Merged: Virgin Blue Share Price - how low can it go and for how long?

[43Inches]

Not sure that shorting has that much affect on VB rather than investor confidence in the product. The shares seem to drop when oil rises more than any other factor as LCCs are vulnerable to this. QF has proven their oil hedging successfull in the profit release and REXs' floating fuel surcharge nulified the effect of oil, these stocks have fallen but generally stayed where they dropped to a while back. VB being hit with poor hedging and dropping load factors and resulting large cut in profits/increasing debt (whatever the cause) does not inspire prospective investors. This poor confidence continues until something changes such as management showing some restraint in a potential recession or the economy/financial sector turns the corner and shows dramatic stable improvement.

[wirgin blew]

1. Posepone V-Australia launch
2. Stop delivery of more E-jets
3. Reduce domestic capacity
4. Further cost reduction measures
And most importantly
5. Senior management

1. Is being done by Boeing Engineers. At least postponed by a month at this stage and possibly longer.
2. They are taking the EJets they are contractually obliged to take and have postponed future orders.
3. Domestic capacity has been reduced by deploying EJets on certain routes and moving frames to PB to expand international routes. Poly Blue made 9.8 million from one route last year so this is worth doing.
4. They announced cost cutting measures, the biggest one being a 2 year pay freeze for head office staff.
5. Why change senior management. The airline made $150 million last financial year (then reduced this by $60 million for V Australia) and over $200 million the year before.

VB is still making money the question is have they over borrowed? Is the debt to equity ratio something that shareholders should be/are concerned about? Are these loans over a long enough period that refinancing won't be an issue? Are airlines something that investors are happy to be lending there money to?

[oldhasbeen]

Yes,Yes,No,No:(

[farrari]

Their book value is still 88 cents, that counts for a lot at this stage, however they are close to the wind alright.

[denabol]

I noticed this article on Business Spectator today.

Business Spectator - Qantas devours its own (http://www.businessspectator.com.au/bs.nsf/Article/Qantas-devours-its-own-JS7VW?OpenDocument?OpenDocument)

Is this as fair cop?

One thing I wondering about is what Qantas profitability will look like compared to Virgin Blue when the next year results don't include $291 million in liquidated damages for the 787 delays and whatever millions Dixon ripped out of costs by not keeping the fleet adequately maintained?

****, this year they are going to have to do something about maintenance and reliability, which won't come cheap, or the travellers are just going to give up on them.

[B772]

Interesting to note that the Commonwealth Bank and its entities advised the ASX on 23 Sep 08 that they were no longer a substantial shareholder in Virgin Blue. Looks like the majority of the shares were only held for approx. 3 weeks.

Looking at the market depth the share price will hit an all time low this week, i.e less than 40c. What it does next week is any ones guess.

Virgin Blue are forecasting a fall of 89% in earnings for 2009 and do not expect to pay a dividend in 2009, 2010 or 2011.

Aspect Financial Pty Ltd are reporting:

Current Assets $924,200,000
Current Liabilities $1,055,700,000

[coaldemon]

I think that CBA would have rules for investments in companies below a certain market cap. Looks like they bought in just above and had to sell out once it went below.

[farrari]

B772
Don't get to worried about those figures, the same for Qantas are
Current Assets $5,616,200,000
Current liabilities $7,603,900,000

[43Inches]

B772 - that number is only current liabilities, total liabilities are 2,412,000,000 against 925,000,000 net assets/equity (or 3,337,000,000 total assets) asset value per share .84c, cash or equivilents available $600,000,000 refer the 2007/08 full year results released by virgin.

QF is just as bad though once non-current liabilities are taken into account. 13,102,000,000 total liability against 6,081,000,000 net assets (or 19,183,000,000 total assets) asset value per share $2.95, cash or equivilents $2,900,000,000.

compare this to rex, 51,730,000 total liabilities (18,000,000 of which is just unused tickets etc... and almost all of which is current liabilities only 5,000,000 in non-current) with 112,653,000 net assets (164,000,000 total assets)

High levels of debt are only a problem if the buisness starts experiencing cash flow problems over an extended period and debt repayment/service provision starts to look doubtful. This is where available cash reserves become more important, as with diversity and having a solid backer capable of cash injection.

[im sparticus]

coaldemon,

I have no idea how CBA manage there investment so I wont completely discount your theory........however here is mine:

CBA never baught nor intended to own a single VBA share but are a substantial holder of TOL (around 6.9%), CBA inherits VBA stock as a TOL special dividend and announce that they are now a substantial holder, CBA sells of there holdings and announce they are no longer a substantial holder.

[Quokka]

McBank on VB...

"We believe VBA continues to look cheap relative to the net tangible assets per share adjusted for the low end market value of the Virgin's fleet. Once the churn from existing TOL shareholders dies down, we believe the share price will return to a range between $0.63-0.80."

ArticleViewer (http://www.macquarie.com.au/fsgapp/fsgresearch/FSGArticleViewerServlet?documenttosend=abstract&report_id=50008664%20&print_view=yes)

McBank on QF...

"We retain our Neutral recommendation; however, the most recent traffic data highlights potential downside risk to our financial year 2009 revenue forecasts, which assumes an 8.8% increase in passenger yields compared to ~3% in July."

ArticleViewer (http://www.macquarie.com.au/fsgapp/fsgresearch/FSGArticleViewerServlet?documenttosend=abstract&report_id=50008660%20&print_view=yes)

[farrari]

I think both, Im sparticus and Mc bank on VB, are close to the mark, and partly sum up at present why their share price is where it is. The other reason is the general downturn with the market. One would feel the outlook is up, given the USA do not FALL over :eek:

[dirty deeds]

VB will be broke in 18 months. No worries at all. Cannot treat your staff the way they do and run a business the way it is managed and hope to succeed. Impossible, luck has run out here, their only hope would be for QF to go broke (ala AN), yet somehow I don't see that happening in the near future! From what I see everyday, they are burning cash. 18 empty red seats per flight. Four sectors a day means 72 empty seats per flight. Which means one in every ten flights is running with no passengers, and that does not include empty "economy" seats. This does not include new head office costs, Vaus delays, backlog in EMB training, cost of Oil and 8th birthday parties. Unless some major strategic marketing and management changes are made, it look like a new rating or job hunt coming our way. Hope I am wrong!

Looks like David has put the match to Camp Davidian!

[wirgin blew]

18 empty red seats per flight
They might be the only empty seats you see per flight which would mean a 90% load factor on a 800 and 87.5% load factor on a 700.
As it is the loads are 80.6% YTD August 08 which is only down 2.6% on previous year.
Passenger numbers are up by 17.8%.
(Stats from ASX.com.au)

Once again a rather inflammatory post with no substance from someone who for some reason is peeved at VB.

[Betsy]

Did someone say that all DJ staff have their pay frozen for the next 2 years? Can anyone confirm? Thought it was only management..

[dirty deeds]

Load factors are only part of the equation, its about yeild and at the end of the day, operating profits, I guess that why VB wants more of the business market. Like I said, I hope I am wrong and that all the staff at Vb have a long and prosperous employment career. Ansett had good load factors until they shut the doors. Time will tell.

[farrari]

WB, good post. VB have for good or bad, work practices that are more efficient than AN and the comparison is gratuitous.

[dirty deeds]

AN work practices hay, I could show you where VB wastes thousands of dollars a day, obviously WB, you dont work there. If you do, you should be dancing in a cage at the 8th Birthday Party in pink lauderhousen with knee high socks and pink crock shoes, wig on and screaming at the ceiling!

BROKE IN 18 MONTHS!

[KittyBlue]

18 red empty seats? So you saying they leave these seats empty when there is 18 people wanting a economy seat?
Remember these seats are convertable seats which go from 2 seat a row to 3 seats a row. Just beacuse DJ don't sell the seats at Premium economy (W class) doesn't mean that they are not sold as economy (Y class) seats. If W sells it sells, if it doesn't, there is not stopping Y seats to be sold for a full Y class cabin.

As for the party, there are inecentives for the company to do it.
1. Morale - 5,000 people not bad for a party ( partners had to pay )
2. Tax and FBT laws allow it.

Frozen wages are for senior management.

[dirty deeds]

Ok Kitty,

Red or blue seats, does it matter, your logic still fails to explain the fact that the seats are still empty! And I bet many of those 5000 people at the party won't be at the 9th or 10th birthday, wait till they have seen through the V BullS$%T and been shafted a few times, most people only go to one party! Oh thats right, only the flight op's people get shafted at V, because "What can I say about pilots,................letsjust say they are in world of their own". (VB HR MANAGEMENT QUOTE).

BROKE IN 18 MONTHS thats what the broking houses are saying too! Time will tell, my CV and log book are kept upto date, is yours?:ugh::ugh::ugh::ugh:

[THE ORACLE]

DJ's shares continued to head south and closed at 38 cents today!

Popular history recorded that 'Nero fiddled while Rome burned'!

I wonder what will be said of the intransigence that seems to have paralyzed the DJ Board and Management (who of course are one and the same)!

[greenslopes]

Not quite true D.D, there are quite a few broking houses(at least two spring to mind on viewing their advisory letters) that indicate that VB has a very strong earning potential and as such offer very good value within the next 18-24 months.
Nice bit of stirring though!

[Sunstar320]

Things seem to be getting worse on the DJ front. Mabye canning all this corportate crap, and cut costs (not wages!) and head back to the LCC side of things.

Mabye some employees at Virgin should mabye consider moving on soon, before its too late:\

[KittyBlue]

DD, blue or red, the seats are pretty full on the major parts of the flying day.... its a bit to hard to sell off an aircraft at $30 fares fill it up and then let the plane lose money 'cos you carry a bunch of thrifties for pax movement numbers only!

That job goes to rev ops and they decide on what goes for what $$ amount. That descision I bet then goes to the commercial head of that department who oversees this position.

Does QF, TT, JQ have completely full aircraft everyday on every flight? Noticed a JQ flight out MKY a few weeks back loaded only 30 people. BNEMEL QF flight had 70 pax.... Mmmmmm they will be going under soon then aswell. The week before in MKY I saw a full loaded TT flight....mmmm they will be around for along time......

Sounds like shafting is a past time of yours! You seem to fly with DJ alot to make such direct comments! Thanks for keeping me in a job!! Appreciate it!

[Sunstar320]

KittyBlue is right

Last month I came back on a JQ flight from SYD-AVV with 24 people!!. And the day before they were selling fares for $119 on this sector? Last week I was also on a TT Flight from CBR-MEL, there was 174 pax, and they were selling seats for only $69.95 that same morning!

Crazy World:}

[KittyBlue]

extremely crazy world. There is a logic out there, unfortunately they dont seem to be birthed by my mother! :{

[greenslopes]

A Woman/Mother and logic...........................Nope can't see the connection....Hehehehehe

[dirty deeds]

"Cesar, Rome is falling."

"Well lets get the wine out and have a party"

BROKE IN 18 MONTHS

Dont forget, TT and JQ have a very deep pocket to reach into. Does VB! At least the staff a Camp Davidian (HQ) can eat healthy food at the cafe which becomes a bar on the weekend to celebrate the wonderful and healthy direction the company is heading into, I remember someone calling it the "perfect storm".

[farrari]

Virgin YTD Aug 08
Pax carried up 17.8% on 07, Load factor 80.6% down 2.35% on 07
QF YTD July 08
Pax carried up 0.7% on 08, Load Factor 82.25 down 1.6% on 07

[dirty deeds]

That is only load factors, it does not related to Yeild and Operating costs!

