Virgin Australia Financially Secure? [Now in Voluntary Administration]

[Scarlett]

If VA survives, then I guess TT as a brand survives.

PS has said both will be back in the air. He's made all the TT drivers redundant but not the whole organisation, therefore TT liveried aircraft flown by VA pilots with TT cabin crew.

Will TT have its own AOC or will it fly under VAs? (certainly not to DPS...)

Best of luck to all in aviation right now!

 

[pauly7]

I'm not saying it will take 10 years to get there.. we are there already. I'm saying it may take 10 years for any of the airlines just to get back to where they were 4 weeks ago. There is so much damage at so many points that unless this was resolved in 3 months (not going to happen!) that they will be throwing away years of work and having to start from scratch.

I understand what you meant and I’m also disagreeing it will take 10 years to get back to where we were 4 weeks ago . Let’s check back in X years and see who was right (Hopefully me!)

Basically what is going to happen is this:

1) There are about 35, probably more , companies/research units working 24-7 to improve rapid diagnostics (one company just cracked a test, had it approved in a few weeks and producing millions of assays in normal times that would take 1.5 years.).

2) Same number working on treatments (multiple clinical trials fastracked, early success using available approved drugs already showing promise).

3) Even more working on a vaccine. This virus is not complex or efficiently lethal - it’s just NEW. That’s what has got us all on the hop.

4) Also research is being done into how many people actually have really caught it. It’s so mild to some people they would not even realise they have had it and are now unknowingly ‘immune/highly resistant’ and contributing to herd immunity.

After a period of lockdowns and all the above racing at light speed along governments are going to lift them after a relatively short period with some limitations and some restrictions still in place . A cautious public will be coaxed back out needing $ and being thrown $ from governments to get back to the ‘new normal’ life albeit I’m sure with some restrictions, some ’red zone’ flare ups now and then as well.

My bet is that all this happens in months rather than over years.

I suspect airlines will creep back up as well with this, over the next couple years to their former selves and VA will be one of them if their owners don’t sell them up the creek.

The bigger unknown is how quickly everyone can restart the economy. But with all the world basically trying to do that at the same time, all governments and corporates spending $ and China spending $$$$ I’m sure at the front of this pack, I’m sure Australia will be dragged along as well.

 

[Jack_OC]

I'm going to go with chargebacks will end up being a completely non material event for any of the airlines in the scheme of what is going on.

However with automation and CRms it will be interesting to see how the airline deals with the customer in the future when they try to rebook with said airline after having had a chargeback..

Are you suggesting that airlines might be preparing a blacklist of customers that they will refuse business from in the future? Seriously? Any airline that survives will gladly take money from wherever they can get it.

In any case, we are talking about people using a chargeback for a legitimate reason (i.e. when a merchant takes their money, but then doesn't provide the service and refuses a refund). As it happens, I'm ok with taking vouchers/credits for my bookings, but I wouldn't be if I had laid out $15k of my own cash on a family holiday, for example, which is exactly the situation that one of my friends is in. BTW, one of the few times I used the chargeback process was when I purchased an expensive gift online and never received it, from what turned out to be a company that went bust a short time later. This is exactly the kind of situation that the chargeback process exists for.

 

[HS-TQE]

I suspect airlines will creep back up as well with this, over the next couple years to their former selves and VA will be one of them if their owners don’t sell them up the creek.

Most airlines that will survive will likely be smaller than they were a few weeks ago.

In VA's case, that would depend if most of their "owners" even survive the current situation themselves (and not go belly up/file for liquidation).
Out of that lot, it's looking like only SQ will be getting a "government bailout" at this stage.

 

[ja1]

You kinda forgot the LEASE fees on 130 or whatever Tiger and Virgin parked planes - all in now payable in SUPER expensive USD.
...
Crippling airport fees for Terminal and lounges and office rent and facilities etc. You think privatised Airports are going to forgive those charges?

Plus the weekly wages for the ~1000 staff still there to fly a few planes about nationally.

...

There is no Virgin anymore - sorry.

Never forget - they were losing money BEFORE Corona hit.

I haven't forgotten but it's great someone has put an estimate (got a source for the actual number ? is it in any ASX filings or annual report?)

So a couple of points - why do you think the USD is super expensive ? Over the last year it's gone from a high of $0.71 to $0.60 yesterday. so around 15% (not 50%!) change. I'd have to assume that as part of the contract if VA behaved like most corporates they hedged their contract to minimize forex exposure.

