Virgin Blue’s wings clipped

[Wirraway]

Shaw stockbroking

Virgin Blue’s wings clipped
24/06/04 By: Stephen Blaxhall

Virgin Blue Holdings Limited (VBA) today announced that seats filled in May were down 12.4% to 70.2% on the same month last year. The result come in the wake of the launch of fellow no frills service Jetstar, on May 25. Year on year revenue load factor also decreased, falling 10.9 to 72.7%.

The company did announce that passenger numbers for April increased by 29.6% over the previous year, while Virgin Blue traffic, measured by revenue passenger kilometres (RPKs) increased by 39.4% as capacity, measured by available seat kilometres (ASKs) increased by 56.3% over the same period. Load factor decreased by 9.1 pts to 75.3% compared to the previous year.

Passenger numbers for the 12 months to May 2004 increased by 32.6% from the previous year. RPKs increased by 39.7%, while ASKs increased by 60.5% over the same period.

The company said that revenue load factors reported for April and May reflect the impact of new capacity and the entry into a number of new longer-haul markets, which virgin say, typically have lower revenue load factors.

In comparison, the passenger load factors for April and May were 77% and 73% respectively, which the company said were expectations for these months.

From January to April 2004, Virgin Blue has grown its capacity at an average rate of more than 50% a month compared to the previous year which the company said compares to an average capacity growth for the market (excluding Virgin Blue) of less than 5% per month.

At 1044 AEST Virgin Blue were down 7c at $1.94.

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[Skyway]

Wings still look fine to me. Possibly Virgin is one of those birds that can fly, even after you clip their wings. Their buggers aren't they.

Seriously though, can anyone report on Qantas Vs Jetstar. Are Qantas domestic Pax down compared to Jetstar? Ie, is jetstar just replacing qantas domestic, or are they a truely independant third airline in Australia. Also while I ask, how about Fly Gold, are they for real? Four airlines in the Australian Domestic market is a bit much. I wish some of these entrepenours or however the F*^K you spell it, would put some money in GA! :{

[Buster Hyman]

Well, that's it then! Virgin's GONE! The planets are also aligning, dogs & cats are living together and the second coming of Sir Reg is almost here!:rolleyes:

[Johhny Utah]

I agree that the sky isn't necessarily about to come crashing down on DJ. However, the figures (& charts) do make for some interesting reading.

Virgin share price has fallen by 25% since its peak of the last 6 months ($2.60) in March, now trading (today) at $1.95. More importantly, it's not showing any sign of breaking out of this downward trend.

Here's the VBA share price chart (https://chart.bigcharts.com/custom/etrade-australia/chart.asp?symb=VBA&time=6mo&freq=1dy&type=2&compidx=aaaa%3A0&uf=0&ma=2&maval=25&lf=268435456&style=217&size=3&comp=1.95/2.6)

On the other hand, QF share price has fallen by 11% since its peak of the last 6 months ($3.80) in March, now trading at $3.40. It is showing signs of breaking out of the current trend & increasing in price.

Here's the QAN share price chart (https://chart.bigcharts.com/custom/etrade-australia/chart.asp?symb=QAN&time=6mo&freq=1dy&type=2&compidx=aaaa%3A0&uf=0&ma=2&maval=25&lf=268435456&style=217&size=3&comp=)

Coupled with QF load factors increasing, whilst DJ loads appear to be decreasing, it certainly reinforces the opinion that the party may very well be over at DJ - it's now time for the real hard slog to begin.

Out of interest, what was the last positive announcement of any news from Virgin Blue - it appears to have been gone very quiet on their PR front of late...:rolleyes:

[Buster Hyman]

In all seriousness, why would you buy shares in an airline?:confused:

[esreverlluf]

Well - one of those listed on the ASX pays a healthy dividend - and it's trading range has been reasonably predictable over the last few years. You work out which one.

[Wirraway]

AAP

Virgin Blue shares nosedive on low passenger numbers
June 24, 2004 - 1:48PM

Virgin Blue Holdings Ltd shares nosedived today, after disappointing passenger numbers triggered concerns its growth plans could be constrained by new market entrant Jetstar.

Virgin shares, issued at $2.25 each in December, were down six cents or three per cent to $1.95 at 1303 AEST.

The low cost carrier, which is 25 per cent owned by Richard Branson's Virgin group, said May passenger numbers increased 35.5 per cent over the same month last year.

But its "revenue load factor", which measures passenger kilometres against available seats, fell by 12.4 percentage points to 70.2 per cent.

The airline said the decline was "in line with the company's expectations" and because of a 64.7 per cent increase in available seating, due to the rapid expansion of its fleet over the past year.

But fund managers expressed concern that the airline could struggle to reach its coveted 50 per cent of the Australian domestic market after the May 25 launch of Qantas Airways Ltd-owned Jetstar.

"Qantas have drawn a line at 65 per cent market share. They're going to fight really hard to protect that," Joseph Palmer & Sons manager of private client services Allan Furlong said.

"Virgin Blue, if they don't continue to grow their business at a rate that the market is happy with, I think you're going to see their share price affected."

Virgin's shares were expensive when the company floated, he said, "so if the market doesn't see that they're going to continue to erode market share ... the market's going to really cast a critical eye over the company".

Qantas shares rose two cents to $3.38 today in a weaker overall market.

Virgin's year-to-date passenger numbers also showed a declining revenue load factor since its financial year started on April 1 - it has fallen 10.9 points to 72.7 per cent.

Total passengers for May increased 35.5 per cent to 946,700 and for the first two months of the financial year rose 32.6 per cent to 1.87 million.

