Virgin Australia Financially Secure? [Now in Voluntary Administration]

[HS-TQE]

Virgin Australia Mk II: "everything is on the table"

The new Virgin will look very different to the old Virgin...

www.executivetraveller.com

The ET article lists the obvious (such as reduced fleet and so forth).

As previous mentioned the article rehashes that most firms had varying "domestic-only" proposals such as 1-class LCC and 1-class hybrid.

Scurrah (who will remain to assist administrators in the process) has both not ruled out "limited" international flying, whether if VAi is reduced to one (LAX), maybe two destinations (e.g AKL and LAX), should VAi not get the chop, remains to be seen.

 

[jakeseven7]

Looks like Paul Scurrah will be on ABC 7:30 tonight with Leigh Sales - will be interesting to see what he discusses around the VA and future of Virgin.

https://twitter.com/i/web/status/1252412806357385217

I doubt we will get much in the sense of real information or juicy tit bits.

I predict it will be a PR exercise in assuring customers that VA will be be around, assuring staff the same, talk about FF points being in a separate company, lots of interest in buying VA, strong business opportunity, few side swipes at the competitors maybe, asking the government again for concessions for sure and defending/deflecting the fact the business has been run very poorly for a very long time*

*Edit: Which by the way is not PS's fault. But it is his problem!

 

[jakeseven7]

Update from PM after National Cabinet on VA administration:


"It is a road out. It is a road out and forward into the future, to ensure that the airline can emerge on the other side and we can have the strong, commercial, viable competition between two carriers in Australia, which the government believes is very important," he said.

"But I believe it will be a challenging road ahead and I think we all understand that, and I wish the administrator all the best. Nicholas Moore will be doing that work on behalf of the government to engage with the administrator.

"I am encouraged by the fact that there are already 10 parties who have expressed interest in working with the administrator regarding Virgin's future, and I think if we had not taken the actions that we have, and not demonstrated the patience that we have had, then what we may have ended up doing is sending $1 billion to foreign shareholders, and that was never part of my plan.

"My plan was always about seeing two viable airlines on the other side, two viable airlines that would be there not just one year from now but five or 10 years from now."

Essentially the same message there as the one we heard from Josh Frydenberg earlier – that Virgin has wealthy foreign shareholders and the government definitely doesn't want to bail them out.

 

[bigbadbyrnes]

if we had not taken the actions that we have, and not demonstrated the patience that we have had, then what we may have ended up doing is sending $1 billion to foreign shareholders, and that was never part of my plan.

I'm *not* a fan of the PM, and *am* a fan of VA, but I'll give him that.

When you're right, you're right.

 

[dajop]

Bit off topic VA's financial situation though

Not that off-topic, as it does help understand why "deep pocketed" foreign interests are not interested in helping "bail out" VA, but instead will write off their investment.

 

[odysseus]

Two of the VA foreign owners have incredibly rich foreign governments lurking behind them.
I don't believe for a second they don't have the money
They chose to 'do squat' and not tip their own money in - for whatever reason, and that is fine - their interests will now probably be zeroed out.

Air NZ will be thanking their lucky stars today - they have literally avoided AN part 2.

Those governments have already had to tip in massive funds (greater than Virgin wanted) to keep their own country's airline operating. Why on earth would they be tipping in even more money to support a stranded asset elsewhere, that they have no obligation to?

It's like some seem to think money grows on trees elsewhere - yet are so tight about it being used here where it's needed.

 

[odysseus]

Air NZ will be thanking their lucky stars today - they have literally avoided AN part 2.

You mean, that they have a government like theirs (willing to bail them out) and not a government like ours?

 

[jpp42]

Does anyone know what might happen to the "Travelbank" flight credits (and forward bookings that haven't been turned into travelbank yet). Is this the kind of thing the administrator can just "erase" with no recourse for the public ?

 

[HS-TQE]

Those governments have already had to tip in massive funds (greater than Virgin wanted) to keep their own country's airline operating. Why on earth would they be tipping in even more money to support a stranded asset elsewhere, that they have no obligation to?

It's like some seem to think money grows on trees elsewhere - yet are so tight about it being used here where it's needed.

Re NZ: I'd say most of the boardroom at NZ (and some of their rank and file) staff would be thanking Luxon for confronting EY/SQ/Borghetti over the CapEx blowouts/losses and subsequent divestment from VA, despite knowing that he didn't have the boardroom support to oust JB.

 

[jakeseven7]

Does anyone know what might happen to the "Travelbank" flight credits (and forward bookings that haven't been turned into travelbank yet). Is this the kind of thing the administrator can just "erase" with no recourse for the public ?

Unfortunately we don't know the answer to this yet.

Yes technically they could decide to do that, but would have to weigh up the extremely negative PR of such a move if they intended to continue on as an airline.

 

[odysseus]

Re NZ: I'd say most of the boardroom at NZ (and some of their rank and file) staff would be thanking Luxon for confronting EY/SQ/Borghetti over the CapEx blowouts/losses and subsequent divestment from VA, despite knowing that he didn't have the boardroom support to oust JB.

