Virgin Blue could go bust: redeem Velocity points now?

[bits]

Hi all,

Saw this report on SMH about the possibility of VB going bust if oil prices continue to climb and VB is unable to dramatically raise airfares.
Virgin Blue has to hike fares to survive, JPMorgan says

What are people's views on the prospect of this happening?

If you had Velocity points, would you continue to save them to redeem for air tickets later or redeem now for store cash cards (which offer less value per point)?

 

[maninblack]

Toll must be rueing the day they decided to get into the airline business.

Maybe NZ can pick up some early deliveries on the 777's :!:

 

[pauly7]

Hi all,

Saw this report on SMH about the possibility of VB going bust if oil prices continue to climb and VB is unable to dramatically raise airfares.
Virgin Blue has to hike fares to survive, JPMorgan says

What are people's views on the prospect of this happening?

If you had Velocity points, would you continue to save them to redeem for air tickets later or redeem now for store cash cards (which offer less value per point)?

Its certainly a bit touch and go... I myself am waiting for Virgin Blue to announce the measures they will be taking to try turn the business around (a la QF Groups announcements over the last two weeks).

Will see the general reaction to that and make a call, but I'm certainly not transferring any points to Velocity from my C/C anymore.

 

[Mal]

I'm not too concerned about Virgin Blue at this stage, or my Velocity points. ASX disclosure and other regulatory measures should help keep things in perspective. I do think that people associated with Virgin Blue do need deep pockets though!

However, Frequent Flyer points earn no interest, depreciate and suffer other issues which reduce their value. Why keep them there if you're not going to use them?

 

[thegurio]

I personally am not worried about any airline going under - lets face it, for most of us, we have to go where we are going regardless so you havent "paid" for them, you have just recieved them.

And i would also imagine that the government wouldn't like to see it dissapear and become a one horse town and niether would the consumer so i think its a while off yet.

 

[codash1099]

And i would also imagine that the government wouldn't like to see it dissapear and become a one horse town and niether would the consumer so i think its a while off yet.

Substitute "Ansett" for "Virgin Blue" and you'll see that that statement isn't borne out by history.

 

[AnonymousCoward]

Substitute "Ansett" for "Virgin Blue" and you'll see that that statement isn't borne out by history.

When Ansett went bust didn't we have two other start-up airlines (including DJ) flying as well?

 

[dajop]

When Ansett went bust didn't we have two other start-up airlines (including DJ) flying as well?

And we don't now? Tiger is a start-up (somewhat comparable to DJ in 2001, but substitute MEL for BNE) and by the time of AN's collapse, Impulse had already been folded into QF, to form the basis of the JQ we know and love/hate today.

 

[Fluid-Flyer]

Tiger is a start-up (somewhat comparable to DJ in 2001, but substitute MEL for BNE)

Interesting analogy... although if DJ releases massive route reductions/cancellations (probably hitting Qld and possibly Tas the hardest?), I reckon it will be mere minutes until Tiger announces a new hub in South East Queensland! AND a huge domestic expansion (maybe even routes into Sydney from SEQ & Melbourne). JQ would then need to respond. Interesting to see if TT have managed to come to LCC terms with BNE airport (who would be likely to lose a hub airline - if the title of this thread eventuates) or if TT will go with OOL?

 

[codash1099]

In reality, the likelihood of DJ going bust is extremely low. Although under some pressure, they are a well run airline, something that couldn't be said of Ansett. They may have to trim here and there, defer aircraft deliveries and the like. Morgan's time period in which fares must be raised is quite long and I can't see DJ not responding to an obvious need.

Short term pain? Sure. Long term danger? Unlikely.

 

[ANstar]

They have something like $800M CASH in the bank.

EVEN if oil was at $200 per barrel (which it is not) and they didnt raise any prices (which they have recently) they are estimated to lose about $200M per year

So they certainly have a bit of liquidity - not going out of business any time soon.

JPMorgan rejects Virgin insolvency talk - Breaking News - Business - Breaking News

Is an article from today - basically JP Morgan clarifying their stance.

Seems some mainstream media went into sensationalist mode and didnt actually print what they thought their forecast for Virgin was - just the WORST case scenario.

"This scenario does not represent our view of Virgin Blues future earnings," he said.
JPMorgan expects Virgin Blue to report fiscal 2008 profit of $82 million, followed by $19 million in fiscal 2009 before rebounding almost 600 per cent to $133 million in fiscal 2010.
"The scenario in question reflected an unlikely combination of factors, including permanently high fuel prices and no increase in airfares or any other revenue or cost saving measures," the finance house said.
"Our actual forecast for Virgin Blue, which form the basis of our neutral recommendation, reflect very different assumptions including higher air fares over several years and lower jet fuel costs."

 

[clifford]

They have something like $800M CASH in the bank.

EVEN if oil was at $200 per barrel (which it is not) and they didnt raise any prices (which they have recently) they are estimated to lose about $200M per year

So they certainly have a bit of liquidity - not going out of business any time soon.

JPMorgan rejects Virgin insolvency talk - Breaking News - Business - Breaking News

Is an article from today - basically JP Morgan clarifying their stance.

Seems some mainstream media went into sensationalist mode and didnt actually print what they thought their forecast for Virgin was - just the WORST case scenario.

Ah, Crighton-Browne strikes again.

 

[pauly7]

They have something like $800M CASH in the bank.

EVEN if oil was at $200 per barrel (which it is not) and they didnt raise any prices (which they have recently) they are estimated to lose about $200M per year

So they certainly have a bit of liquidity - not going out of business any time soon.

JPMorgan rejects Virgin insolvency talk - Breaking News - Business - Breaking News

Is an article from today - basically JP Morgan clarifying their stance.

Seems some mainstream media went into sensationalist mode and didnt actually print what they thought their forecast for Virgin was - just the WORST case scenario.

There were some other articles today with Brett Godfrey coming out fighting all the reports as well (finally! - he could have saved some of the share price by coming out sooner) so that was good to hear.

He mentioned options like selling aircraft, deferring new aircraft and moving capacity around. Interestingly and I hope not omninously, Virgins America flights weren't mentioned, so hopefully still on track.

 

[stuartfaz]

There were some other articles today with Brett Godfrey coming out fighting all the reports as well (finally! - he could have saved some of the share price by coming out sooner) so that was good to hear.

He mentioned options like selling aircraft, deferring new aircraft and moving capacity around. Interestingly and I hope not omninously, Virgins America flights weren't mentioned, so hopefully still on track.

If they're going to focus on profitable routes, you would think that their US routes would become a priority rather than a hindrance. I don't think VA is in any danger.

The assumption of a relatively successful VA may actually explain some of the predicted fiscal 2010 rebound.

To the OP, I doubt DJ is going anywhere anytime soon. Like most of the industry they've been hit by fuel prices and will need to adapt, but that is certainly not beyond them.

 

[straitman]

EVEN if oil was at $200 per barrel (which it is not) and they didnt raise any prices (which they have recently) they are estimated to lose about $200M per year

So they certainly have a bit of liquidity - not going out of business any time soon.

ANstar,

I've just had a quick look and can't find it right now, but Jet A1 was $US165 per barrel two weeks ago and has gone up since then :!:

Are you referring to oil prices here OR Jet A1 prices as there is quite a difference :?:

 

[oz_mark]

Qantas don't seem to think DJ will be going away

IN a rare display of unity, the chief executives of Qantas and Virgin Blue have criticised growing speculation that high fuel prices would force an Australian airline out of business.

Qantas and Virgin fly united | NEWS.com.au