Virgin to lose A330's and B777's - become mid range airline - really?

[HS-TQE]

Virgin was heading for administration Covid or not. Things must have been bad early 2020 as they dropped the axe on the Tiger Airbus fleet overnight in February, sacked all those crew, as well as reducing the network by 40%. Certainly did appear they wanted out from that brand.

I don’t know how PS could have wriggled his way out of near $10b in debt. He had the same idea as Bain, they needed to clear the deck, however PS had no cash left, that plan was about 5 years too late. I thought I read he was talking to Deloitte in late 2019 about options citing concerns continuing operations in the medium term.

The Velocity buyback made cash matters worse, however I guess they own it fully now. The Chair should really be investigated for why she didn’t put it into Administration in prior years, selling off Velocity certainly raised alarm bells. Executives trying to save face no doubt.

Borghetti/EY/SQ/et al selling the Bowen Hills HQ and leasing it back also started to ring alarm bells as well (That was on top of mortgaging the 737s and 777s). Bain surprisingly actually coughed up the $$ to terminate that lease to move to VA's current South Bank co-located HQ with Flight Centre.

 

[Bagpuss]

Borghetti/EY/SQ/et al selling the Bowen Hills HQ and leasing it back also started to ring alarm bells as well (That was on top of mortgaging the 737s and 777s). Bain surprisingly actually coughed up the $$ to terminate that lease to move to VA's current South Bank co-located HQ with Flight Centre.

They moved out of Bowen Hills during administration. They wouldn't have paid a cent to break the lease because appointed administrators can terminate unfavorable contracts without cost.
(Hence why aircraft lessors accepted fly by hour as administrators could have terminated all of them as they did with then entire A330 fleet.)

Also when Bain divest their investment in Virgin Australia you will get the comments of the asset stripping done by Bain and they making billions. The asset stripping (as previously commented by a number of others) was already done many years ago. All Bain are doing is playing a waiting game to divest at an appropriate time to make a financial return.

Everyone seems hates private equity, but want their superannuation to maximize. Make come as surprise on where your superannuation funds are invested folks ;-)

 

[HS-TQE]

They moved out of Bowen Hills during administration. They wouldn't have paid a cent to break the lease because appointed administrators can terminate unfavorable contracts without cost.
(Hence why aircraft lessors accepted fly by hour as administrators could have terminated all of them as they did with then entire A330 fleet.)

Also when Bain divest their investment in Virgin Australia you will get the comments of the asset stripping done by Bain and they making billions. The asset stripping (as previously commented by a number of others) was already done many years ago. All Bain are doing is playing a waiting game to divest at an appropriate time to make a financial return.

Everyone seems hates private equity, but want their superannuation to maximize. Make come as surprise on where your superannuation funds are invested folks ;-)

Virgin Aus had very minimal assets when it went to administration. Thus people had to point out on social media that 'Asset-Stripping' was already done by SQ, EY, HNA et al (e.g the sale/lease back of the Bowen Hills HQ, mortgaging the 737s and 777s, et al) before VAH was sold off to Private Equity.

I think the only unencumbered assets (other than VFF) is most of the Fokkers and the sole legacy Skywest A320), the sole legacy Airbus was already in the progress of being sold off during administration and the F100s are now in the progress of being phased out.

The decision by PS to buy back the 30% of VFF off the Australian Private Equity mob didn't help matters financially prior to administration.

 

[Bagpuss]

The decision by PS to buy back the 30% of VFF off the Australian Private Equity mob didn't help matters financially prior to administration.

If I correctly recall, the Australian Private Equity mob had a saleback clause which they pulled the trigger on. The decision to buy it back would have made the long term financial sense at the time.

 

[Saab34]

I guess it worked for Bain, $623m in notes became creditors while they exited the admin process, with Bain owning VFF 100%. Not great for the bondholders but.

I was just reading, unaware, but Virgin even borrowed money from a Velocity trust, $150m. They never paid that back.

You could write a book around the financials within this business, everywhere you look someone was robbing someone to pay for this and that. When you look back, you really do wonder how the heck it was allowed to go on for so long. The Kiwi's certainly picked that up.

 

[oz_mark]

I was just reading, unaware, but Virgin even borrowed money from a Velocity trust, $150m. They never paid that back.

I believe Bain repaid it as part of the process.

 

[dajop]

The Kiwi's certainly picked that up.

They should know, they wrote the playbook for it

 

[Saab34]

I believe Bain repaid it as part of the process.

Good. Covers our points from what I gather, in the event the place falls over again.

Bit like taking funds from Super. Really paints a picture how bad the balance sheet was.

