View Full Version : Things not looking too rosy at Virgin Blue...

Johhny Utah
15th Aug 2005, 22:26
Latest news reports seem to be having a hard time finding any positive news from the Virgin Blue camp - even the spin doctors have gone to ground :( It will be interesting to see who wears the blame for the latest round of woes...

Talk of a loss makes life tough for Virgin (http://www.smh.com.au/news/business/talk-of-a-loss-makes-life-tough-for-virgin/2005/08/15/1123958005159.html?oneclick=true)
By Scott Rochfort
August 16, 2005

Virgin Blue's dismal outlook shows no signs of improving as the oil price hovers around $US67 a barrel.

There is mounting concern that the airline, which has failed to live up to the hype of its December 2003 sharemarket listing, may plunge to a second-half loss, given its unhedged exposure to rising aviation fuel costs.

With a list of brokers whittling down profit forecasts for Virgin in recent weeks, Goldman Sachs JBWere has become the first to forecast the airline will report a loss - of $11 million - for the six months to September 30.

That would translate into a 58 per cent slump in full-year net profit to $65.5 million.

This is bad news for Patrick Corp, which lifted its stake in the airline to 62 per cent this year and thus derives a larger chunk of its revenue from the struggling airline. Shares in transport and logistics group Patrick Corp, led by Chris Corrigan, have fallen 12 per cent this year.

And the signs for next financial year are not good. Goldman Sachs predicts the airline will make a full-year profit of just $17 million if the oil price remains at its current level.

"With only incremental cost reduction opportunities available, [Virgin] must win revenue market share from [Qantas] to justify its share price," the broker said. Goldman has a $1.35 price target on Virgin shares, which fell 1c yesterday to $1.665.

Virgin's problems have been aggravated by a softening domestic market. This has inhibited the airline's ability to fill seats and made it harder for it to lift its $19 one-way fuel surcharge.

The airline's recent receipt of its 50th Boeing could make matters worse. Virgin's latest data shows that in June this year it filled 73.7 per cent of the seats of its 49 aircraft. The previous June it filled 76.2 per cent of seats when it had only 46 planes.

Virgin's headaches will be compounded this week when Qantas increases its international one-way fuel surcharge from $60 to $70 but leaves its $20 domestic fuel levy unchanged. This could result in Virgin shying away from adding a surcharge to make up for its losses.

Qantas has the advantage of having 90 per cent of its fuel hedged at about $US49 a barrel until December 31. Virgin has no hedging.

If Virgin had the same hedging policy as Qantas, it is estimated it would make up at least $30 million in extra half-year profits at current fuel prices.

The other issue for Virgin is the aggressive growth plans of Jetstar, Qantas's budget offshoot.

Jetstar, which boasts it has a lower cost base than Virgin, plans to add 10 Airbus A320s to its fleet in the next 10 months.

Virgin's woes are set to be highlighted this Thursday when Qantas is expected to report a record net profit of $700 million or more.

Home Brew
15th Aug 2005, 22:52
Just gotta love the crap the media sprout forth with. Townsville refueller stated yesterday the QF's fuel hedging ends at the end of this month. How's that going to effect their profitability then? Maybe then QF will learn the benefit of sitting up at higher levels and saving heaps of gas.!

Has anyone considered what effect this current high price of fuel will have on us individually? Say we start paying a $1.50, the eventual flow on effect to all commodities is scary, when considered!

Looks like its back to riding the old push bike to work!!

coitus interuptus
15th Aug 2005, 22:57
Very interesting Johnny.

Now that the honymoon is well and truly over, there will have to be some shrewd MANAGEMENT at DJ. Staff are sick and tired of hearing about cost cutting and being more productive, when management get multi million dollar payouts and share options (not they are worth much these days).

All the power point presentations of QF and JQ performance are falling on deaf ears. We basically want to see some management initiative to get us on the right track. Low pay and conditions (and morale) is not and has never been a recipe for fiscal success.

Isn't it amusing how we (experts) in the trenches understand this, but management don't.

Three Bars
16th Aug 2005, 00:45
Staff are sick and tired of hearing about cost cutting and being more productive, when management get multi million dollar payouts and share options

Any QF pilot who reads this would be thinking "Welcome to the real world guys!!"

16th Aug 2005, 00:48
lol. I was going to quote the same thing and then ask 'are we still talking about DJ or have we switched to talking about QF?'

Speaking of which, you didn't post the Fin review article about AIPA Johnny! :ok: :E

16th Aug 2005, 23:58
And they wouldn't be getting too many thinking travellers. I tried them once and thought the corny jokes (Bris Vegas) and air robics jus downright stupid. And now they ve been issued with a joke book so every CM is spinning the same old stuff.....oh dear.

I thought people, maybe with the exception of the stubbies and thong brigade, took flying a little more seriously.

titan uranus
17th Aug 2005, 01:52
How about that captain that sings in his PA,
yes...he sings a song
no...I'm not jealous that I cant sing / would'nt sing

jeeeezus wept:sad:

17th Aug 2005, 02:28
I dont realy know what all the fuss is about.............$65 Million profit is still probably more profit than all the US Majors put together over the last 2 years.