Did you also assume that any of the airports aren't currently negotiating with some combination of VA/QAN and the Commonwealth ? Of course everyone is going to try to get the CW to pay but it seems very unlikely there isn't some kind of deal.

Just look at Premier investments announcement they are simply not going to pay any rent for the next 6 weeks as a guide to the sentiment.

In any case, it's super easy to make predictions based on the current events that every airline or 90% of airlines go under but I don't know that's accurate (while completely understanding where you're coming from and respecting your opinion based on what's going on - you could end up being completely right!)

I'd like to think that on this thread in this forum we're trying to get a good idea of what actions VA needs to take to survive and at the same time thinking about what its chances for survival are going to be.

I don't think it's 0% but I also don't think it's 100% but it's a number between those two.

So it's back to basics:

- They have a large reduction in income
- They have reduced expenses by a large amount as well
- They have fixed costs
- Some of which they will try to renegotiate or pause
- Others which aren't able to be changed
- They have liquidity but not much by way of hard assets (i.e planes) unlike their competitor
- Who just borrowed a chunk of money against that asset, so they have just reduced their assets by 20%

Lets also think about the difference between headline profit/loss (which VA have recorded a loss over each of the last 10 years) vs underlying profit, where pulling a number from memory, just in FY18 I think they made ~$110m in an underlying profit before applying all the accounting treatments that led to a headline loss.

So yeah I still think VA will be around.

I'm also a WP (currently anyway, with no way/reason to fly.. unless someone specifically needs a specialist consultant in another state) for the record and would be sad if that went away.

 

[ja1]

Are you suggesting that airlines might be preparing a blacklist of customers that they will refuse business from in the future? Seriously? Any airline that survives will gladly take money from wherever they can get it.

In any case, we are talking about people using a chargeback for a legitimate reason (i.e. when a merchant takes their money, but then doesn't provide the service and refuses a refund). As it happens, I'm ok with taking vouchers/credits for my bookings, but I wouldn't be if I had laid out $15k of my own cash on a family holiday, for example, which is exactly the situation that one of my friends is in. BTW, one of the few times I used the chargeback process was when I purchased an expensive gift online and never received it, from what turned out to be a company that went bust a short time later. This is exactly the kind of situation that the chargeback process exists for.

I'm suggesting if an airline has T&Cs and a customer goes straight to a chargeback to skip the T&Cs this is fraud. Read the front desk forums on how that ends up working out for hotels. They lose pretty much every time as the system is loaded in favour of the customer.

At that point it's entirely possible an airline has a DNR equivalent - will they still accept money from people who have defrauded them in the past ? Perhaps!

Your example is not equivalent - if you had purchased an expensive gift online and it was exactly what you ordered but you changed your mind and returned it and the T&Cs of what you purchased stated you would get a credit (not cash) or that you would be charged a restocking fee if there was nothing wrong with the product and you changed your mind - but you decided you should get it all back and initiated a chargeback to do so - that would be more accurate.

My mum is in exactly this situation - initial call to airline for flights that weren't cancelled at the time but unable to be used resulted in initial refusal of anything as fare was cheapest FoD with no ability to refund. Subsequent call (noting flights still weren't cancelled) resulted in airline offering full refund as a credit - which they didn't have to do at all but chose to do.

I am sure there are people who might have initiated a chargeback in those situations but I don't know that's right, whether it's $150 or $15000.

 

[Jack_OC]

Your example is not equivalent - if you had purchased an expensive gift online and it was exactly what you ordered but you changed your mind and returned it and the T&Cs of what you purchased stated you would get a credit (not cash) or that you would be charged a restocking fee if there was nothing wrong with the product and you changed your mind - but you decided you should get it all back and initiated a chargeback to do so - that would be more accurate.

I am talking about situations where the airline cancels flights and refuses to provide a refund, which is exactly what many of them are doing. This is precisely the same thing as the retailer taking my money but not giving me the product I paid for. Obviously when passengers decide they don't want to fly, or they are prevented from flying by their employer, the situation is different. But that's not what I'm referring to.

PS: I don't know why you refer to "a customer goes straight to a chargeback to skip the T&Cs". Again that is not what I'm referring to. I'm talking about people asking for a refund after the airline cancels their flights, but being refused. A chargeback is 100% appropriate in this situation.

 

[ja1]

PS: I don't know why you refer to "a customer goes straight to a chargeback to skip the T&Cs". Again that is not what I'm referring to. I'm talking about people asking for a refund after the airline cancels their flights, but being refused. A chargeback is 100% appropriate in this situation.

