Virgin Blue shares plunge

[Nigelinoz]

The ASX shows the shares went as low as 17.5 cents today and are currently at 0.18.on volume of 4,322,894 shares.

 

[jakeseven7]

Virgin Blue (like many airlines) is presumably projecting future cash flow challenges. Qantas (like many companies) has/is dealing with a similar issue by issuing new shares.

One of Virgin Blue's minority shareholders may be stifling the company's ability to do something similar, as he doesn't want to dilute his holding past his magic number, nor does he want to put any more of his own cash into the business. Presumably this has caused the extremely dramatic announcement (from the CEO) that DJ can no longer afford to participate in the discount end of the market. (If this is followed through on - strategically it could mean a vast number of routes and staff being ditched by Virgin Blue, as it concentrates on recreating itself as a lean/mean business traveller machine).

do you think RB is blocking an equity issue?? surely he has a longer term perspective than that... after all 25% of something is better than 25% of nothing! i think if it came to the crunch he would allow it (i wonder if dj mgt are annoyed about the whole veto thing...?)

the issue is that qf will probably maintain its hold on business to a large extent and jq now operating their cost base 20% lower than dj - can afford to pick up the ever increasing price concious traveller.... i think the pincer movement so often described may hurt them even more in this environment....??

 

[Platy]

do you think RB is blocking an equity issue?? surely he has a longer term perspective than that... after all 25% of something is better than 25% of nothing! i think if it came to the crunch he would allow it (i wonder if dj mgt are annoyed about the whole veto thing...?)

the issue is that qf will probably maintain its hold on business to a large extent and jq now operating their cost base 20% lower than dj - can afford to pick up the ever increasing price concious traveller.... i think the pincer movement so often described may hurt them even more in this environment....??

Watch him buy when he's ready and then make another $400 million when the stocks recover

 

[Nigelinoz]

Watch him buy when he's ready and then make another $400 million when the stocks recover

And if I had the sort of wealth that he has I would do exactly the same thing.

 

[DJ737]

Hi there

Can you buy 1 share in a company? That's about all i can afford at the moment:mrgreen:

.....And how do they give me change from 20c for an 18c share

Cheers
DJ737

 

[Platy]

Hi there

Can you buy 1 share in a company? That's about all i can afford at the moment:mrgreen:

.....And how do they give me change from 20c for an 18c share

Cheers
DJ737

Time for you to join QFF/OneWorld???

 

[cove]

I think that RB has very little left as the UK businesses and US businesses are going very badly.He should have sold the lot!
Billionaire one day a lot less the next.
Dont expect to see him in a very rich list any time soon.

 

[straitman]

I think that RB has very little left as the UK businesses and US businesses are going very badly.He should have sold the lot!
Billionaire one day a lot less the next.
Dont expect to see him in a very rich list any time soon.

Does anyone seriously think that will stop him having fun :?:

He'll have fun working his way back to the top :!:

 

[ANstar]

I think that RB has very little left as the UK businesses and US businesses are going very badly.He should have sold the lot!
Billionaire one day a lot less the next.
Dont expect to see him in a very rich list any time soon.

Hmmm even if he lost 50% which is the rough share market loss, he would still have something liek $3B.... so he is hardly a millionaire yet lol

 

[comint]

do you think RB is blocking an equity issue?

No idea. Perhaps they would be struggling to raise any interest in the current market anyway.

surely he has a longer term perspective than that... after all 25% of something is better than 25% of nothing! i think if it came to the crunch he would allow it…

As pointed out previously, Virgin Atlantic & Virgin America both have special needs at the moment. If Virgin Blue was to be taken over, or gained a new cornerstone investor, the likely candidates are foreign airlines. I imagine they would not be interested in doing so without naming & management rights. (e.g. DJ becomes Silk Air, Delta Downunder, Lufthansa Pacific or Emirates Australia.)

the issue is that qf will probably maintain its hold on business to a large extent

There are definitely strategies for taking on Qantas in this market. However, they would involve bold and definitive changes to the way DJ does business, something Virgin Blue’s extremely conservative management culture may not be able to achieve.

i think the pincer movement so often described may hurt them even more in this environment....??

Dunno, I think all this “pincer movement” stuff is Qantas spin. In any market there are many competitive positions for businesses to take, this concept of binaries being the only options is false.

 

[Platy]

Dunno, I think all this “pincer movement” stuff is Qantas spin. In any market there are many competitive positions for businesses to take, this concept of binaries being the only options is false.

Maybe. BUT every personal domestic flight need I have looked at in the last month or so DJ has come out more expensive than both QF and JQ.

IMHO they have lost the plot (even worse than QF).

Don't be fooled by the DJ spin (any more or less than the QF spin)!!! :shock:

No cash flow = no business...it's that simple.

