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Virgin Australia Financials 2019/20

HS-TQE

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As expected per earlier it's a loss. The loss reported is $315 million. 715 jobs at Brisbane's HQ is expected to go.


As per previous suggestions, Scurrah's looking at folding Tigerair back into VA mainline, moving domestic mainline closer to it's LCC roots (by unbundling fares similar to the Godfrey era Virgin Blue), and ending the loss making HKG flights.

 

Melburnian1

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Talk of "market demand moderating in the second half of the year" and "challenging trading conditions" doesn't inspire confidence.

In time, I won't be surprised if there's initially a hiring freeze of (say) cabin crew, and eventually, redundancies.

The 'corporate headcount' cut of 750 people (30 per cent reduction in head office staffing) will only generate $75 million in cost savings in 2019-20, which is just $100,000 per employee, but that must be because the redudancy payments (including accrued annual leave) will be significant.

If 750 positions can be abolished, this begs the question: what were they all doing previously?

"Adjusted net debt" is $3.97 billion, probably high for a company of its size.

In 2017-18, VAi had EBITDA of $10.1 million but in 2018-19 this has turned badly negative with a loss of $58.3 million, a $68.4 million deterioration. But one AFfer criticised me hen I said a month or so ago that VA's losses on the MEL/SYD - HKG route could be $20 million annually.

TT's EBITDA was negative $4.8 million, better than the $10.9 million loss of last year but still no return on the capital employed. On an "underlying" basis, losses of $45 million are not far short of $1 million a week.

Should TT be shut down? While perhaps temporary, it has a mixed fleet of A320s (11) and B738s (four or five) and shocking punctuality (not that JQ is much better in respect of the latter.)

VA's Chief Strategy and Technology Officer position is shown as 'vacant' on an organisational chart. That won't surprise AFFers who've contributed to the VA website deficiencies thread on AFF.
 
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Doctore1003

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Unsurprisingly, a fleet, network and capacity review is underway, but nothing announced yet.
Did notice the line in the presentation that the airline is "assessing potential market withdrawals on certain markets deemed uneconomic".
 

Must...Fly!

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They've got to be careful how they go about route changes. JQ will eat them alive if they turn back toward LCC routes and point to point big city travel, where the big money is.

Some of the job losses will be efficiency gains as a result of combining the VA, VARA and TT management in to one.

Three brands is wasteful, three management teams is silly...
 

Melburnian1

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I can't remember all the fine detail of 20 years ago, but my memory is that the closure of AN came as a shock to almost all Australians, including many with high Golden Wing points balances. More through good luck than foresightedness, I never allowed mine to get high, redeeming relatively quickly.

Can AFFers foresee VA going into administration and not being bought out? Hard to see any profits on the horizon. Will banks and other financiers support such a company into the foreseeable future?
 

HS-TQE

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I can't remember all the fine detail of 20 years ago, but my memory is that the closure of AN came as a shock to almost all Australians, including many with high Golden Wing points balances. More through good luck than foresightedness, I never allowed mine to get high, redeeming relatively quickly.

Can AFFers foresee VA going into administration and not being bought out? Hard to see any profits on the horizon. Will banks and other financiers support such a company into the foreseeable future?
The way VA is going with HNA's intention of selling their stake with no clear interested buyer(s) on the horizon (and by extension EY as well), suggests that most potential investors currently know that VA is a 'basketcase'.

And in a breaking announcement, the Tigerair CEO has announced her resignation. No departure date for the departing Tigerair CEO or immediate replacement announced.

 

Melburnian1

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The Tigerair CEO is ex-Ansett if I recall. (Mind you, AN delivered a better experience when it operated than its competitor, and I flew AN at the time by choice.)
 

Must...Fly!

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There are still lots of upsides to the VA business.

It's gotten way too complicated and way too bloated. They need better or improved partnerships in several areas including SIN and HKG.

Tigerair needs to disappear. Free snacks need to disappear (they're useless anyway). VARA to be absorbed in to mainline. Reduce total A320 holding across the group if PER-ADL and NW WA RPT is not enough to sustain. They have no choice but to retain the F100s.