[Quokka]

Disclaimer:

I am now a substantially minor shareholder of VB... therefore... everything I post or say in this thread from now on is motivated by a selfish greedy desire to not-so-subliminally coerce as many of you as I can to buy rediculously huge parcels of shares in VB at unfairly high prices so as to abnormally drive the price of VB up to insanely high levels whereupon you can expect me to sell the whole lot without any warning and retire to a beach in the Bahamas... :E

End of disclaimer.

[Led Zeppelin]

Irrespective of any "war chest" that Virgin Blue may have, there must now be serious concerns at just how VA is going to survive with the current global financial turmoil striking new uncharted lows.

This must impact on the overall Virgin Australian operation and with dwindling share prices and asset values, gold and cash are kings right now - and if Virgin's cash runs out, will there be anyone left to pick up the pieces?:confused:

I am certainly not anti Virgin and accept neither QF or TT is immune from any of this. The strongest will survive. But it is pretty scary stuff right now.

[greenslopes]

Yes I agree Led that now may not be the most opportune time to lanch a new route with a new aircraft to an economy which is rooted.

[SkySurfin]

Today will be an interesting day on the ASX sharemarket judging by the turmoil on the DOW, and especially for VBA. Im picking their shareprice may even drop below 30c when the markets open.

[TIMMEEEE]

SkySurfin - how true.

I have copped flack numerous times whenever I write a seemingly balanced posting on this forum and criticise either Brett Godfrey or Virgin Blue.

As I have said before and I'll say again, Brett Godfrey has handled himself poorly in the running of this airline and the share price reflects that.

VB has gone from being a "Low cost carrier" (keeping the air fair[?]) to being a "New world carrier" (whatever the $%ck that is!), purchased a new aircraft fleet to spread into the regional market and now at the worst possible time he is setting up an expensive venture to operate into a rapidly declining and collapsing market in the USA while their share price has been reduced to almost junk-bond status!

As has been mentioned before certain very well respected airline analysts have said that the only way VB can survive is to firstly cancel their V Australia plans to the USA (which will incur heavy losses), cut out loss making routes and reduce their fleet by about 30% by concentrating on major trunk routes where the returns and profit are.

I copped alot of flack for that one when the share price was about 40% higher!

Godfrey has whinged and whined incessantly and blamed everyone for his company's problems.
If it's not CASA, its Qantas, its Geoff Dixon, its Sydney Airports, its Macquarie Bank, its the Government, its Analysts, its Jetstar, its ........... you get the picture.

About 3 years ago when the share price dipped to $1.75 after the announcement of bad results I copped a fair bit of abuse also.
Now the share price is set to drop to about 30 cents.

I would be very very very concerned if I were working for Virgin Blue.

Godfrey's ability or lack thereof will be further tested in the next few months.

[greenslopes]

Undisputed Timee absolutely undisputed. Till there is a change in direction which will only come with management/Board change the present course will remain.............VB does seem headed towards a very rocky coastline!

[wirgin blew]

Don't forget as at 30 JUN 08 VB held cash reserves of $604,000,000. The net assets of VB were on 30 JUN 08 $925,300,000 valuing the company at $0.88.

At the same time QAN held cash reserves of $2,599,000,000. The equity minus debt of QAN $1,331,000,000 values the company at $0.70. QAN currently trading at 4 x that.

This is my interpretation of the figures and please point out my mistakes if I have made any.

QAN in the last twelve months increased net debt by $429,000,000 and reduced its net operating cash flow by $296,000,000 some $725,000,000. Yet none of you are questioning this because your brokers and the majority of readers here all have large interests in the QAN group and cannot afford for this company to take a dive. I would ask the question has QAN paid dividends from borrowings. Something that has been going on on Wall St with disastrous results.

The other question should be asked about QAN's share price and when is it going to take a beating?

[dirty deeds]

TIMMEEEE,

Finaly someone who can see the wood from the tress, the S%^T from the clay. If some serious management changes are not made, which won't happen because Camp Davidian is so arrogant and pig headed, this airline will be broke in 18 months. They do not have the cash reserves to survive a protracted down turn in the global markets and a sustained high oil price. And now they are starting an International airline to the heart of the melt down. Great timing boys. I reckon Tiger will benefit from the the collaspe of VB, like Vb did with the collaspe of AN. VB boys and gals, get your CV and Log book up to date, there's going to be a melt down.

[KRUSTY 34]

Agree with greenslopes TIMMEEEE.

I recall some time ago questioning the wisdom of DJ going down the path of fleet diversification. The collapse of Ansett aside, the low cost model and single type fleet has led to a fundamental change in domestic air travel in this country. Whether or not this change was one for the better sometimes depends on who you speak to. The fact is however, more Australians than ever before are flying, and airfares are approx 50% of what they were 10 years ago. That's gotta' be a good thing.

From an initial capitalisation of $50 mil (correct me if I'm wrong) DJ grew to become a market leader in the market they were designed for. I hope the doomsayers are wrong, but the factors appear to be adding up. And as far as VA is concerned, I think they may now have more problems than just attracting quality staff and crew!

[Sunstar320]

I was quite suprised by the "Changes" they made to their airline back in June. They only cut a few services, then just put those extra planes on other routes (ie- To Pacific Blue), and just adding a $8 surcharge???
Godfrey vowed:
has vowed not to retrench staff :hmm:
The airline's 4800-strong staff will expand to 6000:eek:

Well, if this stubborn managment wont accept whats going to happen, Its time to go Virgin.

[THE ORACLE]

Dirty, TIMMEEEEE,

DJ's management/Board actions and inaction can perhaps be described by what is loosely termed the 'Arrogance of Ignorance'.

It seems they actually believe their own rhetoric and therefore will prove the rest of the world wrong! Psychologists have a wonderful term for this type of mental disorder 'Narcissism' ('an exceptional interest in or admiration for oneself'). The name comes from Greek mythology where Narcissus was so rapt in his own beauty that he fell into a pool (while admiring the reflection of his image) and drowned.

With the Global financial sector meltdown, all businesses worldwide are operating in changed and uncertain circumstances. The only SAFE way to proceed is conservatively and with minimal risk and these notions seem to be alien to the DJ managerial psyche.

People have short memories. The original (conservative) DJ LCC 'no frills' model ONLY SUCCEEDED on the back of the Ansett collapse. Had this not occurred DJ could easly have failed 7 years ago.

Godfrey and Co obviously learned nothing from that experience as they have assembled a 'house of cards' the with level of exposure built into their current business plan which seems to naively assume the airline business environment is stable!!

[dirty deeds]

'Narcissism' ('an exceptional interest in or admiration for oneself').
You hit the nail on the head Oracle!

I like to call HQ "Camp Davidian" myself, it suits the David Coresh style of management well, if I cannot win, I will burn the place down. And everyone follows the leader blindly.

"Cesar, Rome is falling"

"Get the wine out, lets throw an 8th year Empire Party"

"But Cesar, we cannot pay the troops"

"Well, feed them some cake"

[ANstar]

given fuel prices have come down - and usually in a downturn companies choose to put staff ont he cheapest airline of the day, surely that would benefit DJ on it's business routes?

[mrs nomer]

ANstar -

I don't think fuel is the issue right now.It's gone way beyond that. The problem with Virgin Blue is brand identification, the E-jet introduction, sustaining the VA start up while trying to make money on international routes to a sinking economy in the grips of a recession.

The apparent largesse at Virgin headquarters smacks of a company whose management has lost the plot completely.

VA will probably gulp any cash reserves the group has as a sinking fund. As has been said elsewhere - in a state of declining asset and share prices, the situation that Virgin now finds itself in is very troubling.

My views only - hope I'm proved to be wrong.

[43Inches]

wirgin, i'm unsure of how you came to the figure of .70c value of QF shares when the actual asset value of each share was stated at $2.95 in the prelim annual report (as was VB at 88c). QF is trading only slightly above that figure and is more bouyant as their fundamentals are better for the long run (corporate size/route viability/competition/fuel hedging policies etc...). QF has also talked up their readiness to conserve and cut back if needed, giving a sense of control during the turmoil.

Also the liabilities being quoted are only this years debts, the non-current (long term) liabilities must be taken into account as VB has almost $1.4 billion worth of interest bearing liabilities long term to be addressed, this alone is a very worrying factor if cashflow difficulties are encountered.

The $600 million cashflow 'reserve' was created with borrowings of $700 million not all revenue cash.

[Going Boeing]

VA will probably gulp any cash reserves the group has as a sinking fund. As has been said elsewhere - in a state of declining asset and share prices, the situation that Virgin now finds itself in is very troubling.

I totally agree with this. Brett Godfrey said at the time the startup of V Oz was announced, that a single SYD-LAX B773ER sector risked the same amount of money as 53 B737 domestic sectors. To risk such large sums of money at a time when the international market is shrinking is very worrying for DJ shareholders. It may be smarter to delay the startup of V Oz for a couple of years when the market should be in a growth cycle, however, that would involve writing off some of the money already invested in setting it up - something that the Board would be reluctant to do.

[THE ORACLE]

All,

Perhaps the lack of definitive action from the DJ Board and Management with respect to the global situation has a simple explanation.

Could it be that like the media reports of householders on limited incomes around Australia's 'mortgage belt' who are now so overcomitted they can't service their debts, that DJ similarly is so locked into the penalty cancellation costs of it's business plan for E-Jets/VA and the sustaining fleet, that any significant wind back could be the trigger for a cataclysmic business meltdown?

Food for thought!!

[framer]

I had a conversation with a QF middle management type a while back and he old me that QF would not want VB to go under. He said that they are comfortable with VB as the other side of the duopoly and VB's demise would most likely bring leaner/tougher competition.
As I don't know the first thing about airline management/policy etc, I would like to know what you folk think of that statement.
Cheers.

[KRUSTY 34]

Going boeng said:

"It may be smarter to delay the startup of V Oz for a couple of years when the market should be in a growth cycle,"

Agree 100%. On a much smaller scale, and due to somewhat different circumstances, REX were similarily warned about it's foray into QLD. Blind freddy could see that the chronic shortage of pilots would mean a robbing of the established and money making routes if it were to have any chance at all. Shortly after it began, they were forced to pull the plug, and only after more serious damage than if they had not gone there in the first place!

At a social function some time later, the REX Strategic planner was heard to say, We had to go into QLD because it had gone so far that to cancel before it begun would have been unthinkable!

Lets hope for all the good people at DJ, and those looking at VA, that this sort of mindset is limited to only one group of airline managers?

[Section28- BE]

Well broader market sentiments withstanding it was indeed a big day out for VBA today:

Closed at 0.315 cents

On a volume of 13,025,439

With a High of 0.38c and a Low of 0.315c

Or down 6.5 cents for the day.

They were down 2.5-3c most of the day and softened during the afternoon to close on their low for the day.

[Wod]

framer

QF know that it is politically impossible to have a monopoly in the domestic market. International competition has always been there.

They know there will always be a domestic competitor so the comment you quote makes sense to me.

As far as Virgin Blue goes I have previously observed that QF have them in a vice. JQ have lower costs and can absorb more pain, whilst QF have a larger network, so more connectivity. Virgin have chosen to take on more cost to try to compete with QF and wound up in a cost bind IMHO.

[Thylacine]

VBA Annual report lodged today view at VBA Company Announcements (http://www.asx.com.au/asx/statistics/announcementSearch.do?method=searchByCode&issuerCode=VBA&timeFrameSearchType=D&releasedDuringCode=W) to download PDF of annual report

[Heavy Cargo]

If the shares were 2.65 ish when they floated and the company had a value of 2.6 billionish does the shares at 0.31 cents make the whole show worth 310 million AUD ? Ball park numbers ?