 

[Nigelinoz]

I think that RB has very little left as the UK businesses and US businesses are going very badly.

If Branson has "very little left" then I would love to be in his shoes having so little,remember also that he has more business interests than airlines,he could probably walk away from his airline interests tomorrow and in some respects he'd probably be better off.
I don't think he has much to worry about,certainly not where the next meal is coming from,which unfortunately is probably the situation that some of his former Virgin Blue employees are in at the moment.
edited to add: Maybe that last line is a bit melodramatic but you get my point,I'm sure.

 

[comint]

Maybe. BUT every personal domestic flight need I have looked at in the last month or so DJ has come out more expensive than both QF and JQ.

One might think that DJ is already collecting data on which routes it will be able to maintain in an environment without discounting, and those which it can’t.

Competitively, if they follow the strategy I am surmising - all “CityFlyer” routes will remain, some key secondary routes may have a market large enough for them to hold their own (e.g. Townsville, Hobart…), all routes where QF brand has been completely replaced by JQ would go overnight (to ensure Tiger’s stimulated entry into those markets).

 

[Platy]

One might think that DJ is already collecting data on which routes it will be able to maintain in an environment without discounting, and those which it can’t.

Competitively, if they follow the strategy I am surmising - all “CityFlyer” routes will remain, some key secondary routes may have a market large enough for them to hold their own (e.g. Townsville, Hobart…), all routes where QF brand has been completely replaced by JQ would go overnight (to ensure Tiger’s stimulated entry into those markets).

Indeed a scenario I was postulating with a friend earlier tonight.

BUT that only works in absentia of competition...QF has a cash reserve and DJ doesn't...this is QF's big chance to bury the competition...it's gonna be very interesting to watch the fireworks...(and very bad for many individual ordinary folk)

 

[Nigelinoz]

I think it's a bit early to be talking about burying Virgin,airlines everywhere are struggling and virgin is no exception but if I was Alan Joyce I wouldn't be opening the champagne to celebrate DJ's demise just yet.

 

[Platy]

I think it's a bit early to be talking about burying Virgin,airlines everywhere are struggling and virgin is no exception but if I was Alan Joyce I wouldn't be opening the champagne to celebrate DJ's demise just yet.

Nor would I, Nigel, but I would have a glint in my eye and a spring in my step and be sharing a guinness with my best strategic and marketing brains

 

[brissyflyer]

Indeed a scenario I was postulating with a friend earlier tonight.

BUT that only works in absentia of competition...QF has a cash reserve and DJ doesn't...this is QF's big chance to bury the competition...it's gonna be very interesting to watch the fireworks...(and very bad for many individual ordinary folk)

since when does DJ have no cash reserve, the latest report shows 526m in the bank.

 

[Platy]

since when does DJ have no cash reserve, the latest report shows 526m in the bank.

Anybody want to know how to double their cash?!

 

[Nigelinoz]

As I see it the big problem for DJ is that they seem to be caught in no man's land.
They don't seem to be able to compete with the other carriers in terms of low cost airfares so they
will lose out on the budget traveller market but at the same time they don't have a good enough product to attract the corporate traveller.
At least if JQ started to suffer then Qantas always has the premium end of the market to help sustain them .
I think Virgin need to try and define where they want to be in the market and stay there and if that means cutting a lot of capacity for a couple of years whilst keeping fares low then so be it but they can't market themselves as a LCC if they are being consistently undercut by the likes of Jetstar and Tiger.

 

[dajop]

Asbut at the same time they don't have a good enough product to attract the corporate traveller.

I agree is a problem - what in what way don't they have a good enough product?

Many think of product as the in air product - and personally I think that is adequate for a typical corporate traveller - OK you have to pay for food, but is that such a big deal? Maybe prepaying for meals (ala JQi) would help the corp traveller, but maye not. Perhaps the other exception is lack of widebody capacity MEL/SYD and east coast/PER. People tend to prefer widebodies to narrower planes - but then again the last three QF flights I've taken MEL/SYD have been on a 738 and two 734's.

In the wider sense though - the thing that DJ lacks is being part of a broader alliance. The frequent flyer program is not good enough for the wider corporate market. Sure it has status etc, but it lacks international acceptance/coverage. Until such time as the people who fly MEL/SYD every week for the whole year start getting benefits on their overseas trips, then they will will continue to fly QF. Even then, probably only a star alliance like arrangement or extending benefits with their current program partners (EK, MH) would work, but Skyteam may be a challenge due to a lack of broad Australian access to Asia/Europe. Secondly, lack of extended network to offer corporate deals for may also be an issue.

Anyway, I still think DJ will be around for a while yet. If they go under I think there will be a lot of airlines elsewhere in the world with stronger competition and tighter markets than Australia, that will go under first.