Restructure fares for domestic if necessary. Maintain strong reasons for customers to stay loyal to VA through status and associated benefits. Such as a free drink (any choice) on board and just make everything else buy on board. Keep improving the lounge experience for F&B.

NZ is critically important so instead of just dumping capacity, actually look at flight times and frequencies. VA are a bloody hard airline to fly to NZ with if you're not going to AKL, IMO.
 

MiLK_MaN

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How many others are close to a tipping point of ditching VA to head over/back to QF? All I see is pain on the horizon, similar to when QF went through all their pain before rising above to where they are now.
 

TheInsider

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There are still lots of upsides to the VA business.
It's gotten way too complicated and way too bloated. They need better or improved partnerships in several areas including SIN and HKG.
Seriously QF can't even make international work for them properly, what chance in hell does VA have with SIN and HKG. This is a continually persistent pipe dream that will not work. They don't need alliances (waste of money) or more partnerships (they already have enough), they need to make money on the routes they are currently on.

NZ is critically important so instead of just dumping capacity, actually look at flight times and frequencies. VA are a bloody hard airline to fly to NZ with if you're not going to AKL, IMO
Once again, the TT routes have a lot of competition, if VA can't get it right now, then time to pull out of these routes and make money elsewhere.
 

Melburnian1

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...Once again, the TT routes have a lot of competition, if VA can't get it right now, then time to pull out of these routes and make money elsewhere.
While one could run the same argument about Qf with its TransPacific routes to the USA - lossmaking for the past few years, and much competition - VA's strength (if it has any) seems to be in its domestic routes (and like QF, its loyalty program.)

Unlike QF, VA can't financially afford to cross subsidise some routes.

With VA's ever mounting accumulated losses and complex shareholder mix, may I raise the prospect of SQ taking VA over and rationalising it to become only an Australian domestic airline?

As a 'bonus' SQ might reduce the number of points required to redeem flights on it internationally through Velocity FF> That'd be popular with Australians, and SQ has the huge advantage of being regarded as the world's best airline when QFi is far lower ranked.

I am not an airline staffer but from outside, egos seem to be a major reason why so many airlines continue with routes that have no hope of a profit. How could one see VA earning money on its two routes to HKG?
 

HS-TQE

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While one could run the same argument about Qf with its TransPacific routes - lossmaking for the past few years, and much competition - VA's strength (if it has any) seems to be in its domestic routes.

With VA's ever mounting accumulated losses and complex shareholder mix, may I raise the prospect of SQ taking VA over and rationalising it to become only an Australian domestic airline?

I am not an airline staffer but from outside, egos seem to be a major reason why so many airlines continue with routes that have no hope of a profit. How could one see VA earning money on its two routes to HKG?
SQ has already stated publicly that they are not interested, and they have also been blunt in their own financial reports that VA was the main contributor towards their own profit downturns.

There's a better chance of DL taking over and turning VA into "Delta Australia" with their only international being LAX and timed AKL/CHC/WLG, even though that's not likely to happen either.

Every year there is the obligatory article of SQ "taking over" VA and they have all turned out to be fake news everytime. The fact they are investing more in Vistara in India (also a basketcase) suggests that VA is not a priority for SQ.
 

SheikYerbouti

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If 750 positions can be abolished, this begs the question: what were they all doing previously?
If they're like other big organisations, their valuable work will just be heaped onto those who are left, who will be told "do more with less," and "you're lucky to still have your job so suck it up." And sadly those people will believe it.
 

TheInsider

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It's gotten way too complicated and way too bloated. They need better or improved partnerships in several areas including SIN and HKG.
Sorry to quote again, but VA could only get their planes 60.7% full in May 2019 for inbound flights to AUS, and only 66.1% for outbound flights going to HKG.
Where QF had 83.9% inbound and 88.1% outbound.

Their Hong Kong experiment has failed.