AAP

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[cunninglinguist]

oops Mr.Huttner, %50 is starting to look a wee bit ambitious:{

[TIMMEEEE]

Interesting reading especially from Johnny Utah who has supplied supporting evidence.

The plain and simple fact is that VB were overly ambitious with their ability to both capture and maintain market share.
Their prospectus and forecasts were overly ambitious also and this was reflected some time back by the same company that underwrote their share float.

It's been fime sitting back and riding the gravy train as Godfrey and Huttner will contest.

As I've said before and do so again, the worth of a GM is proven when he is affronted by adversity and has to trade in a difficult and demanding business environment.

VB now has more direct competition which Brett Godfrey stated didnt concern him.
The true figures and poor sharemarket support reflected by declining load factors and its own share price have rang alarm bells in many investment houses and institutional investors who have chosen to dump Virgin Blue stock in favour of other opportunities.

Now let's see Huttner and Godfrey perform as well as they do attacking the opposition and whingeing like petulent children denied their lollypops !!

[Bugsmasha]

Sorry to put a dampener on the doom and gloom thread here but I think you are all wishfull thinking if you think DJ are in strife just yet. Sure it was a pretty crappy result on Thursday which was reflected in the share price. The shares this morning are back up 1% so we will wait and see if they can "break out" of their continuing downtrend. I was talking about the VB shares to an advisor with Commonwealth Premium Financial Services the other day and he said that the predicted 12 month price for VB from the majority of Stockbroking firms was $3. They think they are significantly undervalued. But hey, time will tell.
Also Johnny is dying for some GOOD NEWS from the VB camp as he has had his head burried in the sand for the past few months.
- VB/PB announced 3 new pacific destinations last week, to begin services in September.
- VB announced that it has government approval to build a new multi million dollar jet base maintainance facility in Brisbane, to be completed next year.
- VB awarded best Low Cost Carrier in the WORLD,(yes Johnny, the world).
So there are a few positives for the poor old Virgin. Johnny if you want to find out more simply go to the VB web site and you will see all the news on these announcements, also commsec has them too, you will find them hidden away amongst all the bad announcements;)
And another plus for VB is that Virgin Atlantic will be coming to oz starting December so Maybe some oncarriage?:ok:

[Johhny Utah]

Bugsmasha, perhaps english comprehension isn't one of your strong suits? :rolleyes: Go back & read the first line of my post before you go getting all hot under the collar...:bored:

As far as news goes:
VB/PB announced 3 new pacific destinations last week, to begin services in September.

Old news - DJ announced plans to fly to these ports back in March., and the DJ website had announcements of a similar nature as early as January this year. Not to mention that the international fleet will consist of just 4 aircraft...

VB announced that it has government approval to build a new multi million dollar jet base maintainance facility in Brisbane, to be completed next year.

Another announcement that will still no doubt being 'announced' as 'breaking' Virgin News in 12 months time...

VB awarded best Low Cost Carrier in the WORLD,(yes Johnny, the world).

True, yet still not the "Best Airline Based in the Australasia/Pacific" from the very same awards....

I'm always amazed to see the daggers come out when anyone dares to criticise Virgin Blue. Simply astounded. All that some of the posters here, and others in the media, were suggesting was that Virgin might not have such an easy run over the next 6 - 12 months. It will certainly prove/disprove a lot of peoples theories on the management team at DJ, particularly Godfrey.

At the end of the day, if Godfrey & his team can keep the company growing & expanding at a rapid pace in the face of such stiff competition, then perhaps he really is worth the ~$80m he made from the Virgin float.

Out of interest, since you're so pro-DJ, did you actually buy any shares based on your learned colleagues recommendation...?:confused:

[Beer Can Dreaming]

I agree also that VB are far from being in the poo yet but these results reflect poorly on the companies ability to meet predicted expectations.

Bugsmasha, I reackon you would have to be a mug to go buying airline shares in these market conditions.
The fact that they may be "undervalued" as you put it is certainly not reflected in either its trend or current share price.

The 12 month forecast is certainly an old one, optimistic at best and a long time before its current results were published.
Throw into that the price of oil and things just aint going to get better in a hurry anyway.

The fact is that competition is hurting them as well as rising costs.
As they start new routes they will lose money for a period before they recover to profit - if at all.
Also the further you go afield, the lower the yield and hence lower the profit.

Who is Godfrey going to blame for his current woes I wonder????

[rescue 1]

I'm always amazed to see the daggers come out when anyone dares to criticise Virgin Blue
Think you're right johhny. Your post was well balanced - simple facts - keep them coming.

Any airline is liable to collapse with the unsustainable fares in the market place today

[Rind Skin]

buy pork bellies, you can't go wrong.

[Uncle Festa]

I suggest frozen concentrated orange juice. . . .

[airsupport]

Buster,

NOW you tell us. :rolleyes:

I have only ever bought one lot of shares in my whole life.

Compass Holdings. :uhoh:

Now worth zero, except maybe as wallpaper. :(

[1013]

Airsupport has spoken both honestly and openly.

Bugsmasher.
Put your money where your mouth is son and if they are really worth $3 as you say then why not risk your hard earned cash and buy a swag of VB shares????
We'll talk again in 12 months time.

I too are sceptical about airline shares but will never again buy them.
They are too simply fickle and subject to every little thing both domestic and abroad.

I too held shares in my own airline's owner some years back and finally got an OK return after a long while, but if I were to invest that money elsewhere I would have been a happier individual.Watching them roller-coaster aimlessly wasnt fun.

Good luck on the wallpaper Airsupport.

[The_Cutest_of_Borg]

I'd buy airline shares...but only to short sell them. They are great for that... particularly with oil prices being so much in the news.

They always lead the pack down... but then I am a pilot so anything I tell you to do, do the opposite..;)