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Virgin Australia Financially Secure? [Now in Voluntary Administration]

docjames

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I think given their track record on losses it’s not unreasonable to question viability.

The other side is that the current conditions will empower them (PS) to make the hard decisions that have been needed for some time to get their costs under control and their revenue up.

They need to start (re-?) positioning themselves as the “smart choice” for “smart” business travellers, not the “second Qantas” that JB seemed to favour (that hasn’t worked).

A HNA ”takeover” may also help them improve their complicated ownership structure, where they are beholden to too many masters with at times competing interests (beyond just make money which they’d all want obviously).
 

p--and--t

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why?
The first step to profitability is to stop haemorrhaging cash on poor yield routes.
No argument with your statement.

I merely stated some facts and that "it wasn't a good look".

A long term loss making venture abandoning routes is not a good look. A profitable company expanding is a much better look.

The change at the top is most likely one of the best things that could have happened and PS is making several what on the surface seem to be some necessary containment changes to stop the bleeding. Boeing's debacle with the MAX and consequential delays will probably help a lot as well.

Whether that is enough, I'm guessing we will find out in around 12-18 months.

For the travelling public's sake I'm hoping PS is the right man for the job and can turn the company around.
 

jakeseven7

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VA domestic will be getting hit by the corona ripple effect as well as they are more geared to discretionary travel than QF domestic. Wonder when they will announce their own cuts....
 

Bagpuss

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VA domestic will be getting hit by the corona ripple effect as well as they are more geared to discretionary travel than QF domestic. Wonder when they will announce their own cuts....
VA will need to release their results soon, from memory they are normally a week or two after Qantas.

The HKG route cut has been announced, along with the ongoing NZ capacity reductions.

The only cuts will be domestic, but I expect there to be little after their recent review.
Though outcome is likely the A330's not doing much ... I notice the operational ones (one is currently in for maintenenace) are currently only operating 2 flights a day.
 

HS-TQE

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I think given their track record on losses it’s not unreasonable to question viability.

The other side is that the current conditions will empower them (PS) to make the hard decisions that have been needed for some time to get their costs under control and their revenue up.

They need to start (re-?) positioning themselves as the “smart choice” for “smart” business travellers, not the “second Qantas” that JB seemed to favour (that hasn’t worked).

A HNA ”takeover” may also help them improve their complicated ownership structure, where they are beholden to too many masters with at times competing interests (beyond just make money which they’d all want obviously).
PS has done a good job so far in his short time as VA CEO. Keeping CAPEX under control, whilst also cutting where it's necessary.

As for the ownership structure, VA is not an entity that investors are willing to invest in atm, considering all 4 major investors have looked at selling out (at a loss). In addition of the difficulties that HNA and EY faced in selling their VA structures at different points.

Should HNA eventually be liquidated by the Chinese government, one of the likely scenarios is that CA may become the owners of the VA and HX stakes by default. Which isn't really that ideal for the ownership structure.
 

jakeseven7

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Should HNA eventually be liquidated by the Chinese government, one of the likely scenarios is that CA may become the owners of the VA and HX stakes by default. Which isn't really that ideal for the ownership structure.
Or for passengers. CA. Shudder.
 

bullerdude

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Less worried at the moment as their domestic business has generally performed OK and with their current focus on reducing loss-making routes and reducing capital expenditure before any further expansion it's an OK outlook. In any case, the next round of financial results should tell the story.
 

Bagpuss

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I think what gets overlooked is how Virgin Blue grew rapidly. The part everyone remembers is the unfortunate demise of Ansett. However, it was after Sep 11 in which there was low aviation confidence and Boeing were producing whitetails (aka building planes .... B737s with no customer). This benefited Virgin and both Qantas who were desperate for planes and got them very cheap at “not to be repeated prices”.
Therefore, it’s key remember that the success of Virgin Blue was helped by acquiring cheap planes, which helped with profits.
With aircraft rises now “normal” are Virgin’s woes really based on the repositioning into Virgin Australia or were they already existing, masked by fortunate initial circumstances from the get go.
I tend to think they started off with good luck, and any company which is based on good luck, hits major challenges down the track.
To also acknowledge that with Qantas looking at their domestic fleet renewal, they are also not off the hook. I expect they will encounter some challenges, though not as dramatic as Virgin.
If Virgin doesn’t have a profit based culture, the operation is doomed.
 