[Timber]

I think there are about 1,1 billion shares so ..... $350 mil or thereabouts. Quite a bit less than there is in the cash till..........

[THE ORACLE]

All,

A primary responsibility for the Board and Management of public companies is to increase shareholder value through the combination of capital gain in the stock value and/or profits distribution through dividend yield.

The Australian Airline Majors closing values today were VBA $0.315 cents down 17.11 percent and QAN $3.130 down 3.1 percent. Co-incidentally as the largest independent Regional REX closed at $1.02 down 4.67 percent.

Considering that DJ listed at around $2.40 per share, by any measure the Board and Management have failed spectacularly in their duty of care to shareholders and staff.

Until recent weeks DJ managerial ineptitude has been shielded latterly by the TOLL Holdings majority ownership and formerly the Patrick Corp majority ownership.

Now the 'Gloves are Off' and the market clearly does not like what it perceives as the Board and Managements Buccaneering and Cavalier approach to the business at such an unstable time.

[greenslopes]

Surprising to see the CASK (cost available seat kilometre) was 9.05c for the 737 whereas for the E-Jet it was "above" twenty cents. I would have thought the E-jet a cheaper aircraft to run..........the report did go on to say it expected the E-jets to drop by half within the next year, this however still makes it a more expensive aircraft to operate per seat Km.

Is the 737 strong enough to carry two expensive stablemates i.e the introduction of the E-jet and the introduction of 777 into North America?

I hope for the folk at VB the answer is yes.

[Dehavillanddriver]

A smaller aeroplane is always more expensive in a CASK basis, as the costs dont decrease in proportion to the reduction in seating capacity, the 78 seat 170 has less than half the seating capacity than a 737-800, yet costs did not decrease by half, fuel burn didnt, salaries didnt (despite what some think!), financing cost didnt.

Conversly the 777-300 is cheaper than the 737 to run on a CASK basis.

Where the cost savings come in is that per block sector the Ejets are cheaper to run than the 737 which in turn are cheaper to run than the 777.

So if the sector that the ejet is scheduled on has booking of less than or equal to the seating capacity of the ejet (170 or 190) then it is cheaper to run an E Jet.

Equally if the Ejet allows you to operate on a citypair that you wouldnt otherwise be able to run on (Albury - Sydney for example) then the Ejet is infinately less expensive to run than the 737 (assuming your fares actually turn you a profit)

The Ejet appears to have been extremely popular with the punters and crew, and I reckon it will do the business for VB.

It is a good option as compared to the 146, the F100 and the 717.

[THE ORACLE]

D,

Notwithstanding your excellent summary of comparative unit cost economics, yield is always the critical factor in determining contributions to the bottom line.

Australia currently has more competition in the domestic market than ever before. A great bulk of the passengers have been conditioned to 'self serve' via the internet to save cost and the by-product seems to have been the erosion of any 'brand loyalty' in favour of the cheapest fare on the day.

DJ to an extent have been an architect of this process and the introduction of 'Velocity', in part seems to have been an attempt to recapture the leakage of itinerant passengers. The success of 'Velocity' in this regard is questionable, however, as many VFR passenger will travel 'to and from' with different carriers if they offer an apparently cheaper fare.

The comparatively high unit costs (against the Dash 8 and Saab) in markets such as Port Macquarie and Albury have resulted in DJ's competitors consistently denying them any yield from the E-Jet passengers thus far carried. Qantaslink's decision to operate the Q400 into Albury may further exacerbate DJ's losses on that sector if the schedule runs in parallel with the E-Jet.

Finally, by going to an expensive and smaller airframe for operations on trunk routes services, even for off-peak, DJ will deny itself any opportunity to make a profit form the extra 50 odd seats on the 737 that are no longer available. Their competitors, however, will be able to offer these seats (to those itinerant customers only faithful to price) as they are continuing to operate 150 seat+ aircraft.

This entire discussion may become irrelevant if the DJ share price continues to lose value at the current astonishing rate, which by next week could result in the company being worth...........?

[Led Zeppelin]

Yield with the E-jet is no where near enough to cross the finish line with cash in the bank.

This is the crux of Virgin's trouble. Effectively the cash reserves are feeding the yield gap that:

1. Has been generated by the jungle jets.
2. Will be generated by the 777.

With these 2 factors alone, it will take some very creative accounting to try and stay afloat. Also remember that lines of credit will have dried up to the point that any available funds for this type of high risk venture will attract extremely high interest rates.

In other words if the cash flow isn't there, yield management becomes irrelevant.

Something has to give here if the core brand is to be saved.

[greenslopes]

The greater CASK of the e-jet V 737 means the e-jet is a lot more critical on selling a full aeroplane(or achieving high yield) in order to keep a lid on the greater than 737 costs. Perhaps it isn't fair to compare the two but the balance sheet certainly will. If one doesn't generate greater profit yet costs more to run what is the purpose? Only the accountants know the answer........I hope the e-jet is as good as some report.

[Sunstar320]

Is that why they always seem to cancel a heap of SYD-CBR-SYD Sectors, cause their empty and losing heaps of money??

[1a sound asleep]

How fickle this industry is..

DJ profit $97,000,000
Number of passsengers 16,000,000
Profit per passenger = $6

Now if each passenger paid an additional $10 for each flight then the profit would have been $256,000,000

And if each passenger had have paid $10 less per flight then the profit would have become a loss of $64,000,000

[farrari]

Share price up 16% today Dare I say we reached BOTTOM and now GOING UP!

[1a sound asleep]

I think the annual report is a lot better than some doomsayers were expecting. Ok it's not brilliant, but compared to the likes of some similarly positioned foreign carriers its damn good. Now the share price is seriously undervalued if you look at the balance sheet

[wirgin blew]

DJ profit $97,000,000
Number of passsengers 16,000,000
Profit per passenger = $6

This actually increases to $8.50 without the startup costs of V Aus. So put simply if you then expanded your operations to try and capture more bums on seats and kept your operating costs the same you would be able to continue to make good money in an environment when everybody else is cutting capacity because their costs are out of control.

So lets see: 20 million pax equates to a $170 million. Can VB achieve this target within the next financial year? At the moment they are looking at 17.5 million pax YTD AUG 08 = $148.75 million. QF are handing them customers in certain markets, the Federal Govt has to travel with them for 25% of there bookings (currently at 12%).

Interest rates are coming down, oil prices have come down, the economy in Australia is still hanging in there and the US Govt is probably going to bail-out the US economy.

So once again I am coming to the conclusion that things aren't as bad as the minority in here believe.

[S.N.A.P]

Ha..

I think you'll find that its the opposite regarding V Australia!

V OZ been giving flights away to QF at the moment.

V OZ is far from starting up when they said they would. They sold so many cheap tic's to unsuspecting customers, $500 LA return!

Now unsuspecting customers get to travel QF A380...Lucky bastards lol!!

Thats a massive blow that cant be recovered in any ones books

[bob_bowne]

Virgin looks into Abyss

Debt to Equity is really crappy but at least most of the debt is long term

V Australia is about to operate up to six or 7 very large gas guzzlers to a country that is at the moment in a pilotless uncontrolled spin and has to find a pilot to even find the rudder pedal, let alone push it.

The Aussie dollar is not that sick but no where near as strong as it has been. This has a detrimental effect on US denominated debt and US outbound tourism. It may help US inbound tourism except that many have just lost their house and are not taking an overseas holiday this year.

Domestic yields, as always are under pressure and the BIG Q is about to operate its brand new A380 in direct opposition to V Australia, yield management for V Aust will be a huge challenge!

There is no parent anymore, with deep pockets other than Richard and I think his hands wont be able to reach the bottom of his.

Bottom line is, something or someone will fall by the wayside. It wont be the BIG Q, AirNZ are government backed, Tiger is SQ and SQ Gov owned. This leaves VB, V Aust. and United. One or all of this three is going to hit the wall......Any Bets?

[sthaussiepilot]

Just looking around here, speculation aside, I do think VB does have a shot for survival now...

They are in a bit of a dire situation at the moment, but I am starting to think they may be able to recover....

wirgin might be on the money with most of what he said.

I think V Australia will go within the first few months...
VB - Hopefully, and Might be able to stay
United- Quite solid arent they?

Which leaves V Australia as the odd one out, unless people take a huge liking there, theres no way it will survive, its profit margins would be razor thin, especially if the "gas guzzlers" suddenly had an increase in fuel costs (larger than the last hike)

[breakfastburrito]

United Airlines' parent raising cash

UAL Corp. wants to strengthen its cash balance by $275M by the end of the year by selling assets and agreeing to a new aircraft financing agreement.

CHICAGO (AP) -- UAL Corp., the parent of United Airlines, said Wednesday it is further shoring up its cash position amid a major downturn in the economy and persistently high fuel prices.
The Chicago-based company said financing transactions will boost its cash balance by roughly $275 million by the end of the year.
UAL has completed a $125 million aircraft financing agreement, receiving about $60 million on Tuesday, and will receive the rest of the money by mid-October.
United also has completed or reached deals to sell certain assets for roughly $140 million. The carrier did not specify the assets in a statement Wednesday.
Lastly, United plans to substitute certain cash collateral with a letter of credit, generating $10 million in net incremental cash in the fourth quarter.
The company said it still has more than $3 billion of unencumbered assets to further improve its cash position if needed.

CNN (http://money.cnn.com/2008/10/01/news/companies/ual_united.ap/index.htm?postversion=2008100109)

[Led Zeppelin]

One or all of this three is going to hit the wall......Any Bets?

I can't believe Virgin management would be so stupid to allow the whole operation to fail because of VA.

Maybe the original economic model was profitable, but that model is no longer valid in the current climate. Additionally, QF running the A380 as direct competition won't help.

So, if it all goes south, my money would be on VA folding to try and save the parent.

Without a benefactor, Virgin needs to retain all the cash it can and that can only happen if the status quo (ie the existing VB/PB operation) remains.

[1/2 bank]

In the continuing absence of a revised aircraft delivery schedule, Virgin Blue said it considered the only responsible course of action was to nominate a revised V Australia launch date of 28 February, 2009 to protect the interests of its Guests. V Australia’s Brisbane-Los Angeles direct services, due to launch on 1 March, 2009, are not affected.

[Sunstar320]

For discussions on the VA Delayed Operation,see relevant thread

http://www.pprune.org/d-g-reporting-points/345464-v-australia-operations-delayed-feb09.html#post4434027

[B772]

IATA are of the opinion 20 airlines will fail over
the next 12 months. Rumour is that 3 airlines
in the U.S will fall over. I suspect United may
be one of them.

IATA are also talking about 1,000 aircraft being
grounded over the next 12 months.

BTW. Air Pacific are wet leasing a B747-400 from
United commencing soon.

[wirgin blew]

In response to the previous poster.

Any Bets on Next Airline to go Bust (http://www.paddypower.com/bet?action=go_type&category=SPECIALS&ev_class_id=45&ev_type_id=10368&promo=nov_Nextairlinetogobust&crea=lnk)

DJ don't even rate a mention :)

[ANstar]

Despite the doomsday posts, DJ are actually in a much better position than a lot of other airlines out there.

Any carrier that needs to refinance debt or get a loan will struggle with the credit crunch. DJ still have a good cash flow and cash balance. They stated in the annual report they have no need for any further borrowings.

They are also operating in a less competitve market than Europe, USA etc.

