With lucrative domestic business travel & international flights iced for awhile the most unhappy person about this will be Alan Joyce
Bain sure to slash VAs cost base and retune towards being an LCC whilst the whole market becomes cost conscious, Qantas very top heavy by comparison - this won't be 2001
Before we get too carried away assuming Bain will just walk into the second creditors meeting and get rubber stamped as the new owners of VA2 are we sure that the unsecured bondholders and/or Cyrus wont attempt a last minute stunt like gate crashing this meeting or attempting to remove Deloitte as administrators or pull some other legal spoiling tactic?
A lot of
Yohy's comments worth expanding on there. All depends on where Bain's VA2 pitch their market, one thing that hasn't been talked about too much is the
economy of scale and the
frequency/reach of the VA2 network. Will depend on number of aircraft left and number returned to leasers but dropping entire parts of the domestic network off (say CBR, CNS OOL or Tasmania) can be a risky move on two fronts, firstly - your large corporate clients and government travel want to move people anywhere and everywhere within the country, so if your network map has massive "holes" in it, then there is a danger of the perception that VA2 doesn't fly everywhere where we need to fly their people, so they won't really be in contention and most major corporates and government travel will move solely to QF (have a think about where Federal and State Governments, Westfarmers, Banks, mining companies and say the ADF needs to fly people). and secondly any SME businesses whose town gets "dropped" instantly becomes the home ground of the remaining airline (for example see Qantas' failed attempt to Jetstar-ize OOL which resulted in VA being the home ground advantage for VA).
The other effect on the airline market is that if Bain's VA2 just shrinks to the minimum golden triangle MEL-SYD-BNE plus say PER, or "cherry picking" the higher yield part of the market, then that can bring about some market distortions where airfares and competition result in really cheap fares in these markets, offset by increased fares where there is no competition, so all airlines will have to be careful not to provoke a regulatory response to predatory pricing or ridiculous anomalies in pricing that might result in more government interference on where they can and cannot fly, although the current Federal Government hasn't shown too much inclination to interfere in the market so far.
The added complication is trying to guess which parts of the domestic economy will be hurt more than others due to Covid-19 and that effect on the economies of different cities and towns (once state borders re-open). Obviously Covid-19 is going to have different effects on different parts of the economy and the effects in Mt Isa or Perth might be different to say Cairns or Hobart.
So lots of issues for Bain to sort out just to get the domestic network up and going again, and making money, before they can even think about where they want to go internationally, at least they do have a (smaller) workforce and owned aircraft to start off with, and Bain seem serious about fixing all the things that Paul Scurrah was talking about, and now they have their stupid unfocussed ownership problems behind them. Remember this is a very high barrier to entry to starting an airline from scratch so having the government approvals, resources, crew, aircraft and infrastructure is a massive advantage to letting VA1 go into liquidation and having to start again from nothing.
As long as they can position VA2 as cheaper than QFd and a better product and more reliability than JQd with a frequency/network and economy of scale large enough to be a consideration in the BFOD corporate and leisure markets they stand a chance if they do it smart. There are some people who would literally walk rather than fly JQ and there are some people who care about prices and won't pay sky-high QFd fares because its their own money or their employers money so the trick is to grow this market and develop the Velocity/Flybuys ecosystem to carve out their own profitable business. Then once its all working properly, sell it to another owner or IPO it out on the ASX.