Originally Posted by
Variable Incidence
Knowledgeable comment from a reader who deals with business efficiencies in the online version “The Australian” wrt Virgin’s management under PS:
“It seems to be either lost on some observers or just blithely ignored by them that prior to the COVID-19 crisis breaking, Paul Scurrah had just announced the worst first half results for Virgin since the GFC and the second worst half year result in the entire history of the company; an $88.6 million loss for the six months to 31 December 2019.
While overall revenue rose by 1.5 percent ($47.2 million) that was comprehensively wiped out by a $223.5 million (7.5 percent) increase in expenses. And that increase in expenses would have been higher if not for the application of a new accounting practice, AASB16, that allowed for some operational expenses to be capitalised and recorded on the balance sheet.
When you look past the effect of AASB16 every expense line for the business went up. Astoundingly for a business that was meant to be cutting 7.5 percent of its workforce, labour costs went up by nearly 6.5 percent! That lack of cost control would be worrying for an airline in just normal business-as-usual operations, for a business that had a history of haemorrhaging money and was ostensibly focused on a turn-around, it was most assuredly not a good sign.
And when you look at what was going on in domestic, matters were even more worrying. Revenue grew by $31.9 million (1.5 percent) but profit fell by $65.2 million (36.6 percent). That's not a misprint. Virgin essentially lost $2 for every $1 of extra revenue that they gained.
The effect of their inability to manage costs and yield meant that profitability for domestic fell to 5.34 percent (for the same period pre-Scurrah it had been around 8.55 percent, at Qantas it was 14.4 percent).
And Paul Scurrah reckons that Virgin was “headed towards profitability in the not-too-distant future”. Please! “
Begs the question then, is PS really the best man for the job going forward, given business metrics were actually getting worse?!
I wonder where T-Vasis is. Who'll forget his/her 4 Feb 20 post #14 here
https://www.pprune.org/australia-new...ent-2021-a.htm
Virgin Australia isn't going anywhere. They're cashflow positive. They can service their debts. Cashflow is more important than profit. They're both important - but cashflow rules. They have free cash. So they're not going anywhere. They're holding back capital spend and 'clearing the decks'. They're making a number of strategic decisions that will reshape the carrier - and the carrier will be a different one within the next 12 months - but it will still be here none-the-less. It will be fine. The market can support both.
But... there may be less demand for pilots with any fleet adjustments they make.
EBIT is stil trending in the right direction...
S/he at least got this right:
[T]he carrier will be a different one within the next 12 months.