[sthaussiepilot]

ANstar,

You forgot something..... they're actually liked favourably amoung us Aussies.... :ok:

I have yet to meet a stuck up b*tch from DJ...
Seems they flock to me with QF though.... :suspect:



(I cant really see how Qantas and Aeroflot are in the same catagory on that site wirgin, I thought Qantas would be in a much better position than Aeroflot)

[Dale Hardale]

They stated in the annual report they have no need for any further borrowings.

They may well have believed that internal funding was sufficient a few months ago.

Things have changed somewhat and if VA proceeds, watch the cash fly out the window.

Once the cash has gone, then further borrowings would be essential.

[farrari]

Yet today Deutsche Bank recommended the stock as a BUY.

[airtags]

The VA decision has prompted a few brokers to reconsider - the market is still waiting for some leadership from Godfrey & the Board but at least the sentiment is moving n the right direction.

Sidebar:
- anyone know the status of the 73 rego BN
Saw it take a mighty hit from the aerobridge at Gate 12 MEL last night - looked like a big nudge on the angle just fwd of the L1 door (near the ever popular high speed tape site on the right breast of the Virgin Lady motif)

The poor eng standing near the nose wheel jumped in shock, looked like the chocks moved and the skipper stuck his head out the window and had what looked like an animated chat with the young ground staffer driving the bridge - looked like a serious nudge.

[Blip]

I feel sorry for the ground staff that have to operate these "modern" aerobridges that sit on the two manoeuvring tyres.

I've stood behind the staff on numerous occasions watching them operate the joy stick as they tentatively try and position the lumbering bridge to the front door of the aircraft. Seems to me there is only two setting for the electric motors that drive the tyres, ON and OFF. There seems to be no low gear option where the operator might be able to select a slower setting for the final approach to the front door.

I'm amazed collisions like this don't happen more often.

[KittyBlue]

Well Blip is does!!!! Gates 2 on E pier, Gates 11,12,13 on F pier have caused damage to planes in Melbourne. Sydney have dramas with most gates on DJ side, the worst Gates 31,32 which has slipped and dented planes!! Its hard to work for those ground staff who use upto 30 year old equipment, that is not maintained as best it could be by airport authority and that fact that some still don't grasp that idea of how to operate the damn things.... i think it needs to be windows based for some!!!

:oh:

[B772]

The major shareholder in Air Asia (holds 30.9%) is considering privatising the company at approx USD0.39 a share due to the bleak outlook. I wonder if Virgin Blue will go down this path ?.

[Thumbs up]

28 cents.....Ouch!!.

Time to buy some Qantas shares me thinks .

[Section28- BE]

On an ominous day for the market as a whole- VBA fell through 0.30 during the morning and bounced along under that for the day to close at 0.285 or up a cent on their low for the day.

Closed at 0.285 cents

On a volume of 11,732,846

With a High of 0.310c and a Low of 0.275c

Or down 3 cents for the day.

[maxter]

I would think that looking at any companies share price at the moment, and trying to gain some insight, would be an execise in futility (unless you had margin loans). Price would be irelevant at the moment for VB in my opinion.

Prices are not set at the moment by a companies worth but by 'the fear factor'. Has it got a better chance of not making it than the next one.

There are some 'long term' goodbuys coming.(never airlines or telcos at any price, in my mind):ok: Does not mean it is at the bottom but there are companies that are being hammered that will continue to do well. Bet it is not the thinking investors who are jumping ship, in many cases.

[Quokka]

Patience my friends... patience.

The "break-even" point for VB's expansion programme is 18 to 24 months. The share price, now, is a creature of the economic Apocalypse... not Virgin Blue. The share price is beyond Absolute Bargain levels and has achieved Once-In-A-Lifetime-Opportunity-For-A-Rediculously-Easy-Money-To-Be-Made-On-This-One-If-You-Get -Off-Your-Posterior-And-Open-A-Comsec-Account-And-Buy-Them... status.

Mind you... the price of several Australian companies outside of aviation have achieved this status as well... BHP and CSL are two that come to mind.

Yes, there will be a downturn in the economy that will hit all of the companies in some way... but the share prices are now well below that level and there will come a time... whenever that will be... that the current trading behaviour will pass.

People have rather short memories for cataclysmic events that ensure that, as a species, we keep making the same mistakes throughout history... war... stockmarket crashes... financial disasters... other economic oblivions. We have them, they pass with time, we get drunk on the rise to success... blind ourselves to the possibility of failure... and then make the same mistakes again.

The future of Virgin Blue is looking good for the following reasons...


Virgin Blue has cash.
Virgin Blue has cash flow.
Virgin Blue has assets of considerable value.
Virgin Blue's main competitor is suffering.
Virgin Blue has an expansion programme that can gain market share.
Virgin Blue has secured debt instruments to cover their expansion programme.


The day before yesterday, CNN broadcast a short piece by one of their business presenters that speculated on the future of the travel industry. Whilst he believed that there would be an increase in the number of airlines failing as businesses, he also made the comment... business people are still traveling... they're just traveling economy instead of business class and staying in three star hotels instead of five star hotels.

[43Inches]

VB has proved it can make positive cash/cash flow during economic peaks, now the investors are asking if LCCs' can do the same during the lows.

[mrs nomer]

1. Virgin Blue has cash.

If it ever starts, VA will suck all of that cash straight out of the window.
2. Virgin Blue has cash flow.

Provided it can keep operating.

3. Virgin Blue has assets of considerable value.
Asset values are just that, valuations. Realisation of assets in this climate may bring a few surprises.
4. Virgin Blue's main competitor is suffering.
Suffering from what ?
5. Virgin Blue has an expansion programme that can gain market share.
12 months ago - agreed. But not now.

6. Virgin Blue has secured debt instruments to cover their expansion programme.

Whether loans are still available or not remains to be seen given the changed economic conditions and the now doubtful VA/VB cashflow model.

[Stubby]

Quokka, I agree with what you have written, its nice to see some positive spin on this forum for once not just a cynical outlook :D
To the VB staff hold steady do your best to help the company where you can, lets not just think of ourselves its everyones living at stake.
I dont think management is as silly as some people make out on this forum.:E

[Scooter]

Mrs Nomer, I agree with you 100%.

The way airlines are doing business now, particularly with regard to lease/financing has totally changed the market in the last few months alone.
Having the $AUD below $US 0.70 will only add to their pain for future leases.

Delays with VA, refunding of tickets, rising costs, the US economy in recession and the Americans in their usual mode of panic may see VA a short lived entity that may very well suck VB dry as mentioned.
People will not travel to the US as easily as they did when the dollar was close to parity.

Cash flow is becoming a real and large problem for VB and they will need every cent to finance VA, let alone cover their losses for a few years.

Share price down to 27.5 cents today does not help as the market has risen about 4 % but VB's shares are down about 8% today in a rising market.

Good luck!!:oh::oh:

[indamiddle]

vaustralia is a subsidiary of vb. were it, va, to go broke vb will still survive but would have to write off the total investment in va, a reduction in share value but not a total loss

[RYAN TCAD]

There's not much left in the share price to lose! - and i'm glad i don't have any.

[leading edge]

I hope this isn't too much thread creep.

I have recently flown VB Premium Economy for the 3rd time. Previously, I have exclusively used the rat for all corporate travel, usually at the pointy end. I am platinum with the rat. I am a corporate user chooser with no restrictions on which airline I use.

VB has always been on time on each sector (6)

VB Check in both in the terminal and in the lounge with no bags has been quick, polite and easy.

VB lounges are fine, no better or worse than any others and they have so far been able to can make a great coffee. Free entry when Premium Economy is good although to be expected when paying the full fare Premium price.

VB in flight staff have been helpful, polite and friendly at all times.

VB bag claim handling seems to be a little quicker than others.

Overall, I have found all of the VB staff I have interacted with to be a great asset to the company. They work hard but they work with efficiency and above all, seem to like what they do. If they don't like it, they don't show it. They make me feel like a customer and not like an inconvenience to their social lives, like some other airlines.

I will now continue to use VB Premium for the bulk of my domestic travel where it is available.

I have one small complaint. I object to having to pay for TV, a soft drink or a sandwich. Its not the money, its the inconvenience of the whole transaction (finding wallet etc)

I once flew VQ by necessity, never ever again.

I am now thinking of "punting" some dollars on VB shares. If the staff maintain their hard work and enthusiasm, and the product remains as it appears to be, the share price should only eventually go up, the airline deserves success. I will do my bit to support it by travelling VB Premium, because they make me feel like a customer and that's what I want, its simple really.

[oldhasbeen]

at least VB management use their own arline:p:p:p

[On Guard]

Leading edge

You most likely won't be paying for the food for too much longer.

[leading edge]

Jim

Points well taken.

I will treat it like a small wager on the Melbourne Cup, I will only bet what I can afford to lose if I decide to go ahead with the punt!!

I will, though, be a repeat VB Premium customer, especially if I can get my muffin and coffee without having to pay cash.....thanks On Guard

[Quokka]

mrs nomer & Scooter, so you're stating that the share price of VB will not rise above 28c? ;)

...as the market has risen about 4 % but VB's shares are down about 8% today in a rising market.

Hmm... are you sure about that?

[denabol]

Jim,

Paul Little and his mates in Toll management kept their VBA shares. Little also stayed on the board. What Toll did was to distribute the VBA shares to the general shareholders in Toll in an in specie distribution. It's all there in black and white. Try to do a bit of reading with your pontificating.

[TBM-Legend]

VB 'Premium Economy' = crap

same seats with a plastic divider in the middle istead of another of the unwashed....still had to buy my coffee from the trolly tart after paying the extra for the 'privilege'...that's not service:yuk:

[Gebrselassie]

They are going out the back door ... all the way to zero.

[denabol]

Nope. Once it gets to half a cent I'm betting the farm and buying the lot.

Sell some more cows, mortage the the land, easy.

[denabol]

Jim,

I've got family involvement in DJ as well as QAN shares from way back.

Not happy with both, but at at least DJ hasn't yet shed jobs and it looks pretty good with its single aisles at current fuel prices unless demand vanishes. As an item on Business Spectator pointed out some time back, and I quoted on this board, the QF and JQ experience is driving the punters onto DJ flights at the moment. I don't like the V Aus plan, it is too late and they will get mangled unless they shift the jets to routes other than SYD to LAX.

DJ's big crime is existing. QF has screwed around with its engineering and general standards as people have made very clear on this board especially in looking after their engineering and it is a crying shame. But DJ are backed into a corner and I can't see them growing nearly fast enough to benefit from QF's mistakes.

The thing about the ASX at the moment is that people are going for cash. Margin lending is dead. Valuations are not rational when there is forward economic uncertainty and some people's assets are suddenly worth a lot less than their debts. So they have to feed that debt by flogging anything they can, or opt for bankruptcy. My pet theory is that the up and down surge in sentiment as the blokes in suits call it is just being orchestrated through spin campaigns to generate as many broking fees going up and coming down as possible in a short time before the whole shebang falls in a stinking heap.

Gees I hope I'm wrong.

[denabol]

Jim,

I nearly got around to the same issue of valuations. I don't believe asset valuations as reported in financial documents or balance sheets ever. I don't believe in the integrity of any of the auditing firms.
I think you have to doubt these things as an investor in any business until you get evidence to the contrary.

I also thought I'd read that the finance for the first tripler had been arranged, and that being the one being leased from ILFC. However that was before the owner of ILFC had to be bailed out by the USG. The long haul plan is looking so shaky to me I think it could still get dropped, or made impossible by external issues.

But the second hand goss I'm getting is that the 737-900ER replacements for some leases that reach maturity next year is on. That makes sense.