Storm in a teacup me thinks

Buster Hyman
17th Aug 2005, 03:14
Staff are sick and tired of hearing about cost cutting and being more productive, when management get multi million dollar payouts and share options

...*SNIFF*...Reminds me of...*SNIFF*...me old pal Ansett!...*SNIFF*....:rolleyes:

17th Aug 2005, 03:16
Just out of interest, how much of the Qantas profit is derived from Domestic and how much from international?

I donít think their Domestic profit would be all that flash either.

rescue 1
17th Aug 2005, 09:38
Qantas results out tomorrow.

Guess we'll see then...

hangar 9
17th Aug 2005, 11:42
I heard on the vine that Sir Richard is waiting for the price to drop a little more and then he will buy back in, ala Sir K. Packer.

17th Aug 2005, 12:25

I really think your fmc is inop.

QF domestic is responsible for more profit than international,
has been for many years and I'm sure tomorrow will be no exception.

17th Aug 2005, 13:20
Things not looking too rosy at Virgin Blue...

Wishfull thinking, like the soothsayer's predictions that gave Virgin Blue six months before their demise at start up.

Carlson Wagonlit Travel announced it had won a three-year contract to provide the NSW Government's corporate travel management services.

They happen to be hand in hand with Virgin Blue. The decision to go full service was not a stab in the dark, nor the Patrick stake, it seems.

17th Aug 2005, 13:35
Kaptin [email protected]%#head,

read my post again, I said many years!!!

It has been part of QF for 12, and making more profit than interntaional for about 8 or 9.

Now F$#k Off!

17th Aug 2005, 14:06

Pure poetry my good man. !!!!

18th Aug 2005, 00:28

Well that told us. I feel so humble right now.

We keep forgetting our place, and the fact that we are not Quaintass pilots. Please forgive us.

We will crawl back into the hole from which we came, spank ourselves and than our lucky stars that Quaintass invented aviation which in turn gave us all jobs.

Thankyou Quaintass.

Buster Hyman
18th Aug 2005, 03:20
QF posted a $763 million profit & Jetstar contributed $44 million. Australian lost $11 million.

18th Aug 2005, 10:10
And just from Sky News :


Virgin Blue has issued a profit downgrade, forecasting full year earnings to slump 43 per cent.

The drop comes as record high fuel prices eat into earnings. The airline is tipping earnings to come in between $90 million and $100 million for the year, which is well down on last year's $159 million result.

The discount carrier says the rising fuel prices will add about $150 million to its fuel bill this financial year.

19th Aug 2005, 02:16
Jestar contributes $44 million and pigs fly backwards. Convince me that Jetstar even pays 1 cent toward its fuel bill.

The Australian reports Toll Holdings may be interested in a takeover bid for Patricks. This would liven up the Virgin Blue shares, particularly if Toll wanted to stay out of the aviation sector. Why, they could on-sell to the likes of a hugary Singapore Airlines or Emirates.

Virgin Blue is still considerably profitable, and billions of dollars ahead of most US majors so chill.

19th Aug 2005, 12:59
So even if Virgin Blue manages to come in at (only) +$90 million, that still puts them ahead of QANDOM and JetStar combined by $57 million, and by > $100 million of Speedy's QANDOM.

Kapt, by "Australian Airlines", he means the orange 767 operation out of Cairns. QANDOM again contributed more profit than the International operation as expected.:ok:

19th Aug 2005, 13:17
Rumour has it that Patrick Corp. is subject of a takeover bid. VB shares went up 4% today.

21st Aug 2005, 10:13
Perhaps if VB worried more about their hedging policies instead of Ron Andrews in seat 7c or whatever the F%^% that guys name is on the tv ad, they wouldn't have to be worried about such a significant profit downgrade.
Just remeber there is nothing better than a trimmed hedge!

21st Aug 2005, 21:12
Quite like a well trimmed hedge myself !

A week does not pass by of late when we are introduced to yet another, and another new member of managemnet.

Hope they are saving a few coffee beans for our EBA.

22nd Aug 2005, 01:33
It's Tom. Tom Andrews. Yes, he does sit in 7C


Thumbs up
22nd Aug 2005, 01:45
Ok,I just checked the market which has been open for about an hour and a half.

Patricks are up 11%
Virgin down 7%

Does this mean that someone has figured out that SIA has no interest in Virgin ?.

Anyone know anything?.

:ok: :ok:

Beer Can Dreaming
22nd Aug 2005, 03:04

Sure thing mate.
As you predicted it certainly has livened up the Virgin Blue share price.

It's slumped to $1.60 - its lowest price in history.

I bet all those Mum and Dad investors still in (that didnt lose 20% in the $1.90 Patricks offer) will be glad they hung on to those shares.

Down almost 30% on their IPO price.

Now imagine if they'd invested that money in BHP/RIO Tinto or Macquarie Bank shares???

22nd Aug 2005, 22:03
BCD its only early days yet. You would be mad to invest in Australian Aviation Stocks anyway, as ther are many other better options on the market.

22nd Aug 2005, 22:10
....or uranium miners..