Virgin Australia Financially Secure? [Now in Voluntary Administration]

[AIRwin]

More than 40 of its aircraft, most notably the big 380s and the old, polluting 7474s, are being retired or sold off.

But will there be a market?

 

[p--and--t]

But will there be a market?

Spare parts & conversion to freighters probably.

 

[Must...Fly!]

How are VA going to pay for all their shiny new planes they don’t need ?

A haircut is better than nothing at all. It's not beyond the realms of possibility *if* they can shore up the immediate financial future.

Lessors are in an exceedingly tough spot, as are Airbus and Boeing.

 

[bellsux]

B747 as a freighter possibility and spares but the A380 is only good for spares, once the engines, rotables and avionics have been pulled out there is not much value left in them. Much like the A340's it will soon be parked up at a bone yard, at least the A340 could be used as a freighter.

 

[Scarlett]

The airlines that do survive this year are going to come out the other side with a much reduced cost base: think of the market oversupply for previously in demand professionals... pilots, LAMEs.

If I was a VA pilot and hadn't flown for a number of months I'd be very nervous about getting my job back, or my previous wage back. There will be a lot of competition for the jobs, especially with retrenched TT crew about.

Plus, if everyone is going to have to do the same retraining sims, then why wouldn't the company hire those willing to work for the smallest wages? Speculation seems to be that capability will grow slowly as first domestic then global demand restarts, meaning the companies have time on their side to get their workforce proficient again.

I bet you some senior QF execs are already working out how they're going to lower their personnel costs when they start rehiring. The CEOs comments about hiring a new workforce for Project Sunrise come to mind.

 

[bellsux]

Back on topic.. If Virgin does close shop I can bet that Qantas will reduce the lounge service to something much like the standard found in AA Admirals or DL Sky Club to claw back some of their losses.

 

[juddles]

Hi all, this post will be lengthy, but will eventually get to the specific Virgin situation...

i have a friend who is much more savvy than me. Today I discussed all this with them and now I have a slightly different view on how it is all going...

Travel is linked to many things - from capacity for tourism to border controls. What we are possibly witnessing is that each of the many countries around the planet are going through very different experiences with COVID. At one end are such nations as the USA, and almost of all of Europe, where this virus has escaped any control. Essentially they are already set on a path of great initial hardship, but they will emerge in a few months having overcome the hideous cost in lives this thing brings them. But on the other end, there are nations that have managed to contain this thing - China through to Australia. Through sheer success at social-distancing and so forth, they are managing to actually control this virus, but at the cost of future risk.

Given this, in just a few short months the world will be a radically different playing field. Both the USA and most of Europe will be past the nightmare stage, and essentially be open for business. But China and Australia and New Zealand will be still in essential lockdown.

Australia's success at containing the virus will mean that until a vaccine is available, we have to maintain various levels of lockdown. Which will mean that international tourism will cease to exist until such vaccine becomes available - and the real experts doubt this will be arriving anytime soon - estimates amongst them are two to ten years, if ever.
\There is a likely chace that within Australia that we will be able to relax restrictions on domestic travel relatively soon - but it will be a scenario without all the overseas travellers.

Even that may take anything around six months. And may be someone in government will start to really look at the numbers... Virgin is asking for billions to keep just about 2,000 people employed. What they are essentially asking for is not about those "few" employees. For a couple of billion we can. as a nation, start a completely new airline at that cost. Especially in an era where fleet and staff are in abundance at cheap cost....

 

[p--and--t]

Hi all, this post will be lengthy, but will eventually get to the specific Virgin situation...

i have a friend who is much more savvy than me. Today I discussed all this with them and now I have a slightly different view on how it is all going...

Travel is linked to many things - from capacity for tourism to border controls. What we are possibly witnessing is that each of the many countries around the planet are going through very different experiences with COVID. At one end are such nations as the USA, and almost of all of Europe, where this virus has escaped any control. Essentially they are already set on a path of great initial hardship, but they will emerge in a few months having overcome the hideous cost in lives this thing brings them. But on the other end, there are nations that have managed to contain this thing - China through to Australia. Through sheer success at social-distancing and so forth, they are managing to actually control this virus, but at the cost of future risk.

Given this, in just a few short months the world will be a radically different playing field. Both the USA and most of Europe will be past the nightmare stage, and essentially be open for business. But China and Australia and New Zealand will be still in essential lockdown.