I don't disagree with you on that at all. I am asking if you think that chargebacks are being logged only in that situation ? Or do you think chargebacks are being initiated based on people getting credits who have decided they want or need to have the airfare returned in cash.. and refuse to accept where an airline isn't doing that.

 

[Must...Fly!]

Some may consider that the vultures have come out, again. Further downgrades from S&P

https://www.asx.com.au/asxpdf/20200327/pdf/44gfvwx8rhyvtr.pdf

Though it is a bit of a smack to Alan Joyce.

In our opinion Virgin Australia is fundamentally well managed...

The airline has successfully repositioned itself as a full service carrier...In our opinion, management has taken decisive action to improve the long-term viability of the airline, including resetting the cost base in loss-making parts of the business...

Absent the COVID-19 shock, we consider that management had appropriately focused its efforts on cash generation and maintained liquidity levels in line with most of its major Australian corporate and international airline peers.

 

[Jack_OC]

I don't disagree with you on that at all. I am asking if you think that chargebacks are being logged only in that situation ? Or do you think chargebacks are being initiated based on people getting credits who have decided they want or need to have the airfare returned in cash.. and refuse to accept where an airline isn't doing that.

The fact is that VA has cancelled (or is in the process of cancelling) almost all of its upcoming flights, but to my knowledge they are not offering refunds in most cases. The number of people who have bookings with VA on flights that are going ahead as normal would be very small at this point, so the number of people doing what you are concerned about must be miniscule. Conversely, the vast majority of people who had booked to fly with VA over the next few months cannot go ahead with their flights even if they want to. Those people should be entitled to refunds, and if VA refuses, they are absolutely within their rights to initiate a chargeback.

As I said, I personally am not going down this road, as I only had 2 bookings with VA (both domestic - total sum involved is a few hundred bucks). However, I definitely would be fighting for a refund if there were 5 figure sums at stake.

 

[ja1]

The fact is that VA has cancelled (or is in the process of cancelling) almost all of its upcoming flights, but to my knowledge they are not offering refunds in most cases.

I don't have any data that says they are NOT offering refunds. So in the interests of being fair to VA and not spreading FUD about them..

As their policy is to offer refunds, perhaps it's the case that they are trying to do so where possible and it's simply taking longer than it normally would, especially given they laid off most of their staff.

Specifically their policy is listed on their website and I've reproduced part of it below. VA has explicitly said they would refund under ACL and would do that even if they didn't have to under the law.



5. When we will provide you with a refund
At Virgin Australia, we value our customers and want to ensure you have the best experience with us. That’s why we have committed to provide you with the ability to obtain a refund in a range or circumstances regardless of whether there has been a major failure to comply with the Consumer Guarantees. Please see our Guest Compensation Policy for more information about the assistance and compensation we provide where we delay or cancel your service. For guests travelling on flights between Australia and the USA, please also view Virgin Australia’s Customer Service Plan.

Sometimes we will provide you with the ability to obtain a refund even when we have not failed to comply with the Consumer Guarantees. We do this because we value you as a customer and we want to ensure you get to your destination as quickly as possible.

 

[Jack_OC]

I don't have any data that says they are NOT offering refunds. So in the interests of being fair to VA and not spreading FUD about them..

As their policy is to offer refunds, perhaps it's the case that they are trying to do so where possible and it's simply taking longer than it normally would, especially given they laid off most of their staff.

Specifically their policy is listed on their website and I've reproduced part of it below. VA has explicitly said they would refund under ACL and would do that even if they didn't have to under the law.



5. When we will provide you with a refund
At Virgin Australia, we value our customers and want to ensure you have the best experience with us. That’s why we have committed to provide you with the ability to obtain a refund in a range or circumstances regardless of whether there has been a major failure to comply with the Consumer Guarantees. Please see our Guest Compensation Policy for more information about the assistance and compensation we provide where we delay or cancel your service. For guests travelling on flights between Australia and the USA, please also view Virgin Australia’s Customer Service Plan.

Sometimes we will provide you with the ability to obtain a refund even when we have not failed to comply with the Consumer Guarantees. We do this because we value you as a customer and we want to ensure you get to your destination as quickly as possible.

You're posting stuff from their standard T&Cs. This has apparently gone out the window under the current situation.

Clearly people wouldn't be talking on here about litigation or chargebacks if VA was happy to provide refunds. They have lots of information on their website that's specific to the current situation, and there is no offer to provide refunds - their standard policy is to provide travel bank credit even when they have cancelled the flights. For example:



They are also refusing to talk to anyone other than those booked on flights scheduled within 48 hours - while that's understandable, it means that most customers have no way of trying to negotiate anything more than the default VA offering as shown above.