As has a lot of their other International flights.
Indonesia - 74.1% Inbound/ 80.4% Outbound
New Zealand - 71.9% / 65.5%
Solomon Islands - 30.5% / 44.1%
Tonga - 64.4% / 71.5%
USA - 87.4% / 84.4%

Source: https://www.bitre.gov.au/publications/ongoing/files/International_airline_activity_1905.pdf
 

Tallfont

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How many others are close to a tipping point of ditching VA to head over/back to QF? All I see is pain on the horizon, similar to when QF went through all their pain before rising above to where they are now.
Well, I did it a couple of years ago after flying exclusively and Platinum with VA since 2010.

IMHO things started deteriorating around Q1/2017. A330's were taken of a lot of transcon flights (at least the ones I tend to catch), got charged for 2kg excess baggage on one suitcase when as platinum I was theoretically allowed 69kg and just a general change in attitude by VA staff. It's only got worse since with 26 year old Alliance F100's replacing B737's on one of the routes I travel regularly.

I and several friends and colleagues all agreed that VA were an airline with an "identity crisis". Uncertain of what sectors of the travel market they wanted to target. Probably not doing any of them really great.

I hope VA get through this as Australia needs a robust two airline market. Qantas is far from perfect, even in J but they are consistent. Some might say consistently average..........
 
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Melburnian1

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...I hope VA get through this as Australia needs a robust two airline market. Qantas is far from perfect, even in J but they are consistent. Some might say consistently average..........
A huge difficulty for VA is that many are addicted to QF FF and wedded to flying QF, even though reward seat availability can be poor and its taxes and charges are extremely high on some (if not all) routes compared to VAd/VAi/indirect SQ redemptions.

There's so much fat in corporate Australia, and all levels of government, that lip service might be paid to BFOD. I bet many find a way to fly QF even strictly when they ought not.

History suggests Australia cannot sustain three separate domestic airline groups, and that we have difficulty in a deregulated market sustaining two.

A friend runs a business employing between 50 and 100 staff. When I suggest to him his 10 plus regular flyers ought patronise VA, his dismissive reply is 'if we do, it won't make any difference to whether it survives or not.' Replicate that attitude by 10,000 SME or larger businesses and that's another problem for VA.
 

Andz

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Nov 16, 2016
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passenger numbers up, total revenue up, cash in the bank, looks to me they are making money and profit except......

$315Mil paid to investors, Looks like AN all over again, parent companies ripping off.....As you can't pay dividends from losses, you tend to see other kinds of payments to key shareholders as an expense.

 
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ozfflyer

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As expected per earlier it's a loss. The loss reported is $315 million. 715 jobs at Brisbane's HQ is expected to go.


As per previous suggestions, Scurrah's looking at folding Tigerair back into VA mainline, moving domestic mainline closer to it's LCC roots (by unbundling fares similar to the Godfrey era Virgin Blue), and ending the loss making HKG flights.

we're heading into the worlds biggest ever recession & you have these idiots at Ryanair & BA going on strike.

Guess you won't see many VA staff swanning around at airports doing SFA anymore. Must be some very worried VA staff right now. HKG has to go.

Do VA own or lease their A330s ? These might go soon. What about LAX ?

They really need daily BNE, SYD & MEL/LAX.

But how do they do that without another B777 ?

thinking outside the box ..............

Could VA put an A330 on OZ/AKL/LAX or OZ/NAN/LAX or simply base their A330s at AKL or NAN ?

They probably wouldn't get traffic rights NAN/LAX although FJs loads/yields NAN/LAX are apparently ordinary & from 1JAN, FJ will have A350s with approx 60 more seats to try & fill.

Think VA might be able to fly AKL/LAX right now. Can anyone confirm this ? & presume an A330 can do this ?


or maybe somewhere like out of OOL to LAX via NAN or AKL ?

VA already fly BNE, SYD, MEL daily to NAN & AKL. 3 x B738s feeding into an A330 ?
 

Melburnian1

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...Guess you won't see many VA staff swanning around at airports doing SFA anymore. Must be some very worried VA staff right now. HKG has to go.

Do VA own or lease their A330s ? These might go soon...
Of the five B773ERs, four are owned by VA and one is leased.

The job cuts are largely at Head Office at this stage, so one assumes almost all who lose their jobs are based in Brisbane. Not sure how it relates to staff at airport bag drops and elsewhere.
 

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