers, well, the airlines should be able to downsize to absorb that without collapsing, obviously that includes Virgin Australia.

 

[The Flying Brick]

Good reason for that, I am a BIS traveller and not important enough to be invited to CL or The Club. On occasion my P1 status has enabled access to the CL lounge mainly due to lounge over crowding during widespread delays.

Fair enough.

I was kicked out of the CL at the end of 2015 - still suffering from withdrawal

But do have to add that the Club looked after members far, far better than the Chairmans Lounge ever did.

 

[nesbitt55ee]

Just looking at a different slant to the bid from Bain Capital. They have 51% stake in the cruise company Virgin Voyages, with Virgin Group Ltd having 49%. They have 4 sister-ships planned between 2020 and 2023, with the first one steaming from USA to Europe now, but I don't know for what purpose. Their homeport is Miami and plan to concentrate around the Caribbean, but with COVID-19 many plans can change.
Are they looking at a longer game? When overseas routes open again, may they try to concentrate on airports that coincide with the ship's ports (i.e. Miami, etc)? They may be looking at organising flights to encourage potential passengers for their cruise ships, such as Renaissance Cruises (defunct) did with Hawaiian Airlines pre-9/11.
Just wondering if their may be a longer plan in play here for a post COVID-19 future.

 

[moa999]

Can't see it.
Virgin has already suffered enough flying to international destinations to support other objectives of it's various owners

 

[BNEFlyer]

Just looking at a different slant to the bid from Bain Capital. They have 51% stake in the cruise company Virgin Voyages, with Virgin Group Ltd having 49%. They have 4 sister-ships planned between 2020 and 2023, with the first one steaming from USA to Europe now, but I don't know for what purpose. Their homeport is Miami and plan to concentrate around the Caribbean, but with COVID-19 many plans can change.
Are they looking at a longer game? When overseas routes open again, may they try to concentrate on airports that coincide with the ship's ports (i.e. Miami, etc)? They may be looking at organising flights to encourage potential passengers for their cruise ships, such as Renaissance Cruises (defunct) did with Hawaiian Airlines pre-9/11.
Just wondering if their may be a longer plan in play here for a post COVID-19 future.

They've got two ships afloat, Scarlet Lady and Valiant Lady. One will be for Caribbean cruises and the other for Mediterranean. Scarlet Lady is heading to Genoa to operate the Med cruises in the Northern Autumn before going back to the Caribbean so Valiant Lady can take over in 2021. Their third ship is currently under construction.

 

[jakeseven7]

This speculation is more grim than we expected on job losses:

———

Virgin rebuild could cut 5000 jobs

Virgin Australia could slash up to half of its workforce to rebuild its crisis-hit operations, as Regional Express tries to muscle into the lucrative "golden triangle" routes between Sydney, Melbourne and Brisbane.


They're [Bain Capital] going to get rid of Tigerair, and they're going to get rid of most of, if not all international," Mr Webber said. "They will probably get rid of half of the workforce, but that's dependent on how much of the business they are going to keep."

Anthony Cicuttini – managing director at aviation and infrastructure consultancy group Redwater – reckoned between 2000 and 3000 cabin crew and pilots would face the axe when Bain took over, based on statements from the firm that it would look to retain about 70 aircraft. Such a fleet would be just over half of the 132 planes Virgin operated before administration.

full article:

Virgin rebuild could cut 5000 jobs

The projection from a former chief economist of Qantas comes as Virgin's management team prepares to meet its likely new owners to discuss the size and scope of the relaunched airline.

www.afr.com

 

[jakeseven7]

Well JB is going to take a hit as well, at least people can take some 'justice comfort' in that, although won't be a large dent in his finances given the money the board shoveled him over the years.



-----

Virgin investors wiped out in Bain deal as bondholders brace for spare-change return

Virgin Australia’s bondholders fear they will recoup as little as 6.5¢ in the dollar, or just $130 million out of the $2 billion they are owed, under the collapsed airline's sale to American private equity firm Bain Capital.

The stricken carrier's administrator, Deloitte, confirmed on Tuesday that Virgin's shareholders - which include global aviation giants Singapore Airlines and Etihad Airways - will not see a cent returned to them under the deal signed on Friday with Bain. Former Virgin CEO John Borghetti was one of the top individual shareholders with 9.3 million shares, worth around $800,000, according to the company's last annual report.

Virgin collapsed in April owing $6.8 billion to creditors in total.

full story:

Virgin investors wiped out in Bain deal as bondholders brace for spare-change return

Virgin bondholders remain in the dark about how much of the $2 billion they are owed will be repaid under the Bain deal, but fear it will be as low as 6.5¢ in the dollar.

www.smh.com.au

 

[RAM]

This speculation is more grim than we expected on job losses:

———

Virgin rebuild could cut 5000 jobs

Virgin Australia could slash up to half of its workforce to rebuild its crisis-hit operations, as Regional Express tries to muscle into the lucrative "golden triangle" routes between Sydney, Melbourne and Brisbane.


