Virgin Blue worth less than a 777

[NYCguy]

Airline shares are poison. Avoid them.

 

[nlagalle]

Makes me wonder if Air NZ would be interested (or could afford to be) in DJ's Pacific Blue operations? [Virgin Blue Group currently operating as a LCC, NWC & FSA in different markets, seems a less than cohesive strategy.]

Look what happened last time Air NZ had ownership of an Australian airline.

 

[pauly7]

Agreed,and a lot of the start up costs associated with V Aust would probably be due to them having to rebook passengers after the Boeing strike delayed the start,and one would think that their (Virgin Blue) lawyers would be in discussion with Boeing about compensation.

Please show where the rebooking cost is split out as such in the report - I can't find it? I believe the majority of charges are just the pure and simple cost of starting up a long haul arm (it costs a bit!).

Also I think you will find that usually Boeing have it written into their contracts that delays due to labour strikes do not usually incur compensation... so I doubt there will be much coming from that quarters.

If anything I think the delays may help DJ, I expect they will defer some deliveries if anything (as BG has said).

I would think that SQ has enough trouble at the moment with loss making Aussie airlines via it's stake in Tiger.

Tiger Oz = drop in a very big SQ ocean. I somehow doubt it is their primary concern. Infact they may see opportunity (as it has been speculated before) to merge the two, move DJ upmarket to properly compete with QF - at the moment it is caught in no mans land, and then use Tiger against JQ. DJ did toss around with launching their own very LCC not so long ago remember!

 

[pauly7]

Is it also accurate to say DJ's cash flow improved, whereas QF's actually dropped from $800M to 350M in the same period?

But if you look at the net revenue to PBT conversion - DJ increased NR by about 12% but PBT down by about 68% whilst QF increased NR by about 2% and PBT down by the sameish 68% suggests that QF is still managing to extract a better margin from its business - it implies that DJ are just flogging the seats off for whatever. Top line.

 

[Nigelinoz]

Please show where the rebooking cost is split out as such in the report - I can't find it? I believe the majority of charges are just the pure and simple cost of starting up a long haul arm (it costs a bit!).

Also I think you will find that usually Boeing have it written into their contracts that delays due to labour strikes do not usually incur compensation... so I doubt there will be much coming from that quarters.

If anything I think the delays may help DJ, I expect they will defer some deliveries if anything (as BG has said).

Don't think I actually said it was in the report,I said-
"a lot of the start up costs associated with V Aust would probably be due to them having to rebook passengers .,I never said it was in the report so why raise it?
I didn't say they were claiming that,it was just an opinion of mine,as to the compensation issue Virgin has already indicated that they will be discussing the cost of the delay to their operation with Boeing,whether there are clauses in the contract that prevent such a claim I don't know,but I recall Virgin saying the issue would be discussed at a later date.

 

[brissyflyer]

It would appear that the share market overall is happy with VBA. The share price rose 3.5c today when the all ords dropped 19 points.

After market close there are 375 buyers after 12 million shares vs 235 sellers of 7.7 million shares.

 

[pauly7]

Probably a silly question, but in all the reports they say DJ are parking around 5 aircraft amongst firing 400 ppl. Where are they storing their 'temporarily retired' aicraft does anyone know? Just out of interest...

I imagine they will probably be all 737s as it appears they are downsizing some routes to the E-jets.

 

[albatross710]

But if you look at the net revenue to PBT conversion - DJ increased NR by about 12% but PBT down by about 68% whilst QF increased NR by about 2% and PBT down by the sameish 68% suggests that QF is still managing to extract a better margin from its business - it implies that DJ are just flogging the seats off for whatever. Top line.

I think that Jetstar are hurting VB. For the those first years after the Ansett collapse, VB was offering 60% of the Qantas service for 80% of the price. As long as their price was below the Qantas price they were getting business, but they were offering much less than what they were competing against.

With Jetstar in the market now, the consumer is comparing VB to Jetstar prices and able to also buy Qantas at comparable prices as long as they plan ahead ie 21 days out I can usually get A Qantas seat for the same/less as a VB seat.