Australia's success at containing the virus will mean that until a vaccine is available, we have to maintain various levels of lockdown. Which will mean that international tourism will cease to exist until such vaccine becomes available - and the real experts doubt this will be arriving anytime soon - estimates amongst them are two to ten years, if ever.
\There is a likely chace that within Australia that we will be able to relax restrictions on domestic travel relatively soon - but it will be a scenario without all the overseas travellers.

Even that may take anything around six months. And may be someone in government will start to really look at the numbers... Virgin is asking for billions to keep just about 2,000 people employed. What they are essentially asking for is not about those "few" employees. For a couple of billion we can. as a nation, start a completely new airline at that cost. Especially in an era where fleet and staff are in abundance at cheap cost....

Pure conjecture on my part, but if (as forecast in some reports) up to 50% of the airlines don't restart and/or of all the airlines that do restart do so in a much trimmed down and leaner fashion, surely the world will be awash with airline assets (planes) at $2 shop prices and thousands of qualified staff queuing up desperate for a job.

[That's not even counting the airfields all over the US filled with brand new unsold MAXs waiting for the auctioneer to come in and raffle them off.]

A new paradigm altogether.

 

[juddles]

Pure conjecture on my part, but if (as forecast in some reports) up to 50% of the airlines don't restart and/or of all the airlines that do restart do so in a much trimmed down and leaner fashion, surely the world will be awash with airline assets (planes) at $2 shop prices and thousands of qualified staff queuing up desperate for a job.

[That's not even counting the airfields all over the US filled with brand new unsold MAXs waiting for the auctioneer to come in and raffle them off.]

A new paradigm altogether.

I simply cannot see any light on the horizon for airlines or aircraft. yet another industry with no margins for the unexpected....

 

[p--and--t]

I simply cannot see any light on the horizon for airlines or aircraft. yet another industry with no margins for the unexpected....

I wouldn't discount the industry altogether, but its going to be excruciating for the players in the interim, and the ones that get to the other side are going to have it tough for a while but have less competition and cleaner air to soar over time (pun intended).

 

[bulldog88]

As an island, if Australia can rid itself of Covid, and make sure nobody with the virus is allowed to fly in, Australia becomes very attractive as a safe tourist destination.

This should be possible to implement at some stage over the next 12 months given the amount of effort being put into testing measures.. Ie. a DIY test at home, a test at checkin , another test a few hours later prior to boarding, a 4th test on arrival) .. In fact NZ might beat Australia to this , given it's smaller size.

But even still, unclear whether there would be enough demand to support both QF and VA operations.

 

[oz_mark]

Travel is linked to many things - from capacity for tourism to border controls. What we are possibly witnessing is that each of the many countries around the planet are going through very different experiences with COVID. At one end are such nations as the USA, and almost of all of Europe, where this virus has escaped any control. Essentially they are already set on a path of great initial hardship, but they will emerge in a few months having overcome the hideous cost in lives this thing brings them. But on the other end, there are nations that have managed to contain this thing - China through to Australia. Through sheer success at social-distancing and so forth, they are managing to actually control this virus, but at the cost of future risk.

Given this, in just a few short months the world will be a radically different playing field. Both the USA and most of Europe will be past the nightmare stage, and essentially be open for business. But China and Australia and New Zealand will be still in essential lockdown.

Australia's success at containing the virus will mean that until a vaccine is available, we have to maintain various levels of lockdown. Which will mean that international tourism will cease to exist until such vaccine becomes available - and the real experts doubt this will be arriving anytime soon - estimates amongst them are two to ten years, if ever.

There may not be a vaccine for some time. There is also seemingly another unasnwered question - does having Covid-19 confer any long lasting immunity? And as near as I can tell, that is a bit of an open question at the moment.
Depending on the answers, the end game may just be that eradication of the virus is what is required..or if we can find a good way of treating it, then we accept it as a fact of life.

The end game to all this is just a big 'who knows' at the moment.

 

[samh004]

If it got so bad that Virgin's survival was not possible and the government had to pick up QF to survive, why assume a second carrier could come in?

You raise a very good point. Right now – or rather, at the start of this year – the market is big enough for two main players, but post COVID-19 the market may only manage to support one player. If businesses remain with teleconferences because it keeps costs down, there will be far less business travel, and if others remain out of a job for a long period of time they wont have any money for leisure travel, so the market will have changed. Not much point in pumping money into both VA and QF if you're just prolonging the time till they both fail because the market no longer supports them both.

I bet you some senior QF execs are already working out how they're going to lower their personnel costs when they start rehiring. The CEOs comments about hiring a new workforce for Project Sunrise come to mind.

I believe the pilots association/union came to an agreement at the last moment, so I think this would be hard to give away to a new group now.