[Section28- BE]

Little also stayed on the board.

Think you will find that Little and the other Toll representatives (inc the Company Secretary) resigned from the VB Board- effective 22 August 2008, announced to the market 26 Aug 08.

Cheers

[O2]

Looking at the candles, MACD and the trend i think the SP will continue to slide.

[denabol]

Jim,

My 0.5 cent share takeover bid is starting look serious, or seriously funny.

Can see headlines about Hick buys Virgin Blue already.

[wirgin blew]

same seats with a plastic divider in the middle istead of another of the unwashed....still had to buy my coffee from the trolly tart after paying the extra for the 'privilege'...that's not service

Your forgetting that food and drinks are free in "The Lounge", which is included in the ticket price.
QF fully flex which is what its trying to compete against gets you sweet f.all and you not even guaranteed a seat near the pointy end, let alone a plastic divider. VB Premium $399 QF Fully Flex $438 SYD-MEL Sun 19th Oct.
If you had to fly for business and you were trying to save your company money which product should you be buying?

[TBM-Legend]

not interested in a free cuppa in the "Lounge"....nice to have some treatment on-board. As a QF FF I get the best available seat usually. It isn't always just about $$$, it is about value..

[indamiddle]

wirgin blue,
you would buy the cheapest seat available be it qf or vb on 'the net' to save the company money. going to be lots of cheap seats with both over the next 18 months.

[B772]

The Announcement to the ASX today for the month of September 08 does not reveal any details of the financial performance but does show that compared with September 07 the avearage number of aircraft in the fleet increased by 29.6% yet PKM's only increased by 8.9%. Hence the lower load factor and reduced fleet utilisation.

If the downturn we are in at present is as bad as the downturn we experienced after the minerals boom of the late 60's/early 70's we are in for a rough ride. After the first Labour Government since 1949 was elected in 1972 the sharemarket fell for 2-3 years and after loosing 61.8% (Fibonacci Retracement) of its value it finally bottomed out in 1975; back to where it was in late 1959. All the growth for 15+ years had been wiped out; along with it the hopes and aspirations of countless Australians.

'History does repeat itself and we do not learn from it'

The mess we are in at present will be long and protacted with many financial institutions going to the wall. How many airlines will collapse or merge remains to be seen !.

Ps. The Virgin Blue release is dated 21 September 2008, obviously it should be dated 21 October 2008.

[Quokka]

McBank defines a recommendation of "Outstanding" as an increase in share price of more than 5%.

Given that the share price has risen 10% from it's lowest point you should all sell your shares and join me sipping a Pina Colada on a beach in the Bahamas... :}

[7378FE]

The Virgin Blue release is dated 21 September 2008, obviously it should be dated 21 October 2008.
Hmm......correct, both May & June statements had the same date, since then they have been a month behind.

[ANstar]

McBank defines a recommendation of "Outstanding" as an increase in share price of more than 5%.

Given that the share price has risen 10% from it's lowest point you should all sell your shares and join me sipping a Pina Colada on a beach in the Bahamas...


Actually they were up around 18% yesterday and around 1.6% today despite a falling market.

so if you bought at the end of last week, you'd be about 20% better off if you sold tomorrow once you had settled.

[Teal]

Down again today - 6.15% and the outlook is not great. According to CommSec's figures, most buyers at the moment are only offering between 27 and 29 cents. The market is so fickle at the moment its likely to keep porpoising for a while yet.

[greenslopes]

I read the article myself in the newspaper and whilst I am not privy to the actual Doc referred to it did seem to be reporting and not scaremongering.
Would it be better to not report such matters...............who decides that?
If you start reading something you then find it offensive, then stop. We are all adults capable of reaching our own conclusions, no matter the bias presented.
I didn't hear too many howls of derision when the senior execs announced a pay freeze(as reported by the press), yet when Pilots are mentiones we (or some anyway) get a little precious.
We're all big boys and girls...Go your hardest and report all you want, particularly if it's factual.

[mrs nomer]

If the article is not too far from the truth, I wonder if in fact retrenchments might not be too far away?

Clearly, Godfrey needs to show some leadership and put a stop now to this VA nonsense otherwise the whole house of cards could be at significant risk of imploding.

[greenslopes]

Great idea "Biton"!

[B772]

I understand Virgin Blue lost $5M+ in September and the loss for October will be greater !.

[7378FE]

I understand Virgin Blue lost of $5M+ in September and the loss for October will be greater !.

Lost of what? profit, operating costs, inflight sales or did the they just go to the races?

More info please or go away :rolleyes:

[porch monkey]

I understand they made $5 mill in September. And will make more in October. There. And as many facts included as your statement 772.:hmm:

[ozangel]

Would love to know your source B772...

To me, it sounds like someone divided the recently 'guestimated' $55m loss by 12 and rounded up (keeping in mind it was a 'predicted loss' which is really a bit like taking the 21day forecast as gospel).

[Adamastor]

Caught up in a global rebound, or has VBA become a bit of a darling? Up 20% in the last week or so and the market analysts seem to like it:

http://aspect.comsec.com.au/licensee/aspect/charts/Images/GSC9CWS04.png

[ANstar]

I don't reckon they are loss making yet - load factors are still pretty high, though yields do look like they are going down.

i still think they will ride out this downturn... I'm sure they will pick up some business from QF as corporates look to cut costs.

Geoff Dixon even said that he thinks Jetstar will do better than QF as LCC's will tend to pick up more pax in a downturn.... Ithinkhe forgot that JQ don;t really serve to many business destiantions... Whereas Virgin Blue have a better mix of business/leisure routes.

[dirty deeds]

There is going to be some pain at this airline, no doubt. Some pilots will be laid off, yet the company is still paying executives that have left the building in May 07 (over 400k), they are still throwing Birthday Parties and opening the new HQ with another party for 1500 people, WHAT THA!
Camp Davidian is alive and well.:ugh::ugh::ugh::ugh:

[ANstar]

http://business.smh.com.au/business/airline-profits-predicted-to-take-a-nosedive-20081104-5hpo.html (http://business.smh.com.au/business/airline-profits-predicted-to-take-a-nosedive-20081104-5hpo.html)


JPMorgan believes Qantas carries "as much or more risk" than Virgin Blue's mostly domestic leisure market operations. The former generates about half its earnings in international markets while Australia's second-largest airline takes less than 10 per cent from overseas.
"As the economy slows and travellers respond to the weaker dollar, we expect the domestic aviation market to outperform international markets," a JPMorgan analyst, Matt Crowe, said in a note.
"We believe Virgin Blue is better positioned to benefit from this. We also expect increased travel budget scrutiny to help Virgin Blue finally win corporate market share."

[43Inches]

VB shares came up on Sky news this morning and the analysts all said not to waste your money as the company will go bust in the not too distant future... pretty dire and straight to the point I thought.

[Quokka]

So, after having done their Due Diligence... Singapore Airlines is buying up Virgin Blue... knowing that it will go bust... with the aim of ensuring that it goes bust... which would benefit... QANTAS.

:rolleyes:

[Quokka]

Virgin Blue will be included on the ASX S&P 200 on the 17th November. Barring any unforeseen, unrelated circumstances, one would expect a price movement upwards as funds which require a certain percentage of ASX S&P 200 companies in their portfolios buy an allocation of Virgin Blue shares.

[wirgin blew]

Virgin Blue is expected to receive a boost from a decision by Emirates to allow its Skywards frequent flyer program members to earn and redeem points on the Australian carrier.
Virgin's Velocity members can already earn and redeem points on Emirates flights.
Skywards members will earn up to 125 per cent of the miles flown on Virgin from December 1.
Emirates carries more than 7 per cent of the passengers flying to and from Australia. - The Australian

Hmmm, interesting :D

[Section28- BE]

As we wind down for the Christmas break and I am sure all wish the best for the year and conditions ahead to the good people (& their families) we know and have previously worked with in different times, involved and dependant on VB.

Given the many views and prognostications offered on the various threads related and pertaining to the subject (and my previous comments re the Toll distribution), I thought it would be a good time to relight the specific Share Price thread and offer some points in a year that was in review sense, to see where the collective opinion has settled (as always- stand to be corrected on any of it):

Toll extracted itself on 22 August 08 (taking a charge/hit of $1.3 billion AUD), some four months ago- and in effect diluted the stock by dropping 61% of the stock in one hit.

The VB model has shifted from the high turnover; marginalized revenue (compared to its then competitors) one type LCC start.

The first set of BIG Boeing keys are about to/have hit the Christmas stocking and the second set are being cut, polished and attached to the commemorative key ring, I understand the first one to be an Operating Lease with 2,3 & 4 Financed- with negotiations in train to stall/hold off airframe 3 & 4 and Emb deliveries.

The Voz start-up and equipment acquisition has been/and will continue to be funded ex cash flow on existing operations (always a big ask in my opinion- the parasitic drag builds exponentially) - what is the Capital impact of a B772??, 300-320 million USD???

The Fed in the US cut the cash rate from 1% to a target rate of 0-0.25% overnight, and the AU Dollar has rallied to near 70 cents US early today and as we have seen fuel has abated.

The Global economy is what it is (its potential surely is now visible) and we are seeing its impact here with 545 mining jobs evaporating overnight in Qld, as well as what has/ and is happening in the West- who knows what we'll see in the New Year, I wouldn't be surprised to look back on recent events as the tip of the iceberg.............

The Board has had a significant reshuffle post the Toll departure- are the new proponents up to speed- and do they (and Management??) have the experience in a fast moving/degrading, high capital/ marginal return (by comparison) Aviation market environment???? (Yes acknowledged- Mr Vaile had a seat at the table when we watched AN and its Regionals evaporate, circa 20,000 jobs and families- and the horrific events in NY that played a major role as far as ultimate fleet values and equity percentiles).

Apart from moving to hold off Voz airframes 3 & 4 and the normal media and presentation/s in conjunction with the Annual General Meeting, (and a mention in the annual report presentation of a third phase contingency plan???), There does not seem to be much coming forward publicly to stabilize market (let alone staff/ commercial customers) confidence from the Board or Executive Mgt.

The appetite for cash for this exercise (as we all acknowledge) will be veracious once it gets going (putting aside the market conditions that they are trying to penetrate & cash sunk to get here) - Apart from "Cash Reserves"- Liberating stored equity out of hull values in a fleet in the current and emerging market is going to be a difficult thing- inevitably ends up as an "in the eye of the beholder" exercise pending which side of the table you occupy.

The Queensland Government participated hard in the selection/"Auction" process to obtain the basing of the VB operation, and contributed an unknown level of support/funding to the startup (a value that is not known for "Commercial in Confidence" reasons). There was later much fanfare and encouragement for Queenslanders/and everybody else to dive into the float at $2.40 when it occurred.

As an aside- sometime prior to the float and I can’t recall the event or when, it was on one of Sir RB’s many visits that occurred in those days- from memory "We will offer a float of a portion to let the broader public participate after the risk has been reduced" or words to that effect.

In days gone by the Virgin Flare, Merit and Culture would be orated in large volume from every medium- commenting and offering informed wisdom on any subject from any soapbox or platform available. For mine it seems remarkably quiet as to strategy and ship steadying at the moment- for all concerned I trust it goes well, as we have seen too much Cultural Fixation and the inevitable results in recent years gone by.

