Virgin Australian "Trade Sale" - who would be best?

[777]

With the departure of the CEO and increasing speculation that VA will be subject to a "trade sale" rather than an IPO, I'm curious as to who VA FF'ers would like to see the airline sold to. I presume a "Trade Sale" likely means another airline. You would have to expect that a full sale to another airline would change VA's strategy substantially for better or for worse so which one do you think would be best and why?

Personally I think the most logical candidates are SQ and Air New Zealand. The synergies particularly in NZ's case are pretty obvious and both would likely come with Star Alliance membership (eventually) which would be great for VA FF'ers. Of course, on the down side both have been burned by Australian investments before (more than once?) and I think NZ in particular would be controversial with Kiwi taxpayers who still own a huge chunk of it. Having said that having (near) full control of VA would be a lot easier for them strategically than a minority investment.

The other obvious options are VA's other partners: Qatar, United, and maybe ANA but in each case it doesn't seem to strategically fit as much with them. Looking at the list I don't think any of the other partners could really afford it or are in any position to right now. Are ther any other obvious ones I'm missing or intriguing options out of left field?

In the event that it does actually happens bonus points for whoever calls it correctly first -- double bonus points if it's a really left field option

 

[DAC1]

I believe that if VA is to continue operating international flights, it cannot be majority owned by a foreigner. Which counts out SQ and NZ holding a majority investment.

 

[777]

I believe that if VA is to continue operating international flights, it cannot be majority owned by a foreigner. Which counts out SQ and NZ holding a majority investment.

I'm pretty sure they solved this problem when they had majority foreign ownership before by creating a majority Australian owned subsidiary that operated their international flights so I am pretty sure they could do so again. Pure speculation but if they wanted to be really tricky about it they could possibly have ANZ or SQ operate as a some kind of service provider to that subsidiary if widebody flights were back on the agenda.

EDIT: Pretty sure they are majority foriegn owned (by Bain Capital) right now and are still operating international flights.

 

[ThatMrBlake]

If United continues their focus on expansion on our region - I wouldn’t mind seeing what a VA with UA owners may look like. In all honestly - whatever gets us to full star alliance membership will do.

 

[Saab34]

Doesn’t need to be an airline. Didn’t Toll own Virgin in the past?

Airlines can get what they want from Virgin without taking a stake. Whoever wants in, will be purely from a profit/business perspective, it’s one heck of an outlay to simply buy it for its synergies. Don’t forget this be priced very very heavily also.

I really think it would be better if other airlines didn’t get involved. History isn’t kind to this business on that front. But, United or Delta would be two good owners, service can leave a bit to be desired, but they can run an airline. Everyone else has no idea.

 

[DAC1]

I'm pretty sure they solved this problem when they had majority foreign ownership before by creating a majority Australian owned subsidiary that operated their international flights so I am pretty sure they could do so again. Pure speculation but if they wanted to be really tricky about it they could possibly have ANZ or SQ operate as a some kind of service provider to that subsidiary if widebody flights were back on the agenda.

EDIT: Pretty sure they are majority foriegn owned (by Bain Capital) right now and are still operating international flights.

Possibly. Yes they are foreign owned but there is a good chance that they do not have a single foreign controller (rather just a consortium of lots of Bain limited partners). If they had a single foreign controller, there is a chance foreign countries may not treat them as an Australian carrier (ie. will Japan view it as a Singaporean/New Zealand carrier). I do not know the answer to any of that.

My cynical view is that I am doubtful that any airline in the world will pay the price that Bain wants. There are reasons for why they are adamant on an IPO.

 

[Steven of Mysore]

I'm pretty sure they solved this problem when they had majority foreign ownership before by creating a majority Australian owned subsidiary that operated their international flights so I am pretty sure they could do so again. Pure speculation but if they wanted to be really tricky about it they could possibly have ANZ or SQ operate as a some kind of service provider to that subsidiary if widebody flights were back on the agenda.

EDIT: Pretty sure they are majority foriegn owned (by Bain Capital) right now and are still operating international flights.

True, but it's an Australian controlled entity.

 

[RooFlyer]

I presume a "Trade Sale" likely means another airline. You would have to expect that a full sale to another airline would change VA's strategy substantially for better or for worse so which one do you think would be best and why?

