VA half yearly results to 31 December 2018

[Bagpuss]

VA should just stick to domestic and TT, leave all the international stuff to SQ, DL and others.

I recall when JB joined he was reports he was “24 hour aways” from closing all international operations. Though I think it made a surprise profit so he stuck with it.

If they can get revenue J class passengers and mainly fill economy the A330’s are more probably profitable flying PER > MEL/SYD/BNE than to HKG. I’m still surprised they aren’t selectively used on Auckland services.

That said I’m hoping to do the Virgin Round The World J class fare so that will need the continuation of the HKG route.

 

[Melburnian1]

...the TT business is a complete cluster with a poor mix of fleets and pilots....

Hope the new leadership can pull it together for VA because I don't fancy being Jetstarized if Qantas's only competitor disappears..

I haven'r read every one of eastwest101's contributions but almost without exception those I cast an eye over are stellar. Great analysis.

eastwest101, could you explain the 'pilots' comment re TT? Are you suggesting they're inexperienced, poorly trained, too young, a mix of nationalities that don't meld well together, a mix of experienced versus insufficient hours to be considered that, or something else?

For a while TT's network punctuality had improved. Not the case in the last few months, but I do not know why the drop off.

 

[Melburnian1]

I recall when JB joined he was reports he was “24 hour aways” from closing all international operations. Though I think it made a surprise profit so he stuck with it....That said I’m hoping to do the Virgin Round The World J class fare so that will need the continuation of the HKG route.

Management at VA is about to change (at the top) but don't underestimate with many airlines (including those owned by governments) how egos and a desire to be 'among the big boys' as ozstamps put it that are a key factor in airlines flying international routes.

For instance QF may well still lose money on the London routes but it persists for reasons of history but prestige and ego also may come into play.

 

[eastwest101]

I haven'r read every one of eastwest101's contributions but almost without exception those I cast an eye over are stellar. Great analysis.

eastwest101, could you explain the 'pilots' comment re TT? Are you suggesting they're inexperienced, poorly trained, too young, a mix of nationalities that don't meld well together, a mix of experienced versus insufficient hours to be considered that, or something else?

For a while TT's network punctuality had improved. Not the case in the last few months, but I do not know why the drop off.

Nothing wrong with the pilot group at TT, not casting any aspersions at all onto them, apparently the problem is that they were all trained on the A320 originally, and then they trained some to convert to B737 but a lot of them were poached and the re-fleet and training processes have had some hicupps and delays and the accountants got rid of some of the A320s faster than they told the training guys so they have a heap of A320 pilots and not enough A320s to keep them busy, and a bunch of B738' aircraft without enough B738 pilots to fly them, and then the ones they did have ran out of hours, hence the F100 substitutions in some cases. In true TT tradition as per the Bali fiasco, more of a management and fleet planning stuff-up with the result being the worst of both worlds! High costs and duplication of running two types and reduced flexibility.

 

[Zanzara]

Excellent review. Great read. Thanks for putting it together. I'm pretty sure I recall VA flying to coughet and JNB from MEL when they first got their B777s. Unfortunately, those routes didn't last long.

Yes, I agree, when it all goes well, VA have an excellent product. There's certainly room for improvement when cancellations occur. Whilst in Queenstown, staff from their handling agent (Aerocare) who were dressed in VA uniforms were completely out of their depth and couldn't cope. It's at times like those that you see how good an airline operations are. The coughpit radio malfunctions and Business class and platinum ffs were simply told 'come back tomorrow' we can't help you, we won't put you in hotels and we won't put you on NZ or JQ - even though there were seats available.

My recent experience of priority boarding for LAX from MEL was a bit of a farce too. Shame. I really hope they stick around, improve and continue to give QF a run for their money...

 

[HS-TQE]

Why on earth Virgin Australia fly to the USA, when a major partner Delta (plus several other deep pocketed carriers) do each day, when inbound USA tourism on all carriers has fallen due to Trump era, is a mystery to me. ​

LAX/USA, If I recall Correctly was started back in the Virgin Blue days under the 'V Australia' moniker with Brett Godfrey at the helm (JB's predecessor). Back then Virgin Blue as a group was rolling around in profit across most divisions.

