Virgin Australia Financially Secure? [Now in Voluntary Administration]

[p--and--t]

A lot of wishful (hopeful) thinking in this thread.

Just because VA1 had a nice product and some flyers enjoyed/preferred their international product, doesn't mean it made any real money for the overall business and in essence it was a financial and management/labour intensive distraction from what they were really good at.

I strongly suspect the new owners are not going to want to be distracted trying to restart (loss making) international (other than 3-4 hour sectors several of which were subsidised) in an 50-75% reduced volume market where any airline will struggle to make transpac viable for 18 months.

They will be focused on sussing out what are the right number of seats for domestic sectors to hold market share profitably and reviewing every sector's viability with a sharper knife than prior Covid.

 

[jakeseven7]

None of that's going to be helped by a QF/JQ monopoly charging more than they should (and even if Alliance/Rex do get up, it will take a while before they get VA's presence). Having a government stake can also help them make sure that Queensland routes are prioritised by the new entity.

ABC did an interesting article on how the QLD government would probably be better off supporting and investing into Alliance over whatever VA2 turns out to be. I don't have an opinion as haven't read into their operation deeply but they aren't small, I was surprised. And they used to operate VA1 flights all over the place anyway... (pre-corona)

 

[Spongbob]

VA International lost $75m in 2019, $20m in 2018 and $50m 1H2020.

Hong Kong alone lost $130m over that period, exclude HKG and the operation isn’t that bad.... sill loss making of course.

Back in about 2012, did not Qantas complain their international flights were loss making and therefore the federal government should give them some type of special treatment?

 

[dajop]

ABC did an interesting article on how the QF government ....

Some sort of freudian slip?

 

[p--and--t]

Back in about 2012, did not Qantas complain their international flights were loss making and therefore the federal government should give them some type of special treatment?

...and how is that in any way relevant to the current VA1 administration?

 

[grubbidok]

ABC did an interesting article on how the QF government would probably be better off supporting and investing into Alliance over whatever VA2 turns out to be. I don't have an opinion as haven't read into their operation deeply but they aren't small, I was surprised. And they used to operate VA1 flights all over the place anyway... (pre-corona)

Maybe (personally I don't see it, but who knows - interested though so would love a link). Point is that everyone's making judgements about the Queensland government's decision based on potential profitability, but the reality is the Queensland government could invest in an airline that loses money but still come out on top, if the true aims are those other strategic objectives.

My personal prediction is that a lot of airlines post-COVID will be receiving more "government direction" in their strategies

 

[jakeseven7]

Some sort of freudian slip?

LOL, clearly not as our QLD government are as anti QF as they come Corrected, thank you

 

[GoldCanyon340]

Just because VA1 had a nice product and some flyers enjoyed/preferred their international product, doesn't mean it made any real money for the overall business and in essence it was a financial and management/labour intensive distraction from what they were really good at.

Heavy similarities with AN who had a superior food and beverage service to QF in the mid to late 90s. But I know from experience some AN management thought it could trade on that and not give focus elsewhere. My time at QF showed me that company, unlike Ansett, had and has management who are skilled in what they do and do not slack or spend in a profligate manner.

 

[tomlee1986]

Back in about 2012, did not Qantas complain their international flights were loss making and therefore the federal government should give them some type of special treatment?

QF did say that, but thats why they did the transformation in the last few years

 

[jakeseven7]

They will be focused on sussing out what are the right number of seats for domestic sectors to hold market share profitably and reviewing every sector's viability with a sharper knife than prior Covid.

Looking at you Tasmania - especially LST, sorry

 

[antycbr]

Looking at you Tasmania - especially LST, sorry

Interesting to see if LST comes back as I'm a regular on SYD-LST (my parents retired there from Canberra ?!)

There's a stack of JQ services into LST so if the cost base can come down there's a reasonable number of pax going through LST particularly if domestic tourism recovers to some extent. Given that VA operate BNE-LST seasonally they think the port is probably OK. LST also had enough services to spread the cost of gates, ground handling around services of varying profitability.

I question CFS and BNK, especially BNK as it's one service a day and OOL isn't exactly far away. Some of the Queensland ports will be marginal but there will be obligations on a new VA if the Queensland Government is propping them up.