Yes, 'trade sale' would mean a sale to an entity in the same or similar business (say, airline or airport group).

But I've always thought that a sale, including an IPO would be 19.9% 'cornerstone trade investor' and the rest IPOed. And I've always thought (wished) the investor would be QR. And I've further thought that the early IPO scenario didn't happen because QR (or whoever) was saying 'hold on a bit' and that dragged on until the market for airline equity tanked with QF's share price last year.

With the new QR CEO, we have little idea about their on-going strategy.

But hey, here's a left-fielder - Lufthansa Group, with VA stretching to services to SIN to connect through.

 

[777]

I really think it would be better if other airlines didn’t get involved. History isn’t kind to this business on that front.

By "this business" do you mean VA or the airline industry more generally? Certainly it's true of VA but more recent history across the industry shows an emerging pattern of airline "groups" operating multiple brands across different countries. Obviously that's mostly in the EU where consilidation of once "national" airlines is the driver but it is becoming more and more common in the industry where regulation allows it.

 

[jase05]

QR or UA would be my preference but I doubt either will bother

 

[Doctore1003]

Bain may want an eye-popping price but the business isn’t strong enough and they won’t get it.

Virgin didn’t take any market share off Qantas during its troubles over the last year, and VA profits are miniscule. That’s why there’s no IPO (and Hrdlicka got sacked).

It could be a good opportunity for a Star Alliance member who believes they can manage the business better.

 

[777]

Bain may want an eye-popping price but the business isn’t strong enough and they won’t get it.

That's my reading of it as well. They either stick around for the medium term to have another go at fattening the pig for an IPO or they look to sell for what they can get before they have to sink a lot more capital into it.

It could be a good opportunity for a Star Alliance member who believes they can manage the business better.

You'd have to think a lot of airlines out there would think they could manage the business better if they can get it at the right price.

 

[bernardblack]

Yes, 'trade sale' would mean a sale to an entity in the same or similar business (say, airline or airport group).

But I've always thought that a sale, including an IPO would be 19.9% 'cornerstone trade investor' and the rest IPOed. And I've always thought (wished) the investor would be QR. And I've further thought that the early IPO scenario didn't happen because QR (or whoever) was saying 'hold on a bit' and that dragged on until the market for airline equity tanked with QF's share price last year.

With the new QR CEO, we have little idea about their on-going strategy.

But hey, here's a left-fielder - Lufthansa Group, with VA stretching to services to SIN to connect through.

If LHG eventually led to Star membership, I'm not wholly opposed to it. But they have a decent level of cooperation with SQ and I don't think SQ would want an extra competitor (not in their control) on AU<>SG.

I also don't want Velocity subsumed into Miles&More, or the current ancient junk LH widebody product subbed into VA.

 

[cove]

Singapore Air would be my pick.

 

[Doctore1003]

You'd have to think a lot of airlines out there would think they could manage the business better if they can get it at the right price.

To grow the business, Virgin really needs to offer something enticing like Star Alliance membership.

Also, I imagine any oneworld member or Emirates would face competition hurdles to acquiring VA.

 

[777]

I also don't want Velocity subsumed into Miles&More, or the current ancient junk LH widebody product subbed into VA.

Sadly "ancient junk widebody" is a widebody upgrade in this context.

 

[bernardblack]

Sadly "ancient junk widebody" is a widebody upgrade in this context.

You have a point.

 

[tdimdad]

What if it'll be a consortium of Skyteam airlines claiming this corner of the world?
Perhaps led by Virgin Atlantic and/or AF/KLM and China Airlines, and smaller stakes by Delta, Korean and/or China Eastern.

 

[Bagpuss]

Singapore Air would be my pick.

Why? They have failed with really every airline they have dabbled in. Essentially spun SilkAir back into the main airline and Scoot seems to be doing OK and probably because they allow a Scoot / SIA joint booking.

 

[docjames]

There are competing “bests”

Best for Bain = the highest bidder

Best for staff and contractors = most financially sustainable, with growth potential and fair EBA/pay approach(es)

Best for travellers = similar to staff, but add prepared to invest (sustainably) in the product


I’m struggling to see which airline would be prepared to buy it at the sort of price Bain will want.

They may also need a local partner to own a percentage as well. Again, who’s taking that on?