It isn't greatly relevant as the same coronavirus halted NZ traffic as well i.e. it wouldn't have made the situation worse of AirNZ.

And in any case if they had both, they could just abandon Virgin as they did Ansett last time!

 

[travel_bug]

Those governments have already had to tip in massive funds (greater than Virgin wanted) to keep their own country's airline operating. Why on earth would they be tipping in even more money to support a stranded asset elsewhere, that they have no obligation to?

I would also argue that for those airlines that have received a government bailout/loan, there would be conditions within the agreement as to where those funds can be spent e.g. operation or survival of the actual airline itself, and not any investments unrelated to its operations.

If they had the spare cash to assist VA, the argument could have been made to those airlines that received assistance was that they didn't really need that bailout anyway.

 

[clipped_wings]

I knew I'd find it somewhere. Alan Joyce had quite a lot to say back then. He wanted one rule for Qantas. And one for VA.

Apparently he still thinks that.

Hockey concedes Coalition 'dragged kicking and screaming' to help Qantas

The Government is being "dragged kicking and screaming" on the issue of whether to help Qantas, Treasurer Joe Hockey says, even as he continues to give strong indications that the airline will receive some assistance.

www.abc.net.au

 

[antycbr]

I knew I'd find it somewhere. Alan Joyce had quite a lot to say back then. He wanted one rule for Qantas. And one for VA.

Apparently he still thinks that.

Hockey concedes Coalition 'dragged kicking and screaming' to help Qantas

The Government is being "dragged kicking and screaming" on the issue of whether to help Qantas, Treasurer Joe Hockey says, even as he continues to give strong indications that the airline will receive some assistance.

www.abc.net.au

Apparently ScoMo has said:

“It is important that the competition regulator also, particularly as we are coming out, and the administrator works with the airline to ensure that it can go forward viably, that it is also not crushed by any anti-competitive actions that may be put in place by another player in the market.”

Wonder who the target of that is?

 

[Isochronous]

A basic roadmap for the resurrection of VA out of voluntary administration:

1. Tiger shuts down. There's no point maintaining a second brand, especially one with as horrid a reputation as Tiger.
2. Expensive interest payments disposed of for cents on the dollar or a conversion into equity. This will dramatically improve cash flow.
3. Cancel the expensive A330 leases signed at the top of the market in 2011. Either lease them back at a lower cost, do without them, or get other planes at a cheaper rate.
4. Cancel the 737 MAX order.
5. Flying to NZ has never been very profitable. Scale back or cancel these serves and focus international on USA, Japan, and the small Pacific Islands (but only to the extent that subsidies are available for Pacific services).
6. Bidding war amongst state governments for the location of the company HQ - this is free money on the table.
7. Cancel the licensing agreement with Branson so that VA no longer bleeds millions annually for the right to use the Virgin name. Only agree to remain branded as Virgin if the name can be used for free.
8. Buy the Ansett trademark and rebrand as Ansett Australia --> massive goodwill, free publicity, nostalgia etc. A marketer's dream!

 

[SeatBackForward]

10 parties interested in VA? Sounds like upto 9 of them could join together and form a third player in the market then.

 

[Cubiscus]

Apparently ScoMo has said:

“It is important that the competition regulator also, particularly as we are coming out, and the administrator works with the airline to ensure that it can go forward viably, that it is also not crushed by any anti-competitive actions that may be put in place by another player in the market.”

Wonder who the target of that is?

REX.....? So I'm guessing:

1. Tiger is gone for good, outside of the financials it has a bad reputation that doesn't add value to the group
2. The A330 contracts are voided
3. If they choose to continue VAi they use the 777s to LAX or potentially Japan, if that route was profitable
4. They'll take QLD up on their support offer
5. They'll wait for support from QLD or other states before restarting regional routes
6. The Virgin name will stay, but without the licensing fee

IF, and its a big if, the right owners do this well there's a decent change VA end up stronger out of this.

 

[Franky]

You won't have a choice through FEGS and Jobseeker if VA goes down totally unless the government amends this legislation. So you may as well pick the least worst option.

With respect, whatever it is you're talking about, is of no relevence to me.

 

[jakeseven7]

REX.....? So I'm guessing:

1. Tiger is gone for good, outside of the financials it has a bad reputation that doesn't add value to the group
2. The A330 contracts are voided
3. If they choose to continue VAi they use the 777s to LAX or potentially Japan, if that route was profitable
4. They'll take QLD up on their support offer
5. They'll wait for support from QLD or other states before restarting regional routes
6. The Virgin name will stay, but without the licensing fee

IF, and its a big if, the right owners do this well there's a decent change VA end up stronger out of this.

What is in point 6 for Branson to allow his brand to be used royalty free if his equity is wiped out?

 

[33kft]

What is in point 6 for Branson to allow his brand to be used royalty free if his equity is wiped out?

They might buy the rights for pennies on the dollar at the fire sale that he's about to have. Possibly with an island to use as a maintenance base, as well.