Critical to success is to get the cost base down to make more ports viable. A high cost base will force you back to trunk only which defeats the network effect of the airline.

 

[BNEFlyer]

I wasnt surprised about HKG is a $130m loss.. because CX and QF were the dominant players in this routing between HKG and Australia

Lucky for VA they'll have no competition on BNE-HND, and a partnership with NH which should work better than the one with HX.

 

[RAM]

I agree with the idea to stay with LAX.. it is a bigger port than SFO.. more choices for US connections there i think

Slightly OT...

How big is he population for Los Angeles, San Francisco vs say Sydney & Melbourne?

Would be interested in your honest guesses before you read on.

The answer is not what the Australian Developers' lobby would have us believe...

Sydney 4.63m

Melbourne 4.25m

Los Angeles 3.97m AND is the 2nd largest city in the US!!

San Francisco 0.86m

I was shocked/amazed/disappointed with how various vested interest groups had caused me to be so wrong in my estimations of the population size of Australian vs supposedly huge overseas cities oft quoted as excuses for putting up 20+ storey towers in Melbourne & Sydney especially.

Also explains much about why flying to/from San Francisco would be nowhere near as attractive...

 

[RAM]

I completely agree with you.. there is talk international travel will not return to normal until 2023

The IATA statement was talking about how long before the volumes seen in 2019 are surpassed which arguably is different to 'return to normal'.

Historically, after widespread recessions, it takes at least 2 years before many economic measures surpass their previous levels. So for IATA to say 3 years given the effective global shutdown is, in my mind, VERY optimistic.

VA mk2's international (if any) would likely prioritise potentially easier routes to/from NZ far ahead of a single destination in the US, with any other overseas destinations not really on the horizon. That said, Air NZ has shown how profitable B787s are for operating the Trans-Tasman services.

 

[antycbr]

Slightly OT...

How big is he population for Los Angeles, San Francisco vs say Sydney & Melbourne?

Would be interested in your honest guesses before you read on.

The answer is not what the Australian Developers' lobby would have us believe...

Sydney 4.63m

Melbourne 4.25m

Los Angeles 3.97m AND is the 2nd largest city in the US!!

San Francisco 0.86m

I was shocked/amazed/disappointed with how various vested interest groups had caused me to be so wrong in my estimations of the population size of Australian vs supposedly huge overseas cities oft quoted as excuses for putting up 20+ storey towers in Melbourne & Sydney especially.

Also explains much about why flying to/from San Francisco would be nowhere near as attractive...

City of Los Angeles, maybe. Have a look at the LA Metro Area is 13 million which is LA and Orange Counties. The equivalent would be comparing the population of the City of Sydney LGA to that of Sydney Metro Area which is 30+ LGAs.

 

[dajop]

Worth pointin

Slightly OT...

How big is he population for Los Angeles, San Francisco vs say Sydney & Melbourne?

Would be interested in your honest guesses before you read on.

The answer is not what the Australian Developers' lobby would have us believe...

Sydney 4.63m

Melbourne 4.25m

Los Angeles 3.97m AND is the 2nd largest city in the US!!

San Francisco 0.86m

I was shocked/amazed/disappointed with how various vested interest groups had caused me to be so wrong in my estimations of the population size of Australian vs supposedly huge overseas cities oft quoted as excuses for putting up 20+ storey towers in Melbourne & Sydney especially.

Also explains much about why flying to/from San Francisco would be nowhere near as attractive...

This is not accurate. It is comparing apples to oranges. In the US way of measuring "city" populations they look at the actual city (local government), and if you were to make a comparison, Melbourne would have a population of 0.17m and Sydney 0.24m. Both meaningless figures.

The way "city" populations are measured in Australia, looks at the metropolitan area (statistical area for the city). In the context of international long haul travel you need to look at not only the metropolitan populations of the cities - but overall catchment population. So for SFO it makes sense to include San Jose, Oakland and the Bay Area. For LAX, the whole urban agglomeration. For Sydney, throw in Newcastle and Wollongong (+ 0.6m) and Melbourne include Geelong, Bendigo, Ballarat etc (+0.4m).