At the same time codeshares was done with VX and DL, and at the same time the old interline with UA was dropped (and the relationship between DJ/VA and UA degenerated since to a point where there's no interline agreement between VA and UA). The relationship with DL if I recall was upgraded to a JV not long after JB took over from Brett.

Getting rid of international ops would also enable a takeover by one or a consortia of the shareholders much easier

Luxon should've done that in the first place with NZ instead of letting his ego get in the way against VA's other shareholders.

SQ aren't interested, had a lot of "false interest" which have all turned out to be fizzers and SQ are also ambivalent in their VA shareholding, which only leaves the darkhorses in DL and NH.

The closest VA are going to get to being a mostly Domestic/TT carrier is under a potential DL ownership with NZ and LAX as their only international (along with the Delta Australia nickname).

I recall when JB joined he was reports he was “24 hour aways” from closing all international operations. Though I think it made a surprise profit so he stuck with it.

I do recall JB instead closed HKT, JNB and NAN 777 operations in favour of concentrating on BNE/SYD-LAX and sending the 5th aircraft to AUH (as part of EY influence).

Whilst JB's predecessor BG was the better leader, Brett also had some questionable decisions such as buying the Embraers or sending the 777s to the leisure destinations (which was way too much plane). At the same time JB inherited a mixed fleet that was started under BG.

 

[Melburnian1]

...SQ aren't interested, had a lot of "false interest" which have all turned out to be fizzers and SQ are also ambivalent in their VA shareholding, which only leaves the darkhorses in DL and NH....

Why hasn't SQ sold its c.20 per cent? Can't find a buyer?

 

[Must...Fly!]

Why hasn't SQ sold its c.20 per cent? Can't find a buyer?

Purely a guess, but perhaps SQ might be hesitant to sell it based on who might buy it. And then they lose their foot in the domestic door in Australia too.

Good summary too by the way.

 

[Melburnian1]

Can someone please enlighten me as to why TT 'lost' 200,000 passengers in the six months compared to the same period a year ago?

What roue cessations or frequency reductions have I missed?

 

[Must...Fly!]

Can someone please enlighten me as to why TT 'lost' 200,000 passengers in the six months compared to the same period a year ago?

What roue cessations or frequency reductions have I missed?

ASK has dropped 11.5%, passenger numbers dropped 9%.

Yield up 14.2%, RASK up 13.0%

Basically - rationalisation (or lack of aircraft).

Just a guess on a glance.

EDIT: So the RASK is up because ASK is down. As for yield - because number of flights is down, as are paying passengers you end up with a higher yield if revenue hold steady - which it did.

What I will say - none of these metrics consider cost and it would be interesting to know how much VA are paying QQ each month.

 

[Saab34]

Tiger also flew a lot less because it cancelled a lot more. The cancellation rate has been between 7-10% every month. I have no idea how they an get yield gains with the state of the current operation being the worst in on time performance in its history. You just couldn’t pay me to fly it, the whole thing is a ballsup at the moment.

 

[dajop]

Purely a guess, but perhaps SQ might be hesitant to sell it based on who might buy it. And then they lose their foot in the domestic door in Australia too.

I don't think SQ really cares about the domestic market in Australia per se, but more about the feed to their own network (like Etihad also). With almost 20 services a day (139/week) from Australia to Singapore, that's a lot of seats to fill, and geographically Australian traffic is strategically important to SQ. Although Velocity is not as strong as QFF, the membership base and in particular higher tier members do probably help fill those planes.

 

[odysseus]

Near every carrier I fly long haul has had it for years, and if it affects me it will affect others much moreso I am sure. I'll bet the house that Cathay and SQ offers it. Does Qantas?

No.

 

[pauly7]

Management at VA is about to change (at the top) but don't underestimate with many airlines (including those owned by governments) how egos and a desire to be 'among the big boys' as ozstamps put it that are a key factor in airlines flying international routes.

For instance QF may well still lose money on the London routes but it persists for reasons of history but prestige and ego also may come into play.

I’m agree and am sure there are some big swinging ego plays around flying internationally (JB amongst them). Unfortunately it’s shareholders who pay.

QF London flights though I suspect are a different play. For one, Perth-London is being reported as profitable, I’m unsure about Singapore-London (haven’t seen anything recently reported) so therefore I’m not sure you can assume the homeland flights are not.