 

[Bagpuss]

I was just reading, unaware, but Virgin even borrowed money from a Velocity trust, $150m. They never paid that back.

Yes, they did because it was a secured loan. With administration you can't get out of any secured debt, though you can release the security. Hence with mortgaged 777's they released the aircraft which was the security.

Virgin Australia's savior was always going to be administration to release it from it's key liabilities : ATR leases, A330 leases and mortgaged B777's no longer needed for long-haul.

I believe there was a comment VBY and VBZ (long term -700's) remain mortgaged. I expect there could be a few mortgaged -800's and they don't outright own any aircraft except the F100's which are going.

 

[Bagpuss]

Good. Covers our points from what I gather, in the event the place falls over again.

They always have the option of selling Velocity as a part of whole. Velocity is really the main asset they own and I think was valued at around $1bn during administration. When VA collapsed the shareholders accepted they were going to get nothing from their shareholding but were hopefully of something from Velocity.
Key to remember Velocity as a company never went into administration.

 

[HS-TQE]

Yes, they did because it was a secured loan. With administration you can't get out of any secured debt, though you can release the security. Hence with mortgaged 777's they released the aircraft which was the security.

Virgin Australia's savior was always going to be administration to release it from it's key liabilities : ATR leases, A330 leases and mortgaged B777's no longer needed for long-haul.

I believe there was a comment VBY and VBZ (long term -700's) remain mortgaged. I expect there could be a few mortgaged -800's and they don't outright own any aircraft except the F100's which are going.

IIRC, Bain kept the 50/50 proportion on the 737-800s, half are leased, the other half are mortgaged (ie formerly owned outright).

The older mortgaged 737-800s were let go alongside the mortgaged 777 fleet.

 

[jakeseven7]

Virgin was heading for administration Covid or not.

Correct, and we have our own insiders on AFF who flagged this to us all months and months before Covid had even escaped the wet market / Chinese lab .

We were very lucky to get this insight, I still go back, read that thread and laugh at the people who attacked those people who were pointing out what was pretty plainly obvious. A lot of those people have moved on

 

[HS-TQE]

They always have the option of selling Velocity as a part of whole. Velocity is really the main asset they own and I think was valued at around $1bn during administration. When VA collapsed the shareholders accepted they were going to get nothing from their shareholding but were hopefully of something from Velocity.
Key to remember Velocity as a company never went into administration.

Pretty sure I recall the previous (major) owners were involved in 'robbing', sorry I mean borrowing $150million from Velocity. So I'm sure they wouldn't be getting anything financially from Velocity apart from an increase of members for their own FF programs.

 

[Saab34]

Velocity is a dead duck without Virgin though. Velocity would join Virgin in its grave should that ever happen.

 

[dajop]

Velocity is a dead duck without Virgin though. Velocity would join Virgin in its grave should that ever happen.

Can think of at least two programs that survived the collapse of their airline, JetPrivilege in India (which morphed into InterMiles) and MilleMiglia in Italy (which survived Alitalia). Not sure if Velocity would survive so easily though.

 

[Saab34]

Perhaps Rex might buy it


(Anyhoo I think VA will be around for a while yet, until someone piles up the debt again)

 

[HS-TQE]

Perhaps Rex might buy it


(Anyhoo I think VA will be around for a while yet, until someone piles up the debt again)

If VA ends up with multiple airline owners again (especially with the 'usual candidates' including a former owner) once the first Bain IPO passes, it's probably going to be set up for a 'history repeating' moment.

 

[Digicola]

If VA ends up with multiple airline owners again (especially with the 'usual candidates' including a former owner) once the first Bain IPO passes, it's probably going to be set up for a 'history repeating' moment.

I think SQ has finishing dipping its toes in the VA pool. I think it was primarily to protect its interests but realistically if VA wants to have a presence in Asia SQ is really the next best option (first being having its own network). As long as the partnership stays mutually beneficial it will last and thats good enough for SQ. Lets not forget their stakes got washed out last time and they have enough on their plates with the Air India situation.

EY and HNA aren’t really in a position to invest elsewhere these days, besides their respective strategies seem to have changed. Not sure about Nanshan group but overall overseas investments from China seem to have slowed because of currency restrictions.

My guess is we might see QR take a small share, they seem to be doing this with partner airlines in key markets.

 

[jase05]

My guess is we might see QR take a small share, they seem to be doing this with partner airlines in key markets.

My thoughts too but I also wouldn’t be shocked if United showed a bit of interest

 

[ThatMrBlake]

Ex-VA Boeing 777 VH-VPD ferried from Toowoomba to Brisbane this afternoon. Most likely off to Qatar.

https://www.flightradar24.com/data/airc ... d#2f09b40e