 

[ja1]

You're posting stuff from their standard T&Cs. This has apparently gone out the window under the current situation.

Clearly people wouldn't be talking on here about litigation or chargebacks if VA was happy to provide refunds. They have lots of information on their website that's specific to the current situation, and there is no offer to provide refunds - their standard policy is to provide travel bank credit even when they have cancelled the flights. For example:

...
They are also refusing to talk to anyone other than those booked on flights scheduled within 48 hours - while that's understandable, it means that most customers have no way of trying to negotiate anything more than the default VA offering as shown above.

I'm posting stuff out of VA's T&Cs because they reference the actual law. You're suggesting that the law has somehow been suspended or doesn't exist any more? What's your evidence to suggest ACL has been revoked ?

How about we agree that there is insufficient data to make a determination as I don't think sufficient people have explicitly stated here that they are entitled to a refund and VA is refusing one.

And they are not refusing to talk to people any more than they are physically unable to deal with the volumes of people trying to talk all at the same time. So like any sensible organisation that delivers services that is overwhelmed they are using a triage approach to dealing with the most time sensitive issues relating to actual travel first.

Can you also please explain the issue where if the policy in the T&Cs at the time of purchase was to refund by way of a travel bank credit unless specifically requested otherwise or offered otherwise - and people knew this or ignored it.. why you'd expect to see any change now ?

For the record:

3. What happens if VA cancels or changes the timing of my flight prior to the day of travel?

• If we need to change or cancel your flight prior to your travel date, we will either contact you or your travel agent will contact you using the contact details provided in your booking (which may be by phone, text or email) to advise you or your nominated booking contact of the change to your flight details.
• If the new flight time is not suitable to you:
  • You can contact our Guest Contact Centre or your nominated travel agent to request a different flight time. We will use our best efforts to move you to another Virgin Australia service which is acceptable to you without charge.
  • If we cannot make suitable alternative arrangements, you may request a Travel Bank credit or a refund of the total price you paid for your impacted flight by contacting our Guest Contact Centre or your travel agent
• You may be entitled to claim compensation for reasonable costs you incur as per section 8 or under the Australian Consumer Law.

So VA explicitly note that you can ask for a refund - which you have said multiple times they are not saying. And it's there above. Your own words are that "no offer to provide a refund" and VA is offering a refund above. So which one is it ?

I am no fan of believing a corporation always does the right thing.. but I think we should at least try to be fair/objective to VA as they SEEM to be trying to do the right thing by their customers.

Which tying back to this thread is the way to ensure future financial stability when more normal operations resume..

 

[AustraliaPoochie]

Didn't realise/I forgot about their lease fees perspective.
Very good point on that one.

 

[ja1]

I've read the S&P report now and noted:

- They are conservative - but thats what you'd expect / want from a ratings agency
- That VA has pulled all the levers it can that they know about
- That there are no hidden surprises they are expecting to cause more damage (i.e well run)
- That their shareholders aren't going to do anything (by way of cash) and in some instances I think they have the book value of their shareholders already at $0 (so if VA folded it isn't like they're losing anything in accounting terms anyway)
- And the sole unknown at this point is whether the Australian government will step it or not
- And if it doesn't and this goes for more than 3 months (and it will) and nothing else happens or noone steps in then.. things are not looking good for VA's survival.

So you have to figure that PS has done what he can and is now waiting for the CW to think about its next step and while he'd like something sooner rather than later, the CW has so many whole sectors in crisis on the finance side plus a whole actual health crisis at the same time there isn't likely to be any short term answers.

And to read AJ's words a bit more kindly - if the government does something like spend $1 in the sector he's suggesting that QAN should get at least $0.67 of it rather than $0 because 'the other group needed it more'. Which is not a bad place to start your negotiations.

If I were the government I'd want both of them around and would want to figure out a way to support QAN and VAH. They are both largish employers in their own rights and whose services are used by a whole range of other industries where they can accelerate or reduce the rate of return back to 'as normal' operations of the economy at the end of the current crisis.

 

[Jack_OC]

@ja1, I'm certainly not suggesting that ACL has been revoked - what a bizarre comment.