I think you also have to factor improved/targeted competition into VBs woes.

I'b be thinking that the middle of an airline slump is the time to buy airline shares. When everyone is selling...good time to buy.

Alby

 

[Nigelinoz]

I'b be thinking that the middle of an airline slump is the time to buy airline shares. When everyone is selling...good time to buy.

Only if you can afford to sit on paper losses for a while,you would think.
there is a saying about the only way to make a small fortune out of running an airline is to start with a big one,and at the moment that goes for airline shares as well.
At the moment I would not be putting any of my hard earned into airline shares,that's for certain.

 

[albatross710]

Only if you can afford to sit on paper losses for a while,you would think.

I'd think that new investors wouldn't be sitting on any losses...they have been taken by the existing shareholders. The longer the price stays down, the more shares turnover and the more people will have bought in at the new price.

Airlines are cyclical beasts.

as hard as it is, now is the time to buy in the cycle when everyone can present reasons for not buying them. As soon as the reasons return, then everyone else will buy in.

 

[NM]

I'b be thinking that the middle of an airline slump is the time to buy airline shares. When everyone is selling...good time to buy.

Perhaps the end of the slump may be better than the middle of the slump

 

[Nigelinoz]

I'd think that new investors wouldn't be sitting on any losses

If you buy a share at $2.00 today and it drops to $1.00 tomorrow you have a choice of either selling at $1.00 and taking a loss or waiting to see if it climbs again.
Your argument would appear to be that if you buy now while the price is low it can only go higher,most analysts I have read recently suggest that there is a lot of downside in airlines shares to come.

 

[NM]

If you buy a share at $2.00 today and it drops to $1.00 tomorrow you have a choice of either selling at $1.00 and taking a loss or waiting to see if it climbs again.
Your argument would appear to be that if you buy now while the price is low it can only go higher,most analysts I have read recently suggest that there is a lot of downside in airlines shares to come.

The best way to end up with a small fortune from airline ownership is to start with a large fortune.

 

[Nigelinoz]

The best way to end up with a small fortune from airline ownership is to start with a large fortune.

Beat you to that one mate,
"

NIGELINOZ,there is a saying about the only way to make a small fortune out of running an airline is to start with a big one

 

[NM]

Beat you to that one mate,
"

That's what happens when skimming through a thread! Then again, that one is probably worth a repeat posting! Seems pretty pertinent at this time. I expect quite a few invested fortunes are looking somewhat reduced as both QF and DJ share prices struggle.

 

[albatross710]

Perhaps the end of the slump may be better than the middle of the slump

Certainly agree on that. How to know the end of the slump?

I just know the number of times I've looked back on my portfolio and wondered why I didn't buy more in the slump.

It seems that every time I have waded into the maret in the last year, it just keeps getting worse.

You would have to think that with Virgin's current share price it is a 'cheap' way to get into the Australia airline market, marketing and licences in place, air operators certificates, relationships, management in place etc etc. Biggest problem is lack of interested buyers as everyone has their own problems in their own airlines.

 

[NM]

Certainly agree on that. How to know the end of the slump?

If I could reliably predict the answer to that one I would not need to work any more!

 

[albatross710]

If I could reliably predict the answer to that one I would not need to work any more!

In the last year, I've already invested three times "at the end of the slump".

 

[pauly7]

You would have to think that with Virgin's current share price it is a 'cheap' way to get into the Australia airline market, marketing and licences in place, air operators certificates, relationships, management in place etc etc. Biggest problem is lack of interested buyers as everyone has their own problems in their own airlines.

Surely a government bank rolled airline like Emirates or Singapore must be casting the ruler about... although I guess even governments are in trouble atm!

How about an AFF consortium to buy DJ? What would your first decision be hahah.

 

[Nigelinoz]

How about an AFF consortium to buy DJ? What would your first decision be hahah.

Pretty simple,hire as good a spin doctor for DJ that you are for Qantas,pauly7.