They're [Bain Capital] going to get rid of Tigerair, and they're going to get rid of most of, if not all international," Mr Webber said. "They will probably get rid of half of the workforce, but that's dependent on how much of the business they are going to keep."

Anthony Cicuttini – managing director at aviation and infrastructure consultancy group Redwater – reckoned between 2000 and 3000 cabin crew and pilots would face the axe when Bain took over, based on statements from the firm that it would look to retain about 70 aircraft. Such a fleet would be just over half of the 132 planes Virgin operated before administration.

full article:

Virgin rebuild could cut 5000 jobs

The projection from a former chief economist of Qantas comes as Virgin's management team prepares to meet its likely new owners to discuss the size and scope of the relaunched airline.

www.afr.com

For each aircraft type that goes = entire maintenance crew no longer needed, premises used = no longer needed, HR & IT related to the area - surplus to requirements, spares kept around the country etc etc.

Think of a triangle made up of 4 equal sized smaller triangles - so one on top with 3 beneath. Halve the height of the 'big' triangle and volume is now 1/4 the size. Think of 'overhead' personnel this way. 1/2 the fleet size may end up with 1/4 the 'mgmt & admin etc'.

Bondholders (misleading term)

The media, in it's love of using inaccurate information to make stories grab more attention, keeps refering incorrectly to bondholders when the subject they are actually talking about are 'UNSECURED' bondholders. If the 6.5 cents is correct then the vulture funds stand to make 400% to 500% returns on their recent purchases if the rumours are correct. That helps pay for a few lunches for 'helpers' perhaps even the odd journalist or two. Maybe even for a '50+ team working for (unsecured) bondholders'?

 

[moa999]

keeps refering incorrectly to bondholders when the subject they are actually talking about are 'UNSECURED' bondholders. If the 6.5 cents is correct then the vulture funds stand to make 400% to 500% returns on their recent purchases if the rumours are correct.

Don't see what's misleading about leaving it out. Don't think they have any secured bonds - just secured loans over aircraft.

While a few vultures may have made money,
The bulk of the bondholders paid 100c under 12 months ago as part of funding for the Velocity acquisition

 

[Bundy Bear]

I am glad there is some certainty that Virgin has found a buyer.

There is still some pain to go through with the likelihood of A330s, ATR72s being removed and 777s probably been parked somewhere hoping that that can come back to life.

Having a simpler owner structure should help, that way they are concentrating on what makes them money not what the 4 owners wanted.

Looking to the US big 3 airlines should give us an idea what is probably going to work.

Lounges
business class
pay for bags unless you have status or a credit card promotion.
pay for food, in economy on all flights.
I seem to remember that premier US routes with food included was available, think of Perth to Brisbane/Sydney/Melbourne.

The new owners don't need to do everything or fly everywhere, they just need to make money and probably could make lots of it.
Jetstar service for economy with business class, Economy X seating

Rex now is your time to buy some bigger turboprops, like the ATR42 and ATR72s, and stay away from Jets,

A cozy duopoly on all routes makes money for everyone

 

[RAM]

Don't see what's misleading about leaving it out. Don't think they have any secured bonds - just secured loans over aircraft.

While a few vultures may have made money,
The bulk of the bondholders paid 100c under 12 months ago as part of funding for the Velocity acquisition

There are secured bonds out there as well as secured loans & secured leases.

A couple of vulture funds stand to gain up to between 1/3rd to 1/4 of the proceeds reportedly = likely a $150-$200 profit.

The Australian Dollar unsecured bonds issued late last year for the VFF part purchase were under $400m in face value (money raised) and included a 'junk bond' interest rate for good reason (7.5% margin above the equivalent riskfree rate). The Australian buyers of these make-up close to 94% of 'unsecured bondholders' by number I was told.

The media have been throwing around figures in a way that could mislead people (& make the community less likely to support VA). I don't recall any article raising the 'junk bond' interest rate offered for that issue - but there may have been one amongst the hundreds since March.

Reporting on VA has been 'curious' to say the least. Almost as if someone with clout has been orchestrating an agenda - but of course there's no group who would do that as that would be illegal.

One such anomaly seemingly in arriving at 'VA total debt'.

For example: When you take out a $400,000 mortgage do you have a $400,000 debt (Present Value of expected repayments) or a $967,000 debt (= expected sum of repayments over mortgage lifetime)? What does the ACCC permit the finance industry to advertise etc?

Yet the figures bandied about for VA's leases is unusual. That's the way the VA leases seem to be reported - as the sum of all repayments through to lease end NOT the Present Value of the leases = BIG difference. If Q's were reported the same way then it would wipe out all Q equity including the just raised chunk it appears.

For some reason the media are not reporting Q that way?

Always hope for the media providing a balanced & unbiased picture - frequently disappointed

 

[oz_mark]

Rex now is your time to buy some bigger turboprops, like the ATR42 and ATR72s, and stay away from Jets,

Rex has already announced it is looking at the ATRs.