Virgin Australia Financially Secure? [Now in Voluntary Administration]

[eastwest101]

Correct. They have a bond payment October 2021? Which is about $500 million. So if there is little travel this year they are simply slowly sinking.
According to reports 50% of their expenditure is fixed so they are burning through money. Still gotta pay those airfcraft leases and pay for them to be maintained etc.

Yes - it all seems to about who/which stakeholders are going to get how much of a haircut:

Remaining ASX listed VA shareholders - definitely the first to take a 100% haircut = total destruction of investment

Remaining other airline shareholders such as SQ EY HU and Nanshan unless one/some of them stump up more money = total destruction of investment

Richard Branson - most likely a big haircut otherwise a total destruction of investment in a rebrand

Aircraft Leasors - obviously a big target on their backs now - you would think fairly large haircuts

Lenders - unless they are willing to put more money in probably cents in the dollar return

Other non-customer travel bank unsecured creditors/suppliers - e.g. airports, contract ground handling, catering, maintenence contractors etc expecting haircuts but depends really how much "fat" is in the existing contracts to cut/renegotiate, some might have a bit (i.e. Airports) some may not.

Staff - probably a 50% reduction in head office, operationally staff reductions will be commensurate with aircraft reductions

Tigerair - brand is worthless, future uncertain, looks like a liability to any takers - strip any owned assets (B737s?) back to the new relaunched airline

VARA - WA resource contract work and fleet worth keeping unless Qantas make a very generous offer (unlikely) ATR operations too small to bother with now

The Virgin Brand itself - comes with debt baggage, but also some loyalty and goodwill vs cost of rebranding, will be balanced against pocketing all the travel bank money, there are other less tangible things that may also be assosciated with the culture and staff, what parts of the "culture" do you want retained? And what parts sacrificed?

Velocity - worthless without an operating airline - difficult to predict given the funds spent recently to buy it back, can't sell it to anyone without being able to demonstrate a viable airline partner in the future. Velocity members - probably some devaluation of points

Freight division - needs the economy of scale of an operating airline to be a viable business, otherwise its a non-core drag



As others have said - ideal time to be in administration, because some government funded flying is continuing thus keeping a small core fleet and staff operational while the airline market is essentially shut down, need to get it done before domestic travel is reopened.

 

[tomlee1986]

Part of me believes Virgin have on purpose made a possible bailout political with Queensland now responding to NSW's possible headquarters move to western Sydney.

With talks of Chinese airline involvement and now states possibly bidding against each other its turning into one of those auctions people get carried away with only to walk away thinking what did I just buy.

I like to stay on topic.. but if the Chinese airline got involved... I would cancel my velocity membership immediately - this is just because I do not trust my data going to the CCP (Chinese government), and besides China themselves may not even have enough money to buy this airline as they are already struggling with their own airlines such as Hainan air and its subsiderys

 

[Must...Fly!]

The Australian is reporting "it's on" with a board meeting happening today

- International Airline + Private Equity
- Creditor Scheme of Arrangement or temp administration
- Government backed provided PRC based firms excluded apart from debt
- Continuing INT+DOM service

https://www.theaustralian.com.au/business/dataroom/virgin-australia-airline-private-equity-partnership-eyes-buyout/news-story/6bff600143fdaf133fa3c93959710a1b

That seems to be a pretty good solution from the bullet points.

 

[jase05]

Wonder who the interested airline is.
VA definitely getting some media attention now. If they do survive I wonder if they will take up the NSW government offer and move to SWZ eventually. Still a long way off completion but could be a game changer, I know that we can hardly wait for its opening

 

[jase05]

I like to stay on topic.. but if the Chinese airline got involved... I would cancel my velocity membership immediately - this is just because I do not trust my data going to the CCP (Chinese government), and besides China themselves may not even have enough money to buy this airline as they are already struggling with their own airlines such as Hainan air and its subsiderys

You don’t think the Chinese government have enough money to buy VA?
VA would cost them pocket change in comparison to what they spend on other investments

 

[antycbr]

I like to stay on topic.. but if the Chinese airline got involved... I would cancel my velocity membership immediately - this is just because I do not trust my data going to the CCP (Chinese government), and besides China themselves may not even have enough money to buy this airline as they are already struggling with their own airlines such as Hainan air and its subsiderys

You are aware that HNA is Hainan Airlines which own 20% of VA - if the PRC government they wanted your data they would have access to it already as HNA is both an equity owner as well as an airline partner.

HNA is owned by the Government of Hainan Province.