Back on topic.. If Virgin does close shop I can bet that Qantas will reduce the lounge service to something much like the standard found in AA Admirals or DL Sky Club to claw back some of their losses.

They could start by removing the number of discounts given to Business Reward members and free memberships given to Point Club Plus if they were hurting... but I think they probably look at Qantas Club as golden handcuffs that make people spend money regardless.

As an island, if Australia can rid itself of Covid, and make sure nobody with the virus is allowed to fly in, Australia becomes very attractive as a safe tourist destination.

This should be possible to implement at some stage over the next 12 months given the amount of effort being put into testing measures.. Ie. a DIY test at home, a test at checkin , another test a few hours later prior to boarding, a 4th test on arrival) .. In fact NZ might beat Australia to this , given it's smaller size.

But even still, unclear whether there would be enough demand to support both QF and VA operations.

Wouldn't such a test be one of the myriad taxes added to the cost of a ticket so not really a VA or QF cost to bear, but a passenger cost. Depending on the cost of the tests this might result in only high net worth tourists coming to Australia, which isn't necessarily a bad thing.

 

[coyote25]

I’m wondering when partners of the velocity program will stop or reduce purchasing points from velocity with members of the program now starting to think they can’t redeem for flights or other Rewards or being hard to redeem.

I know I used to complete e-rewards surveys when I had nothing better to do (low value reward for time spend earning so only worth it to kill some time) but even with home isolation I am not motivated to do any surveys as im linked to velocity transfers. For background depending on your set up you only get one redemption partner (who invited you to join) in my case Velocity.

I wrote to e-rewards about the problem of only earning points for a program that is starting to shut down, or at least is now marginal, and they said they are looking into allowing people to switch to other program partners. Surely at some point a velocity business partner like this will have to switch to someone else as it will effect what they earn.

Velocity has many such partners who much also be looking at halting buying points from velocity.

I put the banks / credit cards in a different category but at some point they must look at this as well. I wonder if their customers are asking to switch to a different partner (KrisFlyer, QF etc) or to no longer automatically transfer points to Velocity until this settles one way or another. I recognise some people would still want to transfer an take the risk but others may not want that risk.

As less points are then purchased for transfer to velocity surely that starts halting the cash flow into velocity and value of the program.

Thoughts?

 

[Major]

I have a Virgin Money Plat Visa and was wondering the same thing. Citibank haven't changed anything yet but I'm sure it's only a matter of time before questions are asked.

 

[hydrabyss]

https://www.theaustralian.com.au/inquirer/troubled-virgin-reduced-to-a-wing-and-industry-prayers/news-story/36e6138550f90acca938d78aa3aae5c8

 

[Rembrandt]

For all those forecasting things will be back to normal and honky dory in a few months or by xmas, I'll just leave these reports about the largest player in Europe and the third largest airline in the world

It's wishful thinking to think that international travel will be even partially open by the 4th quarter. However, I can foresee domestic travel opening up again within the next 6 months. So at least VA and Qantas will have income trickling in again which is something many other airlines around the world wont have.

I think international travel will be very woeful for the next 3 years. Most if not all countries will have their borders closed or mandatory quarantine for at least a year until a vaccine is made available. For example Europe and the US don't want a 2nd or 3rd wave of Covid-19 do they? Even a proven vaccine or treatment for Covid-19 doesn't mean everything will go back to normal within months. We still need to vaccinate billions of people and hope the virus doesn't mutate and become stronger. Covid-19 could very well cause a global re-shift not seen since the end of a world war.

I was meant to visit Europe in September and have lost all hope about going. I'm waiting for the flights to be cancelled. Frankly, there is a 50/50 chance that September 2021 wont be ideal either.

 

[pauly7]

You raise a very good point. Right now – or rather, at the start of this year – the market is big enough for two main players, but post COVID-19 the market may only manage to support one player. If businesses remain with teleconferences because it keeps costs down, there will be far less business travel.

Telecons will remain (unfortunately for some who are ‘webexed out’!) until those companies recover their sales/profile profiles.

Note also corporates will be the most wary about releasing travel restrictions from a legal perspective as well, they’d have to have their underwriters confirm it was safe (enough) to do so without serious blow back if something went wrong.

 

[Notyourbag]

https://www.theaustralian.com.au/inquirer/troubled-virgin-reduced-to-a-wing-and-industry-prayers/news-story/36e6138550f90acca938d78aa3aae5c8

Paywall. Can you post the article

 

[pauly7]

Paywall. Can you post the article

Does this one talk about the run on Velocity points or is that the other one?