QFflyermelbourne
Member
- Joined
- Feb 7, 2012
- Posts
- 306
This is doing the rounds on the internet. I have no idea of it's credibility but anyone who has followed the Virgin story the past 24 months would not find it hard to believe...
Anyone with thoughts or further information?
Virgin Australia is facing a “severe cash flow crisis” with “very limited options” for recovery, according to an internal report seen by Australinea, due to low margins, a large amount of debt, unsuccessful hedging strategy and its current fleet financing obligations.
Virgin has limited options for raising equity and a poor outlook for its domestic business. The carrier has just under $3 billion (AUD) in debt maturing between FY2017 and FY2020 and almost no unencumbered assets to leverage with 109 aircraft of its 117 leased. The report shows Virgin Australia facing severe difficulty financing this debt as it matures, with the carrier looking toward HNA Group, and possibly also Nanshan Group, for assistance in its financing requirements. If either are unwilling to come to the table, the report suggests Virgin has “very limited options” moving forward.
While it remains unlikely Virgin is at any risk of insolvency – its shareholders have too much at stake – it reflects an undesirable outcome for the carrier, and a poor vindication of Mr Borghetti’s strategy.
In August 2016, Virgin Australia reported it had hedged 90% of its expected fuel consumption for the remainder of FY2017 – but did not disclose at what level. Earlier in 2016, the carrier noted it had hedged at an effective rate of $77 (AUD) per barrel during FY2016 with a participation rate of 14%.
The flow-on benefit of lower oil prices has gone almost unnoticed in Virgin’s accounts; at least two financial years have passed with statements that benefits from more favourable exposure to falling oil prices would commence “next financial year.”
Full link: https://australinea.com/virgin-australia-faces-financing-crush/
Anyone with thoughts or further information?
Virgin Australia is facing a “severe cash flow crisis” with “very limited options” for recovery, according to an internal report seen by Australinea, due to low margins, a large amount of debt, unsuccessful hedging strategy and its current fleet financing obligations.
Virgin has limited options for raising equity and a poor outlook for its domestic business. The carrier has just under $3 billion (AUD) in debt maturing between FY2017 and FY2020 and almost no unencumbered assets to leverage with 109 aircraft of its 117 leased. The report shows Virgin Australia facing severe difficulty financing this debt as it matures, with the carrier looking toward HNA Group, and possibly also Nanshan Group, for assistance in its financing requirements. If either are unwilling to come to the table, the report suggests Virgin has “very limited options” moving forward.
While it remains unlikely Virgin is at any risk of insolvency – its shareholders have too much at stake – it reflects an undesirable outcome for the carrier, and a poor vindication of Mr Borghetti’s strategy.
In August 2016, Virgin Australia reported it had hedged 90% of its expected fuel consumption for the remainder of FY2017 – but did not disclose at what level. Earlier in 2016, the carrier noted it had hedged at an effective rate of $77 (AUD) per barrel during FY2016 with a participation rate of 14%.
The flow-on benefit of lower oil prices has gone almost unnoticed in Virgin’s accounts; at least two financial years have passed with statements that benefits from more favourable exposure to falling oil prices would commence “next financial year.”
Full link: https://australinea.com/virgin-australia-faces-financing-crush/
Maybe less....
