What is Virgin Australia's strategy (post-administration)?

[jase05]

Link comes up 404 but I can see it's paywalled via Google.

Slight serious note, NZ still has loans to pay to their government which they took out during the pandemic, so any third attempt at the Australian market via VA 2.0 will be a long while off. NZ's current management will be aware of the Ansett and Virgin 1.0 failures under different managements and egos at NZ, AN and VA 1.0 during those eras.

Noticed this bit in the article

Sources say that discussions have been held between New Zealand’s national carrier and Virgin in recent weeks, although they do not suggest that the pair have necessarily progressed towards a deal at this stage.

But DataRoom understands that the plan would involve a back door dual listing here and across the Tasman of Virgin into Air New Zealand, providing an expansive trans-Tasman network for both groups in what would be somewhat of a move back to the future.

 

[jakeseven7]

It’s not the world’s stupidest idea. VA2 will never have the scale it once did, they’ve basically just ruled out long haul for a very very long time, so that means NZ could do that part and VA2 could just play it safe as a lower cost domestic airline with some short haul to leisure / budget holiday destinations and hand off anything more premium to NZ. No conflict.

 

[HS-TQE]

It’s not the world’s stupidest idea. VA2 will never have the scale it once did, they’ve basically just ruled out long haul for a very very long time, so that means NZ could do that part and VA2 could just play it safe as a lower cost domestic airline with some short haul to leisure / budget holiday destinations and hand off anything more premium to NZ. No conflict.

Considering Air NZ still has loans to pay to their government to pay off COVID related debts, it's likely this proposal would be sometime off. Likely medium term, if at all.

As for Long Haul, it's already covered by UA / Qld Government (ex-BNE), and QR/SQ for anything west.

NZ at best would be covering mainly their own country and anything in the Pacific west of Fiji, including Honolulu.

 

[jakeseven7]

Noticed this bit in the article

Sources say that discussions have been held between New Zealand’s national carrier and Virgin in recent weeks, although they do not suggest that the pair have necessarily progressed towards a deal at this stage.

But DataRoom understands that the plan would involve a back door dual listing here and across the Tasman of Virgin into Air New Zealand, providing an expansive trans-Tasman network for both groups in what would be somewhat of a move back to the future.

Imagine if Airpoints took over from Velocity

 

[HS-TQE]

Imagine if Airpoints took over from Velocity

blergh.

Any 'Expansive Trans Tasman' network will be just VA pulling out of ZQN and NZ carrying 100% of the cost of operating the entire Trans-Tasman network, the only 'expense' is putting back a VA code on it.

It won't be old JV if it all, especially if it's a merger/takeover proposal by NZ. Basically back to the future after the failed 'merger' with Ansett Australia

 

[QLDAviator]

If anyone with access to the australian wants to copy paste the article it would be much appreciated!

 

[dajop]

It’s not the world’s stupidest idea. VA2 will never have the scale it once did, they’ve basically just ruled out long haul for a very very long time, so that means NZ could do that part and VA2 could just play it safe as a lower cost domestic airline with some short haul to leisure / budget holiday destinations and hand off anything more premium to NZ. No conflict.

Wasn't it rumoured that the reason NZ sold out of VA1 was because NZ wanted it to adopt the strategy that Bain has adopted for VA2 - retreat from international, not be over extravagant with the product offering domestically. Which didn't align with the now burnt other investors.

 

[HS-TQE]

Wasn't it rumoured that the reason NZ sold out of VA1 was because NZ wanted it to adopt the strategy that Bain has adopted for VA2 - retreat from international, not be over extravagant with the product offering domestically. Which didn't align with the now burnt other investors.

Pretty sure that was Luxon and co's view at NZ. Of course with Borghetti and EY's Hogan being BFFs, along with SIA's Choon Phong. Luxon was clearly the "third wheel" in the 'relationship'.

 

[roby]

Imagine if Airpoints took over from Velocity

Airpoints is infamous for its elimination of reward seats (I, X classes). I don't think consumer pressure on this side of the ditch would allow this to happen. If it were to happen, I would imagine the merged program retaining the core structure of Velocity and we would be doing New Zealand flyers a big favour.

 

[Saab34]

Both sides of the ditch have new management so you can forget the dramas from the past.

Would be a huge boost for the Velocity program if they dump airpoints and Velocity take over.

 

[HS-TQE]

The AF KLM merger has 'Flying Blue' as their merged FF program.