 

[tomlee1986]

You don’t think the Chinese government have enough money to buy VA?
VA would cost them pocket change in comparison to what they spend on other investments

I don't think so - because I hear Chinese news often (because of my Chinese heritage) - many state owned enterprise had went bust before Covid 19 - so I do not believe that Chinese government has the money to pay to be honest

You are aware that HNA is Hainan Airlines which own 20% of VA - if the PRC government they wanted your data they would have access to it already as HNA is both an equity owner as well as an airline partner.

HNA is owned by the Government of Hainan Province.

As to this reply... I can say this.. at the moment - VA is still in Australia control - not exactly Chinese enterprise, but with further involvement from Chinese government - then it will fall into Chinese hands

 

[antycbr]

As to this reply... I can say this.. at the moment - VA is still in Australia control - not exactly Chinese enterprise, but with further involvement from Chinese government - then it will fall into Chinese hands

The Federal Government up until now has refused to assist. VA are looking for a solution and if the government refuses the market solution (which may include a PRC investment) then they really need to butt out or stump up the money.

I am *not* saying that a PRC based investment is ideal here.

 

[tomlee1986]

The Federal Government up until now has refused to assist. VA are looking for a solution and if the government refuses the market solution (which may include a PRC investment) then they really need to butt out or stump up the money.

I am *not* saying that a PRC based investment is ideal here.

I agree with you there... I would prefer this airline to continue even "with" PRC investment too.. but for me personally, I would leave velocity once this investment occurs. This is because with my Chinese heritage, I do NOT trust my data going to China and CCP... I fear what my data would be used in China

 

[woodborer]

The Federal Government up until now has refused to assist. VA are looking for a solution and if the government refuses the market solution (which may include a PRC investment) then they really need to butt out or stump up the money.

Have to agree. It's a bit rich to go 'find a market solution', then go 'but not that one'. Intrigued as to who the airline might be

 

[Must...Fly!]

Would be happy for the government to take a "no PRC" approach as long as they provided backstop financing if no other realistic option presented itself.

But as on The Australian article...let the speculation run wile on "an airline".

You'd suspect it's likely to be none of the existing shareholders as they all said no to an initial equity injection. But you'd also expect that it would be someone securely financed (likely government, or at least significant government backing?) and with a strategic exposure to the Australian market.

There are quite a number of possibilities

 

[antycbr]

I agree with you there... I would prefer this airline to continue even "with" PRC investment too.. but for me personally, I would leave velocity once this investment occurs. This is because with my Chinese heritage, I do NOT trust my data going to China and CCP... I fear what my data would be used in China

I guess even if you don't fly VA for your personal reasons, you will still benefit if you're on QF by the continued existence of VA through reduced fares. However if enough people do this and fly QF only VA will collapse again.

 

[TheInsider]

I guess even if you don't fly VA for your personal reasons, you will still benefit if you're on QF by the continued existence of VA through reduced fares. However if enough people do this and fly QF only VA will collapse again.

Capacity or price wars again?!

 

[antycbr]

Capacity or price wars again?!

I don't think so, more putting an upper cap on the extortion that QF can charge. Both airline groups seemed to have achieved a fairly happy equilibrium domestically and I dont think any new investor would be willing to fund a capacity war in an environment where demand has been crushed.

 

[tomlee1986]

I guess even if you don't fly VA for your personal reasons, you will still benefit if you're on QF by the continued existence of VA through reduced fares. However if enough people do this and fly QF only VA will collapse again.

I never said no to VA existence - but I am just advising people what would happen if Chinese airlines gets majority ownership of this airline...

 

[woodborer]

Capacity or price wars again?!

If international doesn't fire up anytime soon, Qantas may not be in a position to wage a huge war.

 

[jase05]

Would be happy for the government to take a "no PRC" approach as long as they provided backstop financing if no other realistic option presented itself.

But as on The Australian article...let the speculation run wile on "an airline".

You'd suspect it's likely to be none of the existing shareholders as they all said no to an initial equity injection. But you'd also expect that it would be someone securely financed (likely government, or at least significant government backing?) and with a strategic exposure to the Australian market.

There are quite a number of possibilities

Yeah, the lazy journalists run with the usual suspects but as I said yesterday I wouldn’t be surprised if someone comes from left field.

 

[woodborer]

Yeah, the lazy journalists run with the usual suspects but as I said yesterday I wouldn’t be surprised if someone comes from left field.

Imagine if someone like, oh I don't know, Swire Group, came swinging in

 

[tomlee1986]

Imagine if someone like, oh I don't know, Swire Group, came swinging in

Big problem.. Swire group already has Cathay Pacific - already in One world Alliance with Qantas

 

[jase05]

Imagine if someone like, oh I don't know, Swire Group, came swinging in

I prefer my fantasy of QR coming in