Regardless, QF are playing the medium game with London and Europe because Project Sunrise once it hits will probably hand them an exclusive (for a while) chance to make some decent money out of a previously challenging continent. It’s clear what they are doing is keeping the market warm until then and also warming up their old European markets with more codeshares too like the Air France deal.

And they can do it because QFi is profitable now.

 

[pauly7]

I don't think SQ really cares about the domestic market in Australia per se, but more about the feed to their own network (like Etihad also). With almost 20 services a day (139/week) from Australia to Singapore, that's a lot of seats to fill, and geographically Australian traffic is strategically important to SQ. Although Velocity is not as strong as QFF, the membership base and in particular higher tier members do probably help fill those planes.

Well they should care about the domestic market because if SQ owned VA outright they would have an ongoing profitable ‘protected’ business churning away in AU in a cosy duoply with QF group and sending money north every month to help SQ fight the ME3.

And to your point they could then route all those domestic pax up through Singapore and fling them around the world as well.

‘All’ they would have to do is make s few big decisions like:
- bin most of the existing patched together alliance currently used and streamline to SQ plus maybe keep Delta for US
- end VA international flying except for short haul pacific perhaps
- ditch the tiger experiment (or refine)
- cut back (or refine) on VARA experiment

Easy

 

[HS-TQE]

Well they should care about the domestic market because if SQ owned VA outright they would have an ongoing profitable ‘protected’ business churning away in AU in a cosy duoply with QF group and sending money north every month to help SQ fight the ME3.

And to your point they could then route all those domestic pax up through Singapore and fling them around the world as well.

If SQ did actually care they would've bought VA outright by now. They haven't. Every year there's a "article" about SQ "taking over" VA, they have all been fizzers.

The fact that SQ are more hands-on in their stake in Vistara India (e.g buying planes for them) says it all in their real priority for VA.
SQ have been hands-off in VA since the Capacity War (Heck, they were even more hands-on in AN and they didn't have a stake outright in AN)

IIRC SQ wanted access to the TransPac market but the AU government isn't budging on fifth-freedom rights hence once of the reasons investing in VA years ago. Plus with the yield downturn on the TransPac market in recent years, this has all become moot.

Considering SQ had blamed VA for a profit downturn in a recent quarter, I wouldn't be surprised if SQ actually wanted out of VA.

Source: (SQ blaming VA for profit down in Q4 2018)
Singapore Airlines profit sinks on fuel costs, Virgin Australia losses | Reuters

- bin most of the existing patched together alliance currently used and streamline to SQ plus maybe keep Delta for US
- end VA international flying except for short haul pacific perhaps

Don't think DL is going to give that one up without a fight due to the long-time JV. If DL is the one to buy the EY and/or HNA stakes, 'Delta Australia' is probably more likely with NZ and LAX being VA's only international.

 

[cove]

Can you see how much Virgin paid Branson for using the Virgin name in the latest half year figures?
The debt burden is pretty big.
We do enjoy VA business on the A330.

 

[Melburnian1]

With almost 20 services a day (139/week) from Australia to Singapore, that's a lot of seats to fill, and geographically Australian traffic is strategically important to SQ. Although Velocity is not as strong as QFF, the membership base and in particular higher tier members do probably help fill those planes.

In terms of seats, Australia is SQ's number one market.

 

[grubbidok]

I'm not sure if VA flying internationally is the problem as much as VA aren't using it effectively or marketing their strengths. I get the point re the US and the reduced inbound tourism due to Trump, but I assume this is temporary and it's much more cost-effective to ride it out than to start up again. AFAIK this used to be a profitable route? I assume the HKG experiement is the same rationale.

I've got no idea why VA don't more actively promote their Pacific network in the international market. I know in the domestic sector we get happy hour deals to the Cook Islands, etc all the time but why aren't they aggressively marketing their extensive presence here in the Asian, American or European markets? It's one of the few regions where they aren't in a hyper-competitive market.

I've got no idea why they continued sinking money into flying to AUH for so long. Glad that's gone. I'd imagine that they're still hurting from that.

The problem is that VA international seems to be an afterthought, whereas it needs to be more central to their entire strategy.

 

[dajop]

L

In terms of seats, Australia is SQ's number one market.

Nah, it’s number 2.