So here we are- Chart ex the ASX site for the previous 12 months:

VBA, VIRGIN BLUE HOLDINGS ORD

The chart of daily prices over 1 year for security VBA
http://hfgapps.hubb.com/asxtools/imageChart.axd?s=vba&pi=Stock&ct=3&tf=D12&ovs=XJO&si=Index&tima1=0&tima2=0&bi=2&bima=0&comt=index&ds=vba&dovs=XJO&val=1&stmp=20081217135756866

ASX excludes all liability arising out of any inaccuracies in this Chart, except where liability is made non-excludable by legislation. Chart values may be adjusted for changes in a company's capital structure or to link historical values that represent the company's primary equity security.
Charting
Chart the price and volume of various ASX listed securities and compare their performance to an index. You can chart shares, indices and interest rate and hybrid securities.The volumes since August are quite something.

So now as the incumbent #2 airline and with the Share Price having a long hard look at below 0.25 cents- where to from here?

A happy and safe festive season to all.
Rgds
Section 28

[Kranky]

Ditto Section28- BE.
And lets not mention the value of BG's 29,000,000 shares at this point. (and still going south). That alone should be enough to get him motivated into being seen to be doing something in the area of cost saving and or increasing revenue.

I know it's the festive season and the slowness in share trading shows this however, the DJ share price could do with some good news. Its been going sideways for too long now. Maybe people are unloading at these prices because they're sick of waiting.

Looking at the Operating stats from DJ and QF (incl JQ) Virgin stack up quite well.
Perhaps it's a good opportunity to buy cheap and hope for some good news to kick the price along, then get some capital gain out of the stock.
Crystal ball anyone.........

[Arctaurus]

Perhaps it's a good opportunity to buy cheap and hope for some good news to kick the price along, then get some capital gain out of the stock.

Mate, you are dreaming. If you buy VBA on such reasoning, you deserve everything that comes your way and I wish you luck. You are obviously not a serious investor.

[Jack Flash]

Well said Section 28. Your comments re the tip of the iceberg are absolutely spot on. Mine closures and job losses are certainly going to increase as only the most efficient ones are going to survive... and we are seeing this happening right now. This is also true for the airline industry, as too Fat QF and too lean JQ and DJ will also see cut backs as this very vulnerable country of ours starts to feel the repercussions of Americas stupidity. Buy shares now ??? you would have to be a very brave man ... sit a while .. on both hands if necessary .. and watch with interest !! As section 28 has not quite finished yet.

[Kranky]

There's been much interest today with 369 trades for a total of 13.8m shares.
On a 26c share it doesn't take much to get a 10% gain in a day. Not a bad capital gain.
Risky I'll give you.
Touchy shares like this move quite quickly on news of any kind.
Just a thought.........

[Adamastor]

Your reasoning is quite sound, Kranky. Ask all those 'serious investors' how they've gone over the past 12 months! :ok:

[tsalta]

So VB made approximately $113 mil in the first half of FY07/08 and then made approximately $97 mil for the whole of FY 07/08. That translates to a loss of $15 mil in the last half of the FY.

In a year when the debt burden doubled the revenue only increased by a meager 10% ish.

The soon to be released half yearly results for FY08/09 will be very interesting to read.

Of the $600 mil in the bank $215 mil is reserved capital for the funding covenants. V Australia is coming at a terrible time for the company right in the middle of the slowest passenger time of the year, both domestically and internationally.

At least the oil price has come down however I don't believe that will be enough to prevent a full year operating loss in 08/09 once VA is operating.

I hope they are able to delay aircraft 3 and 4.

I would not be expecting any improvement in the share price for some time yet. Not until the global economy is well and truly on the upswing.

[wirgin blew]

So VB made approximately $113 mil in the first half of FY07/08 and then made approximately $97 mil for the whole of FY 07/08

You are forgetting the $42.8 mil invested in VAUS/EMB/PE/Lounge/PB took from the business so VB actually made $140.5 mil which was down about 25-30% from the previous full year. Which at the time was great considering the high price of fuel.
I think we will be surprised when VB announces results soon. The $50 mil of cost cutting that has been done will help the bottom line and trimming the workforce by 5% in 2009 which is BG's worst case scenario should probably happen anyway. The company has a few middle managers that wouldn't be missed. There is $200 mil of fuel hedges that have been offset by $200 mil of currency hedges so they got a little lucky there.
At the end of the day they are still selling plenty of tickets and have increased business from the government (up 31%) and private sectors (up 14%). The finance minister reminded Federal Departments of the need to give 25% of there flying to VB. At the time this was only around 10% so there is more revenue coming. These are areas that will continue to provide revenue for the company when the rest of the general population will probably slow down as they become increasingly worried about their jobs and put holidays on the back burner.
Interesting times ahead for all. VB managers have only dealt with the good times so far. Lets see if they have what it takes to manage the company through the uncertain times.

[tsalta]

Hi Wirgin Blew,

No, I did not forget those items. The profit and loss figures I gave were those derived from continuing operations not including one off:p expenses such as those you listed.

VB did indeed make an operating loss in the last half of the financial year.

Please don't get me wrong, I do not wish ill upon VB. I have lots of friends who fly there and would hate to see it struggle or worse. I am however concerned that they may have stretched themselves a little to thin and not left very much, if anything, in the kitty.

Yes, the soon to be released results will be very informative indeed. I will be extremely happy if I am wrong, as I often am (both wrong and happy).

I don't think too much has changed in the last six months compared to the previous six months. Maybe the rate of internal cash wastage has been slowed (anymore $700 chairs in the new HQ) however the yield could not have increased much. Hopefully the $50 mil in savings is coming through. A single dollar saved goes straight to the bottom line so if they have been successful in that then perhaps a profit will be in order.

There has not been any market guidance since the last result so perhaps a profit.............................time will tell.

Cheers

Tsalta

[im sparticus]

There is $200 mil of fuel hedges that have been offset by $200 mil of currency hedges so they got a little lucky there.





can someone explain how a currency hedge can offset a fuel hedge??.

i mean if you are using the + $$ from your currency hedge to offset/justify your - mtm on your fuel hedge, what are you going to use to cover your currency exposure that your original currency hedge was put in place to protect??

[O2]

You would have to be a game man to touch an airline in the current climate.

VBA has a Debt to Equity Ratio of 160+%, QAN 72% and REX 3.7%, REX is the standout imo....

[tsalta]

Hey Sparticus,

A hedge, be it fuel, currency or corn etc, is just locking in a future price. If the price moves against you, then you lose. If the price moves for you, then you win.

VB bet that fuel would stay high so they hedged. They pre purchased fuel at $100 per barrel (I'm not privy to the exact figure so this number is just for the example) however, now fuel is $60 a barrel. So they lose $40 per barrel. Their total hedging exposure is 200 mil.

Where the currency hedge came from I am not sure. Perhaps there was financing arranged in US dollars and then the Aussie dollar plummetted giving them a windfall. Maybe it materialised from the purchase of the e-jets. I'm not sure.

Regardless, Wirgin Blew indicated VB got lucky that their 200 mill loss on fuel hedging was covered by their 200 mill dollar gain on currency hedging.

tsalta
(part time options trader)

[im sparticus]

so whats going to cover their planned future spending in USD that now has to be done @ 60something cents is what im saying?

the currency hedge was there for a reason and it wasnt to speculate on the USD/AUD for profit.

[rescue 1]

VBA has a Debt to Equity Ratio of 160+%

O2, if that was true then I am certain that the income stream would be insufficient to cover the debt, which is trading insolvent, which is illegal...

[KRUSTY 34]

I'm no been counter rescue 1, but I think VB's cash reserves are the only thing stopping the "insolvent" scenerio at the moment?

Just how much of those reserves are pumped into an as yet to fly International carrier will be interesting to say the least :confused:!

[wirgin blew]

Got my info from Chairmans Announcement - ASX website (http://www.asx.com.au/asx/statistics/getAnnPdf(%27/asx/statistics/showAnnouncementPDF.do?idsID=%27,%20%2700908843%27,%20%27Ann ouncement%27);return%20false;) re the hedging.

As for the debt to equity ratios not sure where you got the 160% from but if you take a look at VB's annual report the ratio is 66% @ 30SEP08. As rescue 1 said they would be shut down if that was the true ratio.

I don't believe they could borrow any more money as it is. It is also highly unlikely that they could raise any money from the stockmarket either.
The only way forward for the company is to continue to keep VB, PB and Poly B profitable. Do everything possible to make sure VAus works. Make sure Delta/NWA want to continue with some sort of interline/loyalty program deal, perhaps even by joining Skyteam even though VA has pulled out of it.

ICAO has said that world numbers in 2008 were only up 1.8% on 2007 and they expect only a 0.9% increase in 2009. However they are more optimistic in 2010 forecasting a 5.1% rise.

[Skystar320]

VBA has a Debt to Equity Ratio of 160+%, QAN 72% and REX 3.7%, REX is the standout imo....


You have just won the idiots post of the year.....

[tsalta]

You have just won the idiots post of the year.....

What is really funny is when some clown makes a statement like the one above and the person who they were slagging off at is actually correct, or at least, more correct than the slagging clown.

Skystar, I think you have just won the idiots post of the year with that call.

Virgin Blue, does not have a debt to equity ratio of 66%. It does have a debt to equity ratio of somewhere in the vicinity of the 160% previously indicated.

Financial ratios lesson 1. The debt to equity ratio is the long term debt / shareholder equity. It is often confused with assets to liabilities but is a completely different measure.

The 66% quoted by VB in their annual report is a pseudo debt to equity ration where they have calculated Adjusted Net Debt/Adjusted Net Debt Plus Equity. By including the adjusted net Debt plus equity it is essentially and assets/liabilities ratio, NOT debt/equity.

I haven't calculated the actual figure but it is for sure in the range o2 quoted previously.

The debt/equity ratio has nothing to do with solvency which has been confused a couple of times here.

regards
tsalta

[Johnny_Fabulous]

ANZ Etrade quoting 160.6%.

[fire wall]

comsec 160.6 %

Debt/Equity

Ratio of interest-bearing debt to shareholders equity, as of the last annual report. Shareholders equity is based on the book value of equity, not the current market value of a companys stock.

[On Guard]

Correct me if I am wrong but a hedge does not bind the company to purchase fuel at $100 a barrel. They pay a fee (purchase an option) to have the option to purchase fuel at eg $100/ barrel. If fuel goes up to $180 / barrel then they exercise the option and laugh all the way to the bank saving $80/barrel. If fuel goes down to $35/barrel as it has then they do not exercise the option, lose the small fee they paid for that option, and buy at market rate of $35/barrel.

Same with the currency hedge, so hedging is a very smart thing to do, much like an insurance policy. So my summation would be VB have 2 very good Ace's in the hole with a currency hedge of 200mil at 95c and fuel hedges not being exercised and just buying fuel at market rates. I would also suggest some smart person in VB has been hedging fuel all the way down so that when it does go back up they ride that hedge at say $30/barrel.

So VB really has no penalty whatsoever for its hedges just plenty of pluses in exchange for a premium to buy the hedge in the first place!

I would also suggest VB's figures will come out better than expected (bar the V Aus costs) as fuel has fallen from July - 154AUD/barrel to now 54AUD/barrel. BG did say every $1 in the barrel costs 1 mil , so effectively 100mil has been gained. Hopefully this has not been squandered elsewhere. Not sure of Sing Jet prices but they will be fairly relative.

[im sparticus]

ongaurd, that would be true if all they did was buy the call, but to offset some of the cost of the call they sold a slightly lower striked put (collar), and are now marked to market ($200mil odd) on the put as it moved in the money.


the currency hedge cannot offset this as it is already offsetting the fact that the exchange rate is @ 60odd cents and they have alot of future spending to do in USD.

CAPISH!