For LA the metropolitan area has a population of 13.2m, SF 4.7m. You add in the population of Riverside/Ontario/San Bernadino to be the LAX catchment, that becomes 17.8m, and add San Jose/Santa Clara to SFO it goes to 6.6m, and another 2m 1.5hrs away in Sacramento area.

 

[jakeseven7]

VA mk2's international (if any) would likely prioritise potentially easier routes to/from NZ far ahead of a single destination in the US, with any other overseas destinations not really on the horizon. That said, Air NZ has shown how profitable B787s are for operating the Trans-Tasman services.

VA1 were on the record as saying most of their NZ routes were not profitable so will be interesting to see what VA2 will do, if they decide to operate to NZ.

 

[RAM]

Interesting to see if LST comes back as I'm a regular on SYD-LST (my parents retired there from Canberra ?!)

There's a stack of JQ services into LST so if the cost base can come down there's a reasonable number of pax going through LST particularly if domestic tourism recovers to some extent. Given that VA operate BNE-LST seasonally they think the port is probably OK. LST also had enough services to spread the cost of gates, ground handling around services of varying profitability.

I question CFS and BNK, especially BNK as it's one service a day and OOL isn't exactly far away. Some of the Queensland ports will be marginal but there will be obligations on a new VA if the Queensland Government is propping them up.

Critical to success is to get the cost base down to make more ports viable. A high cost base will force you back to trunk only which defeats the network effect of the airline.

I cannot understand the timing of the announcement given bids are due in to day but our is not to reason why.

Looks like a replay of the Commonwealth Games all over again - Tasmania has been left off the map....

VA announces Reward redemptions for flights starting from 1 September

From 15 May 2020 you can use your Velocity Points for Virgin Australia Reward Seat and Any Seat bookings for travel from 1 September 2020 to the destinations listed in the table.

These are the redemption destinations we're initially making available - we will update this list as this changes.

Virgin Australia

Earn Points with Virgin Australia and Partners, also earn status credit when travelling with eligible fare types. Offering include trans tasman flights, short haul and long haul flights and international long haul flights

experience.velocityfrequentflyer.com

 

[antycbr]

Historically, after widespread recessions, it takes at least 2 years before many economic measures surpass their previous levels. So for IATA to say 3 years given the effective global shutdown is, in my mind, VERY optimistic.

Totally agree, and that's before you compound the public health failures in the USA on top. Usually in recessions people are unable to afford to fly even if they want to. This is more like 9/11 where people are scared to fly or travel at their destination, and there's no effective intervention possible such as increased screening or air marshals for a virus you can't see. International travel is a big leap of confidence required by pax while there is no vaccine.

Post automatically merged: May 15, 2020

I cannot understand the timing of the announcement given bids are due in to day but our is not to reason why.

Looks like a replay of the Commonwealth Games all over again - Tasmania has been left off the map....

VA announces Reward redemptions for flights starting from 1 September

From 15 May 2020 you can use your Velocity Points for Virgin Australia Reward Seat and Any Seat bookings for travel from 1 September 2020 to the destinations listed in the table.

These are the redemption destinations we're initially making available - we will update this list as this changes.

Virgin Australia

Earn Points with Virgin Australia and Partners, also earn status credit when travelling with eligible fare types. Offering include trans tasman flights, short haul and long haul flights and international long haul flights

experience.velocityfrequentflyer.com

I guess there's nothing to be lost as the points are held hostage inside VA or Velocity at the moment... Also a tiny cashflow from taxes and charges coming in to be held for the flight and paid after travel, plus preserving the attractiveness of Velocity for credit card and Flybuys transfers - it may stop people changing credit cards to QF.

 

[odysseus]

VA International lost $75m in 2019, $20m in 2018 and $50m 1H2020.

Hong Kong alone lost $130m over that period, exclude HKG and the operation isn’t that bad.... sill loss making of course.

Exclude HKG and that's $15m over 2.5 years - including the big issues with NZ split and funding restart there. Without that it seems viable - and does it account for feeder traffic benefits to the rest of the network. I.e. what would be the negative impact to domestic without it?

Basically it should be a goer aside from startup costs, which happen everywhere any business tries to enter new markets.