AustraliaPoochie

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Feb 9, 2014
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I feel that VA got too ambitious, going as far as AUH and LAX and HKG too.
But VA to AUH and HKG has been pared back, cancelled, so their costs should reduce a bit, but then there is the pick up of cost for flights to HND.
They should have just focused on partnership with other airlines.
If VA only Aust dom operations, and maybe just to NZ, they could have saved a tonne of $.
Also, as BNE airport didn't want to build up, or out, VA had spent at least 2 mill $ to have that pokey spot.
#1 lounges, too is money spending, could have had a tie in with the other lounges at MEL/SYD.
VA Aust domestic lounges, the flow of people could make a revenue neutral, or a bit of profit, as the turnover of people is high.
I pay to sit in econX on flights, and do note that VA's J class of 8 seats is always used up, of course we don't know if those pax have paid for their J seats, or are upgrades.
 

Saab34

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HND slots are a once in a lifetime opp. Its like being gifted a Heathrow slow. They got a free peak time slot which is worth millions.

I would say they are thinking long term for that route.

I wonder if the MAX10 will make the A330 a thing of the past . 777 can replace the Tokyo and MAX10 flatbed across to Perth. Would bring costs down somewhat quite a bit.
 

AustraliaPoochie

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Going on a tangent, if they were to get 2 or 3 787s or 350s, that are aerodynamically fuel saving, it could work out better in the long run, though the cost of buying or leasing it will be prohibitive in the first few years of operations with them, but in the end, they would save fuel cost.
Yes, they would have to train their pilots to fly the 787s or the 350s, but flying those aircrafts will have a lower running cost.
Their 737-800s would be past the first quarter stage of their flying lives, maybe 10 to 15 years to go.
Their 3rd hand F100 take a lot of wear and tear, seeing it was from Skywest, who did a lot of flying out in the sticks, and they were used to be fifo, so they would have had a lot of strain, many touch downs and take offs, probably more than their 737s.
 

HS-TQE

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Going on a tangent, if they were to get 2 or 3 787s or 350s, that are aerodynamically fuel saving, it could work out better in the long run, though the cost of buying or leasing it will be prohibitive in the first few years of operations with them, but in the end, they would save fuel cost.
Yes, they would have to train their pilots to fly the 787s or the 350s, but flying those aircrafts will have a lower running cost.
Their 737-800s would be past the first quarter stage of their flying lives, maybe 10 to 15 years to go.
Their 3rd hand F100 take a lot of wear and tear, seeing it was from Skywest, who did a lot of flying out in the sticks, and they were used to be fifo, so they would have had a lot of strain, many touch downs and take offs, probably more than their 737s.
Now or the short-term isn't ideal for VA to introduce another wide-body type. If PS decides not to renew the A330 leases in 2022-2023 (when the 10 yr contracts are up), he would have to get a start early on sourcing one or two extra 77Ws for HND (replacing the A330).

The 2nd 'extra' 77W, or the '7th' 77W (in addition to a 6th 77W for HND) would enable daily LAX from both MEL and BNE (in addition to the current daily SYD-LAX, which Scurrah has been on record singling LAX out as one of the few 'profitable' routes in the VAi network)
 

Bagpuss

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If PS decides not to renew the A330 leases in 2022-2023 (when the 10 yr contracts are up), he would have to get a start early on sourcing one or two extra 77Ws for HND (replacing the A330).
I suspect to get replacement new aircraft, they would need to be committing pretty soon?
Unless one of their airline owners plan on transferring aircraft.
 

Bagpuss

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Their 3rd hand F100 take a lot of wear and tear, seeing it was from Skywest, who did a lot of flying out in the sticks, and they were used to be fifo, so they would have had a lot of strain, many touch downs and take offs, probably more than their 737s.
The F100’s are interesting. They seem to have a few days of high utilisation and then idle a bit. The F100’s aren’t heavily used over the weekends.
It always seems that a couple at any time are under maintenance, normally for an extended period.
I think VH-FZO has exited the fleet as it flew to Melbourne Avalon on 24th January.
 

Bagpuss

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I wonder if the MAX10 will make the A330 a thing of the past . 777 can replace the Tokyo and MAX10 flatbed across to Perth. Would bring costs down somewhat quite a bit.
The rumour I read was they are favouring the A350 going with two variants to replace the A330’s and B777’s. The deal involves the lessors of the A330’s to leverage additional cost savings with exiting the A330’s.
With SQ (and other airlines) now having A350’s into Perth I assume that helps with maintenance issues too.

The A350 could enable VAi to fly Perth - Europe direct which would more and more seem logical and profitable.
 

jase05

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I suspect to get replacement new aircraft, they would need to be committing pretty soon?
Unless one of their airline owners plan on transferring aircraft.
HNA apparently have a stack of aircraft that have been parked for months and I thought it may have been a good time to enquire about them but with recent developments it sounds like the government will “acquire” them
 
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