[im sparticus]

BG did say every $1 in the barrel costs 1 mil , so effectively 100mil has been gained

so if 100mil would have been gained had they not had sold the put and 200mil has been lost because they did does this mean their synthetic exposure is twice there requirements, what does this mean for their actual cost of fuel if fuel prices stay where they are or continue to head south??

tsalta your good with options care to enlighten?

[tsalta]

Hey Sparticus,

I understand that VB actually used two different strategies for their fuel hedge policy. The first was options and the second was swaps.

Usually for hedging with options they would just purchase a call option, which as stated, gives the purchaser the right but not the obligation to purchase the oil at a set price on a set date.

A put gives the options holder the right but not the obligation to sell a product (oil) at a set price at a future date. It also obligates the put seller to purchase the product (oil) at a set price on a future date. As a seller, if they did in fact sell a put then their exposure continues to increase as the oil price falls below the option strike price.

That seems like a bit of an odd strategy. The option premium for each call would only have been in the vicinity of USD 6-10 per barrel for a strike just out of the money and 6-12 months out.

The other hedging method is swaps. Swaps have no premium fee but are obligations for both parties. VB's swaps are set at around USD 110 per barrel and the Singapore jet fuel last week was USD 58 ish. I understand VB are about 40% swaps and 60% option hedged. I'm not sure about the strike price for their options though.

They are not Robinson Crusoe though. I don't think there would be an airline on the planet who hedged in the correct direction last year.

Regarding the currency hedge. There are currency options but they more common method is currency forwards. They are more similar to swaps in that they are obligations for both parties.

cheers
tsalta

[im sparticus]

www.asx.com.au/asxpdf/20081128/pdf/31dxh1yhw6bkx9.pdf (http://www.asx.com.au/asxpdf/20081128/pdf/31dxh1yhw6bkx9.pdf)

17/33

80% fuel hedged using mainly collars, not that uncommon/odd.

[tsalta]

Hi Sparticus,

Thanks for the link. Unless VB are calling something a collar which is not usually considered a collar, then I am confused.

A collar is an option strategy which is used by someone who already owns the underlying asset, in this case oil. If VB already owned the oil then there is no need to hedge the cost.

A collar uses a protective long put to limit any loss if the price of the underlying falls, and a short call to offset the cost of the long put. If this strategy is employed without owning the underlying then they are merely speculating on the price movement of oil. In addition, they left themselves open to theoretically unlimited losses if the price had kept rising. That does not make sense and is definitely not common in hedging price movements of a commodities.

40% swaps and 60% options is "mainly options".

If anyone has any further info, I'd love to hear it.

Regards
tsalta

[im sparticus]

they are trying to hedge the price rises of fuel they are theoretically short not the downside risk of a stock they already own so its like you say but in reverse, you can construct a collar to protect whichever direction you choose. CAPISH!


www.econoutlook.net/2008/07/airline-industry-part-6-hedging-calls.html (http://www.econoutlook.net/2008/07/airline-industry-part-6-hedging-calls.html)

[tsalta]

Hey Sparticus,

Sure, got that. Thanks. Great link.

The problem for VB then becomes that if they are short a put to reduce the cost of the long call they have set themsleves a floor price for fuel which would have to be way above the current price. I guess this is where the 200 mill loss of fuel hedging is coming from. They have given away a major cost advantage to other operators.

Whoops! Would just have been better to go the long call and wear the cost. Hindsight is a pain!

Cheers
tsalta

[im sparticus]

glad we are now on the same wavelength

which brings me back to this statement from "on guard":

BG did say every $1 in the barrel costs 1 mil , so effectively 100mil has been gained.

if this statement is correct and they were perfectly hedged they would have only lost $100mil so why have there hedges lost them $200mil, did they write twice as many puts as they baught calls (or long twice as much whatever swaps/futures etc as required or a combination thereof 60/40), would this gearing of downside risk theoretically double there locked in price of fuel at current prices ??


I have no idea just trying to make some sense of the figures and facts that are being thrown around.

any ideas??

[dizzylizzy]

... heard there's a chain txt msg going around the Q halls saying "DJ gone bust" send to all your DJ friends at this date and time... bit of a low joke?

[Mr. Hat]

DJ gone bust

Full loads over xmas maybe one or two seats spare.

New bases, new lounges.

Hardly sounds like a company going "bust".

[Stationair8]

Todays Financial Review,

Virgin Blues pax numbers for November increased by 9.6% over last the previuos year to 1.53 million. Virgin Blue traffic measured by RPK rose 12% for the month while revenue load factor was down 3.4 percentage points to 79%

[Stationair8]

Price is trending up over the last week.
Market must be pricing in some positive news on a good load factor over the Christmas period.

[KRUSTY 34]

Traditionally no airline makes money over new year, January period. Once we're well into Feb, we should see the trend for the coming 09'

Those that have built their businesses on solid ground will probably survive. Those built on the short sighted altar of debt, well...? :(

[MrApproach]

Heard a rumour here in Melbourne that ASA had excluded VB from forward income estimates due lack of confidence in the airlines survival and purchase offer by ANZ. (and we know what happened to the last of those!)

[Ratter]

Mr Approach,

All i can think of to respond to your "rumour" is to say with much emphasis.........."BULLSH*T"

I think no further clarification required!

Ratter :ok:

[greenslopes]

Mr Approach......................Check Wheels?........................Go Round!

If it looks like B'sht,smells like B'sht.....it's probably B'sht.

[Quokka]

From McBank today...

Earnings revisions

QAN: financial year 2009 +21%; financial year 2010 -2%; financial year 2011 -9%.

VBA: financial year 2009 +68%; financial year 2010 +71%; financial year 2011 +14%, albeit off mainly negative earnings.

Price catalyst

We expect QAN's November operating traffic data to provide a further indication of yield and load factor trends, although further guidance from management may only be forthcoming at the interim results for QAN on 19 February and for VBA on 23 February.

Action and recommendation

We remain cautious on the airline sector, although the negative news flow for both carriers appears to be mainly priced in.

We believe VBA's earnings, while not inspiring in the short term, are the most positively leveraged to a recovery in consumer sentiment, with the stock still looking cheap at 0.4x price/book value. Outperform.

QAN by contrast has significant exposure to declining international premium traffic, and greater exposure to declines in cargo volumes and leisure travel. We believe a better entry point should exist for QAN in second half 2009 - first half 2010. Neutral."

[Section28- BE]

Ex AAP- 16 Feb 09:

Qld: Virgin Blue could ground discount fares

Virgin Blue boss BRETT GODFREY says discount fares could be grounded in a tough economy.

The Virgin chief executive says the company will be reducing capacity .. which will make discounted fares difficult to sustain.

The arrival of Virgin's first long-haul .. full-service airline is expected to spark a price war on the trans-Pacific route with established carriers Qantas .. United Airlines and Delta.

Virgin boss .. Sir RICHARD BRANSON .. will attend the launch party for the first V Australia flight from Sydney to LA on February 26.

The company will use the launch party to raise money for the Victorian Bushfire Appeal.

AAP RTV ahe/pjo/tm

[saabsforever]

Leaving Auckland yesterday I noted a big shiny new 777 in VAustralia colours. Looks great and notably longer than the ANZ ones:ok:. I assume she was on delivery being parked on a remote ramp. Looked like a refuel stop on delivery but not sure why it would need one.

[ANstar]

Leaving Auckland yesterday I noted a big shiny new 777 in VAustralia colours. Looks great and notably longer than the ANZ ones. I assume she was on delivery being parked on a remote ramp. Looked like a refuel stop on delivery but not sure why it would need one.


It wasn't a delivery flight. I believe it was a proving flight simulating a diversion to AKL as part of the AOC process.

[markontop]

I guess BG whining about 'tough conditions' could be perceived as contradicting the bearded, grinning idiot. ie Recession, what recession? :D But wait, what about keeping the air fair?

[im sparticus]

Even with all the support @ 25c, VBA has made a new all time low currently 24c hate to see what it will go to when the support gives up and just lets the market have its way!

[markontop]

Maybe proving they can fly around with no passengers. Cruel irony.:hmm:

[ANstar]

400 jobs could go

http://www.asx.com.au/asxpdf/20090217/pdf/31g36bd7235l5g.pdf

Parking of 5 aircraft and reduciton in domestic flying of 8%

[Section28- BE]

Currently at 23 to 23.5 cents.

article ex the Courier Mail/AAP:

Virgin Blue posts $100m loss


Article from: AAP
February 23, 2009 10:05am

BUDGET airline Virgin Blue reported a first-half net loss of $101.4 million as the company took charges for investment in trans-Pacific partner V Australia and reversals of currency and fuel hedges.
The airline's net loss for the six months to December 31, 2008 compared with the net profit of $113.3 million reported for the same period the year before, the Brisbane-based company said in a statement on Monday.
Virgin (http://markets.news.com.au/newscorp/Company/Profile.aspx?SecId=VBA) said it won't pay a first-half dividend.
Revenue for the first half grew 12 per cent to $1.35 billion.
The bad news follows reports the Richard Branson-owned airline was to cut 400 jobs (http://www.news.com.au/couriermail/story/0,,25069395-5003402,00.html).

[B772]

The net loss reported is almost $4M per week over the half year to 31 Dec 2008. Back on 25 Oct 2008 I reported DJ lost $5+ for the whole of Sep 2008 and were on track to loosing more for Oct 2008. A few contributors such as 7378FE. porch monkey, OZangel and ANstar made a few comments at the time canning me. I guess there is no substitute for inside information and B... S... walks.

[tsalta]

The real issue for VB at the moment is CASH.

Of the current 526 mil in cash, approximately 300 mil is not available to be spent as it is locked as cash reserves required by the groups financiers.

That leaves around 120 mil liquid cash reserves.

The total cash position decreased from 772 million to 526 million over the previous 12 months. This is a decrease of 246 million or 4.7 million per week.

If that rate of cash burn is maintained, there is only 26 weeks of operational cash remaining.

In addition to the current rate of cash burn, the debt position has worsened in the last 2 months and is set to deteriorate even further over the next 6-12 months. An additional 1.4 billion in debt will be added during this period.

The dry leasing cost for 1 x 777 is in the vicinity of $45000 per day. Each additional aircraft will be placing an increasing burden on an already depleted and decaying cash position.

Unless there is a dramatic about turn in passenger numbers and yield in the next 26 weeks, VB will either need to raise capital or take some other action to survive.

[Con Catenator]

tsalta -

Can you run through your maths again in arriving at 120 m cash reserves ? :confused:

[slice]

tsalta - where does $772m figure come from ??? I thought the last reported cash reserves were just over $600m. and your maths does seem to be bit out!

$526m - $300m = $126m...hmmmm

Dry lease of a B777 at $45000 per day??? That equates to 13.5 million a month!!!!!:rolleyes: I think you are out by an order of magnitude at least!!

[Con Catenator]

Slice -

The cash assets from the published reports FY 2007 was indeed 772 m.

The latest published cash position in the 6 months to 06/2008 was $ 603 m and the next 6 months to 12/2008 was $ 526 m. This is a decrease of $ 246 m over 78 weeks or approx. $ 3.5 m per week. Some of this is attributable to the 777 start up costs.

Cash security deposits for fleet financing are technically "untouchable" and effectively do have to come off the company's "spare" cash available. Any move to use these funds would be a breach of the leasing contracts. Would the lessor act ? - who knows.

IF the $ 45000 per day for 773 dry lease is correct, this amounts to $ 1.35 m per 30 day month. 3 aircraft is $ 4.05 m per 30 day month or approx $ 1.0 m per week

Anyway you look at it, Virgin Blue Holdings with 3 x 773 aircraft in it's fleet will suffer considerable losses that will have to be met using cash. It's debt position after 12 months will be significantly worse.

