Virgin Blue to make more domestic cuts

[oz_mark]

Virgin Blue to make more domestic cuts - etravelblackboard.com

Virgin Blue CEO Brett Godfrey revealed at an investment conference in Sydney that the airline will be making further cuts to its domestic flying next financial year.

 

[JohnK]

Forward bookings must not be looking good. I wonder if Virgin Blue is considering cutting any routes.

 

[Nigelinoz]

They must not be too concerned though because only last week Mr Godfrey was granted a further 1.6 million share options under the senior executive share program,not that they would be of much value if the business went under.

 

[JohnK]

They must not be too concerned though because only last week Mr Godfrey was granted a further 1.6 million share options under the senior executive share program....

How can this be justified?

 

[Saab34]

Forward bookings must not be looking good. I wonder if Virgin Blue is considering cutting any routes.

5% obviously didn't cut it.
I have seen quite low pax figures out of Canberra lately, especially over the last few months. SYD-CBR is rumoured to have Government support, so mabye they are subsidising the losses? ADL-CBR is either going to dropped or reduced, have counted around 20/30 pax over the last few weeks, while Tiger managed to get around 5 times that. CBR-HBA seems to be on Happy Hour everyday, hows the new Townsville service going by the way?

Mabye they should cut all this corportate stuff, admit that it failed, move on, and go back to the LCC model. Their mostly excellent image and customer service they have here in Australia certianly dosn't need to be moved on. Fares are getting lower, Tiger and Jetstar can obviously limit their losses, while Virgin is staying away from offering these low-fares, but can they keep it up? Certianly not over the next few years.

I think DJ will be up for a bit of a fight in the next 5 years, especially with Tiger staying to there word of 30 A/C by 2014, and JQ seems to have big plans with their huge Airbus Order...

 

[pauly7]

Forward bookings must not be looking good. I wonder if Virgin Blue is considering cutting any routes.

Hope not the Tassie routes! they have downgraded a few to EMB flights but I have noticed they are a little empty (the Tas flights) atm. QFLink has acutally added more capacity and upgraded a/c of late and may be picking up some of the business trade through this...

Anyway, better to cut back than to drown

 

[vet]

I wish V could clarify the speculation that Melb-LA might be scrapped. If I have to go to Sydney, I may as well fly on other airlines that land 6 hours closer to my ultimate destination.

 

[NM]

They must not be too concerned though because only last week Mr Godfrey was granted a further 1.6 million share options under the senior executive share program,not that they would be of much value if the business went under.

How can this be justified?

Justified by the low share price at present.

It is common practice to ensure people in such positions have suitable incentive to ensure they are committed to delivering their number one success measurement - increasing shareholder value. What better way than to ensure he has a significant amount of skin in the game and remains focused on that goal.

 

[pauly7]

I wish V could clarify the speculation that Melb-LA might be scrapped. If I have to go to Sydney, I may as well fly on other airlines that land 6 hours closer to my ultimate destination.

Where are the rumours / speculation coming from??

 

[Nigelinoz]

Some speculation here.
V Australia - No More Melbourne - Los Angeles Flights - forums.ski.com.au

 

[JohnK]

It is common practice to ensure people in such positions have suitable incentive to ensure they are committed to delivering their number one success measurement - increasing shareholder value. What better way than to ensure he has a significant amount of skin in the game and remains focused on that goal.

Now why would someone on a 7 figure, or even 8 figure, salary need further incentive to perform the job, and more, they are paid to do? Why do I get the feeling that there is one rule for senior executives and another rule for the workers?

 

[NM]

Now why would someone on a 7 figure, or even 8 figure, salary need further incentive to perform the job, and more, they are paid to do? Why do I get the feeling that there is one rule for senior executives and another rule for the workers?

Because people are inherently greedy. If he can add 20c to the share price, his net worth goes up by $320,000. That's a pretty good incentive to focus on ensuring the share price goes up.

I have some share options in the company that employs me. This gives me a different perspective of what the share price is doing than I had before I received the share options. While I may have very little influence in share price variations, I expect the CEO does and I am comforted knowing that he is financially incented to deliver increased shareholder value. This is very similar to just offering a bonus based on financial results. Australia's taxation laws make it a less popular incentive device here than it is in countries like the USA where shares and share options are a more common component of employee compensation packages.

 

[vet]

Some speculation here.
V Australia - No More Melbourne - Los Angeles Flights - forums.ski.com.au

The post refers to a week's chatter on, I suspect, pilot/flyer forums. Hopefully CrazyDave or Rici Riccardo clear the air asap.

 

[codash1099]

Because people are inherently greedy. If he can add 20c to the share price, his net worth goes up by $320,000. That's a pretty good incentive to focus on ensuring the share price goes up.

I have some share options in the company that employs me. This gives me a different perspective of what the share price is doing than I had before I received the share options. While I may have very little influence in share price variations, I expect the CEO does and I am comforted knowing that he is financially incented to deliver increased shareholder value. This is very similar to just offering a bonus based on financial results. Australia's taxation laws make it a less popular incentive device here than it is in countries like the USA where shares and share options are a more common component of employee compensation packages.

Conversely, it tends to encourage short term thinking, rather than looking after the long term performance and growth of the company.

 

[JohnK]

Because people are inherently greedy. If he can add 20c to the share price, his net worth goes up by $320,000. That's a pretty good incentive to focus on ensuring the share price goes up.

And we know for sure and certain that a company's share price is no reflection on how the company is performing. And if the share price goes up the CEO has done the job he is paid to do and nothing more. In most cases share prices are just speculation anyway. What is it with bonuses anyway?

I can think of a few companies that paid directors performance bonus based on the share price at a certain point. One of these was OneTel. And we know where OneTel is now....

 

[NM]

And we know for sure and certain that a company's share price is no reflection on how the company is performing. And if the share price goes up the CEO has done the job he is paid to do and nothing more. In most cases share prices are just speculation anyway. What is it with bonuses anyway?

I can think of a few companies that paid directors performance bonus based on the share price at a certain point. One of these was OneTel. And we know where OneTel is now....

Its not just abo9ut the share price. The objective of all public companies is to deliver shareholder value. Remember that the board are legally required to act in such a manner as to deliver shareholder value. The actual share price is just one aspect of shareholder value.

 

[NM]

Conversely, it tends to encourage short term thinking, rather than looking after the long term performance and growth of the company.

And that is one of the risks of many regularly reviewed incentive plans. Finding a measurable criteria on which remuneration can be based often results in encouraging short-term decisions rather that long-term strategies. This can be seen in many organisations.