I'm saying that VA has introduced a new policy regarding how they are handling bookings on flights that they have cancelled due to the COVID-19 situation, and they are not offering refunds. This is published on their own website, so it's a bit weird that you're refusing to accept that is the case. They have even added an alert at the top of the Virgin Australia Guest Compensation Policy page (the page you've been quoting from) to make sure people know there are special policies in place right now:



When you click on that link, you get directed to a further link that takes you to a form requesting a Travel Credit Request. There is no option to request a refund or anything else, and no way of talking to anyone at VA right now unless you are booked to travel within 48 hours. For anyone who is not booked to travel within 48 hours, VA is offering two options: (i) accept a travel credit, meaning VA keeps their cash; or (ii) do nothing, meaning VA keeps their cash.

I'm not even trying to have a go at VA here - I imagine they simply don't have enough cash to offer mass refunds and so they probably feel they have to adopt a policy that is much less favourable to their customers than their standard policy. However, individuals are not necessarily willing or able to forego the cash either. All I'm saying is that I think it's quite reasonable for people to expect a refund if they want one (if the airline cancels their flights), and if VA doesn't offer that, a chargeback is perfectly justified.

 

[pauly7]

Has anyone actually completed a successful chargeback to VA yet?

One of my employers has quite a large $ booking with them and is considering it.

 

[Carrots]

You kinda forgot the LEASE fees on 130 or whatever Tiger and Virgin parked planes - all in now payable in SUPER expensive USD.

Virgin and Tiger leases fees in 2020 will be about $A500 MILLION. (Qantas owns most aircraft and just got a $ BILLION line of credit on them - so they are safe)

Do you honestly expect they'll not be out negotiating amended repayment options?

And more so that the financier(s) would not be agreeable to this?

Sound business logic will dictate financiers renegotiating terms with airlines globally in the short to medium term (ie for loan changes from today through to perhaps 12 months from now) as it is in their best interests to ensure some payment is made and the airlines stay afloat. The alternate is repossessing (fleets of) planes that will be potentially worth no more than spare parts, if not less, given the downturn we'll see in demand for aircraft both new and used.

As they say, a bird in the hand is worth two in the bush.
Or rather a plane in the air is worth more to a financier than a fleet parked in Arizona.

 

[ja1]

@ja1, I'm certainly not suggesting that ACL has been revoked - what a bizarre comment.

I'm saying that VA has introduced a new policy regarding how they are handling bookings on flights that they have cancelled due to the COVID-19 situation, and they are not offering refunds. This is published on their own website, so it's a bit weird that you're refusing to accept that is the case. They have even added an alert at the top of the Virgin Australia Guest Compensation Policy page (the page you've been quoting from) to make sure people know there are special policies in place right now:

View attachment 211003

When you click on that link, you get directed to a further link that takes you to a form requesting a Travel Credit Request. There is no option to request a refund or anything else, and no way of talking to anyone at VA right now unless you are booked to travel within 48 hours. For anyone who is not booked to travel within 48 hours, VA is offering two options: (i) accept a travel credit, meaning VA keeps their cash; or (ii) do nothing, meaning VA keeps their cash.

I'm not even trying to have a go at VA here - I imagine they simply don't have enough cash to offer mass refunds and so they probably feel they have to adopt a policy that is much less favourable to their customers than their standard policy. However, individuals are not necessarily willing or able to forego the cash either. All I'm saying is that I think it's quite reasonable for people to expect a refund if they want one (if the airline cancels their flights), and if VA doesn't offer that, a chargeback is perfectly justified.

Hey, I'm trying to make sense of your comments in terms of bizarre comments. You've been saying VA aren't offering refunds when they say they are.. now you're saying they may in fact be offering refunds but with one specific example you're saying you can't see how to get a refund. So they aren't..

Then you've said VA don't have enough cash to pay refunds - so you're saying they are trading while insolvent. Can you provide any evidence of this as that's a serious charge.

The law is fairly clear on this - refunds are a part of doing business and if they didn't have the ability to provide refunds where they are obligated to under the law (if they choose to provide refunds where they don't need to, clearly that's going above and beyond).

We're back to the main topic - is VA financially secure? At the moment the answer seems to be yes. For the next 24 hours, 1 week or whatever. Are they financially secure for the next 3 months ? longer ? I don't think anyone knows the answer to that but we've seen responses on both sides..

 

[deebens]

Maybe just Durie talking out his rump at The Australian

Singapore Airlines has raised $US10.5 billion through Singapore Inc, which raises the question - is a takeover of Virgin Australia on the horizon?
The early commentary has put the airline’s capital raising as more of a rescue package as airlines worldwide reel from the blow of coronavirus.

But Singapore Airlines, which has a 20 per cent stake in the Australian carrier, has of all the Virgin shareholders the most to gain from a takeover.

NoCookies | The Australian

www.theaustralian.com.au