Having the potential merged FF program as Velocity (with Airpoints folded into Velocity) run out of Sydney could potentially face scrutiny by ComCom NZ

 

[HS-TQE]

Also mentioned has been a option of VA looking at buying out Rexy

Going back here, I'm not sure spending millions to 'buy back' the leases to 6 of their former oldest jets, in which 3 of those 6 were reported on the internet to be 'Hanger Queens', along with acquiring a large bunch of Saabs which are due for replacement would be a wise use of CapEx for either Private Equity owners or most other airlines.

 

[jase05]

Going back here, I'm not sure spending millions to 'buy back' the leases to 6 of their former oldest jets, in which 3 of those 6 were reported on the internet to be 'Hanger Queens', along with acquiring a large bunch of Saabs which are due for replacement would be a wise use of CapEx for either Private Equity owners or most other airlines.

Agreed. I still maintain VA should have looked at partnering with Rex though and you would’ve got a decent network but that ship has sailed

 

[jakeseven7]

Both sides of the ditch have new management so you can forget the dramas from the past.

Would be a huge boost for the Velocity program if they dump airpoints and Velocity take over.

Agree and Rex is really really turning the screws on VA2 now… they are basically the exact same offer, going after the same target consumer at a similar price point in the same planes (literally! Most of them anyway).

Bain doesn’t have the $ or stomach to take VA2 internationally properly - which to be honest is probably a wise decision, so a scaled up trans tasman airline with NZ doing the premium and long haul work and dragging VA2 into Star Alliance on paper makes a lot of sense.

 

[HS-TQE]

Bain doesn’t have the $ or stomach to take VA2 internationally properly - which to be honest is probably a wise decision, so a scaled up trans tasman airline with NZ doing the premium and long haul work and dragging VA2 into Star Alliance on paper makes a lot of sense.

Not sure if 'scaled up' is the right words to use. It's basically (the) NZ (side) doing 100% of the work under their current schedule with potential for marginal upgauge/frequency increases at best and paying 100% of the cost of TransTasman under the proposal.

Passengers connecting beyond NZ to USA/Canada will likely to be low yielding at best and numbers likely to be marginal. Hence the UA (and AC) partnership for East Long Haul work, plus the Queensland Government taxpayers partially subsidising the ex BNE services on UA. South America via AKL might be useful for VA/VFFs however.

 

[jakeseven7]

I still maintain VA should have looked at partnering with Rex though and you would’ve got a decent network but that ship has sailed

Stranger things have happened.... With VA2, Rex Jet and soonish Bonza (+ Jestar but in a slightly different position due to backing of QF group) all fighting it out at the mid/bottom level of the market, someone is going to get hurt.

None of them really have the scale, and at the end of the day the owners will tolerate the losses / meagre returns for so long. There could be a forced marriage...

I wouldn't rule it out - like you say on paper makes sense, maybe lots of red ink on that paper for a period of time will see some more rational heads come together, depsite the animosity that Rex has for VA2 right now.

 

[HS-TQE]

REX is also in the process of acquiring NJE, so there's another bunch of different aircraft types that either Bain (or any carrier) won't be willing to deal with right now.

Especially with Bain the process of reducing aircraft types across the group with the Airbus A320 subfleet (used in WA FIFO and thin PER-Interstate routes) being their only non-Boeing aircraft and the chatter that the VARA and VAA AOCs will eventually be merged as there would be little point keeping the VARA AOC for the Airbus subfleet.

 

[dajop]

Going back here, I'm not sure spending millions to 'buy back' the leases to 6 of their former oldest jets, in which 3 of those 6 were reported on the internet to be 'Hanger Queens', along with acquiring a large bunch of Saabs which are due for replacement would be a wise use of CapEx for either Private Equity owners or most other airlines.

If they were to buy out Rex, surely the main objectives would be an investment in securing margin for VA, and not what Rex itself has to offer. If Rex continue to build a small, but ongoing, presence in the jet market, then the main impact for VA is probably not an erosion of market share but more an erosion of yield. Having a ready made regional network with a number of government contracts for operating regulated services could be a small bonus (but just a bonus), without the need for other investment.

 

[bernardblack]

Yeah, my big fear with some sort of NZ/VA merger would be that Velocity is dragged down to Airpoints' level. But if Velocity were left more or less intact and inherited Star membership through NZ ownership, that would be a substantial upside.

Of course NZ's own offering is not premium (no domestic J even), and while the long-haul fleet has all-aisle flat J, it's well behind the times and the new cabins are still some years away I think? (And even then the upgraded product doesn't look groundbreaking.) So I understand it's not a Bain priority but I'd still be happier to see a boutqiue VA long-haul widebody operation to LAX/SFO and HND.

 

[deepblerg]

As much as I don't like the sound of a VA/NZ merger it really does seem to make sense and will enable both to compete effectively against QF on trans-tas. The VA/QR partnership also makes even more sense post-VA/NZ merger too.