That is just not a position that lends itself to VBA surviving in its' current form. There will have to be some sort of cash injection.

[tsalta]

Con Catenator,

Pretty much correct mate however:

The reported cash position at 31 Dec 07 was 771 million.
The reported cash position at 31 Dec 08 was 526 million.

The reserved cash as required by the leasing agreements is 300 million.

The reserved cash is locked by the leasing covenant and is not able to be spent.

526 million less 300 million = 126 million.

The cash burn is over the 52 week calendar year 08 and is 4.7 million per week.

Slice,

Take your shoes off and do the math again.

Given the poor credit rating of VB, it is likely the leasing cost is higher. I obtained the figure from a research paper of an MBA grad.

[chookcooker]

Can someone explain how $526 mil - 300 mil = 126 Ml. Wheres the other 100 Mil gone?

[adsyj]

tsalta

Slow down take a deep breath and recheck your maths you are beginning to embarrass yourself.

Where do you get the information that the Lease facilities have a cash coverage componenet

[tsalta]

Along with a whole boat load of other really interesting information, you will find the restricted cash detailed in the notes to the annual financial accounts.

The notes are where you will find all the good stuff they are trying to bury.

As of Jun 30 2008 the restricted cash was 201.5 million. With the addition of debt since, the restricted cash is now set at approximately 300 million and will climb further in the next 6 months.

Me embarrassed? Yes, I can't seem to drive the calculator.

Make that 526 - 300 = 226 or 48 weeks at the current cash burn. My bad.
Still not a flash position for VB.

tsalta

[ebt]

It may not be a good position, but only assuming they do nothing. As Godfrey said, they're taking steps to hoard cash over the next 2 years which is what they've built as their expected time until the market heads north again. I take that to mean that they'll take the measures necessary, such as cutting capacity (as already foreshadowed) and managing the workforce to cut the expenditure as needed.

But, hey I guess time will tell

[tsalta]

Hi EBT,


Sure, if they manage to change enough to escape then great. However, what concerns me is where they are taking action to exacerbate the situation, i.e. VA.

Anyone giving the results more than a cursory glance will see how they have tried to use the results delivery and presentation prose to make the results seem better than they are.

No one could foresee what is happening now financially. What was initially a great move is now going to cost dearly.

My main fear is from about mid year, the real financial pain will begin and what little profit is generated domestically will evaporate.
If that happens, then VA will be the Kryptonite necklace around VB's neck.

I look forward to being proven wrong (and that is often the case) but I believe that VB in their current form are VSF.

tsalta

[greenslopes]

Look.Settle down geezers. It's not all that bad.I do believe VB is ripe for a takeover...stay tuned

[indamiddle]

va is not vb. vb will have a cash burn max. when or if it is reached va, a separate company with separate debts/assets it would be cut loose, i.e. wound up or sold (singapore !!!). vb will still exist buts its image somewhat tarnished

[tsalta]

Dude,

if you think that is the case..................good luck to you.

VB is VA.

VA is VB.

end of story.

There is no separation, they are cross colatoralised.

VA's assets are secured by VB's.

Think about it. If you were a lender, and going to extend a startup organisation 300m for a plane, wouldn't you want some more security other than the plane which is now only worth 250m because it is second hand?

The basic sniff test always works in the end.

tsalta

[Going Boeing]

indamiddle
va, a separate company with separate debts/assets it would be cut loose, i.e. wound up or sold (singapore !!!).

V Oz has to remain majority Australian owned to keep the rights to fly the planned routes and as there are not many rich Aussies willing to risk big money on an airline at this stage, I don't think that there is any chance of VB successfully selling off V Oz.

[roamingwolf]

I don't think that there is any chance of VB successfully selling off V Oz.
I dunno about that mate.Theres another airline in OZ that has a rep for buying competitors if they look like a threat.
Mini Me buys V Australia if not the whole box and dice with VB then he's got J* mark II with lower crew costs and gets rid of the competitor in OZ as well as on the pacific money run and he gets some new 777 aircraft as a sweetener for little more than sweet FA.

he keeps VB and V australia in their paint scheme like Gerry Harvey has with Harvey Normans and Domayne.He owns both and they compete with each other and help each other to keep other chains from starting up and Gerry pockets the dough and laughs all the way to the bank.Thinking about it I reckon Gerry harvey should run VB instead of BG.

[roamingwolf]

That might be why QF raised $500 million the other day,so they can buy VB.:E

[Wod]

It is politically impossible for QF to pick up Virgin. The pollies would legislate to achieve "competition".

Air New Zealand might be interested, though.

And they have form;)

[Skystar320]

They have form, but a bad form....

Bite more than they can chew and run everything into the ground....:yuk::yuk:

[Wingspar]

As someone high up in QF told me years ago,

It's in QF's interest to have sound competition.

[Lookleft]

Air New Zealand have already tried to buy Virgin and had "Beardie Branson" rip the cheque up on TV (even though he had agreed to the deal). One of the sticking points was the Virgin brand and what would happen to it if the purchase went ahead.

[roamingwolf]

It is politically impossible for QF to pick up Virgin
In politics there is nothing impossible.What if VB and V Australia were going under?
No only lasts about 5 min in politics.

[indamiddle]

singapore airlines could buy 49% of va with 51% owned by an aussie entity, similar to the allco job on the failed qf deal. it would still have to go by the FIRB. if successful, sometime down the track they could purchase a significant, but not majority, share of the aussie entity. effectively they would control va. the only problem here is that they already own 51% (or is it 49%?) of virgin atlantic which has been a problem child and a money pit for many years.

[Section28- BE]

Twas it not the FIRB that knocked them buying the second half of AN on the head, with some arrangement to contain the ANZ bit onshore ???. Resulting in that B@stardized ANZ investment/arrangement:eek::eek::cool:.

[tsalta]

In the current environment it is highly unlikely there are any possible purchasors for a failing airline around. The last thing airlines need at the moment is additional capacity and debt. VB has plenty of both.

I hate being so down on VB as I, like most have friends there and would love to see it survive. However, their half yearly statement was a joke.

After going over the half yearly report several times I still can't see where the 60 million underlying profit is. I can only find about 1.1 million of profit.

I would be very concerned if I was working there.

tsalta

[airtags]

tsalta that's right - why would anyone pay $500 for a loaf of bread.

VB has a net asset value of almost zero and given the debt burdens ahead anyone with a desire for aviation would be better off waiting for the liquidators auction rather than paying a premium for a low value product.

The iceberg is the off balance sheet liabilities - VB is so highly geared it has side deals on almost every aspect of its operations and it's these 'hidden'/non reportable liabilities that would wipe out any residual asset value.

The really sad part is that the CEO appears to be ignorant of the bad wx - ....the interview transcripts from this week's pressers are testimony to a lack of fiscal responsibility and governance. (loved the bit about it being the media's fault!!!!)

That said I'm sure Friday's Oz will be full of praise and puff after the cockatoo island p*ss up tomorrow night - [which those attending should thank all the virgin crew who have been forced to take leave without pay and give up their wages to cover the costs for the party]

[Section28- BE]

I note, VB announced to the market today (Mon, 2 March 09) the Sale and Leaseback of 4 Hulls- B737-800's.

1 x "late 2008" and 3 x 4th Quarter 2009 Deliveries.

Sold to BOC Aviation (100% owned by the Bank of China).

Rgds
S28- BE

[abc1]

TSALTA, don't take this the wrong but from your posts I can only conclude that your fiscal knowledge seems more of a ''copy and paste job'' on facts rather than an informed opinion.
The current environment is ripe for M&A's and not when the market is at its peak as the recently demonstrated take overs or attempts ranging from from RAMS to Alcoa or Hard Yakka to name a few.
VB has a positive cash flow,market share, brand and it posted a profit.Its turnover increased.Why then didn't the share price slump to near zero like Centro for example?
The investment strategy of management, on the other hand, well I am not informed so I will refrain from speculating as that in itself just feeds the rumor mill, especially with glee and hope they get it wrong.
Risky yes but with risk comes reward depending on what your risk reward ratio is based on.

[ANstar]

Both Singapore Airlines and Air NZ have done similar things in the past 6 months.

Normally airlines will sell and leaseback for a couple of reasons

- Cash flow (Which isn't DJ's issue as they have positive cash flow)
- To meet capital requirements for new aircraft or investments (poss the 777's)
- To realise the current value of the aircraft/ this is done especially when the market price of said aircraft may decline significantly in the near future.

It is usually banks that do these deals and they structure them in such a way that they get numerous tax breaks etc as well.


Both Air NZ and Singapore Airlines have done similar deals in the last 6 months. And airlines like BA have done in the past as well.

Flight Global also hinted that they could be looking to defer frames 5-7

[pylet]

Are these aircraft in addition to those parked for the 8% reduced capacity mentioned last week:

The eliminated aircraft, believed to be B737s, will be used "as operational spares" until next year.

Virgin Blue: Branson plays his Poker hand | Centre for Asia Pacific Aviation (http://www.centreforaviation.com/news/2009/02/27/virgin-blue-eating-at-the-heart-of-australias-aviation-future/page1)

good article.......

[Skystar320]

Jim Irwin, such an armchair expert with a can of VB in hand I presume???

[tsalta]

ABC1,

VB has a positive cash flow - Incorrect. VB is burning cash at an alarming rate.

market share. - Domestically - yes, Internationally - No

brand - Yes

it posted a profit. - A great big NO.

Why then didn't the share price slump to near zero like Centro for example? Is a decline from the mid two dollar mark to 25 cents not enough of a decline for you?

Personally I think my financial opinions are very well informed. I am quite frankly dismayed there appears to be very few on these boards (like yourself for instance) who grasp the dire situation which VB are in at the moment.

Even Anstar in his latest post says that VB have positive cash flow???????? I am at a complete loss to understand how anyone can arrive at that conclusion.


Tsalta

[Skystar320]

At only 21, it seems the choice is a leather armchair, with a glass of Scoth and a fine cuban cigar? :mad:

[tsalta]

If you would like to debate the subject, I would be more than happy. However, as usual, you have nothing to contribute.

tsalta

[slice]

When you own your own aircraft you can park them up

That in effect does cost you in terms of an idle depreciating asset. I would interested to know the terms of the leaseback in terms of minimum contracted hours / rates etc. i.e. fly these airframes at the minimum and flog the ones you still own as part of the capacity reduction - as mentioned previously there are also tax / banking issues that come into the equation. Are there any REAL (not tsalta) aviation accountants here that know these issues in any depth ?

Oh wait what am I saying! That's like asking for real pilots on Pprune!:E

(Specks of gold in avalanche of dust!)

I have heard talk of redeployment of VB ac/ to PB for near SE Asia flying (Singers etc.)

[TBM-Legend]

sale and lease-back on purchase of a new aircraft is not an uncommon way to finance them. I wouldn't read anything into this. You will note that BofC has done this on three acft 'not yet delivered'...plus one that is relatively new to VB. Same paperwork for four as one!:hmm:

BRISBANE: BOC Aviation has closed a purchase-and-leaseback (PLB) deal with Virgin Blue Airlines.

The deal covers one late-2008 vintage aircraft and three new Boeing 737-800 aircraft. The aircraft will be leased for an average lease term of 10 years, with delivery of the three new aircraft scheduled for the fourth quarter of this year.

Virgin Blue, Australia’s second largest airline with a 32% market share, will use the aircraft for domestic and international flying in the Pacific region.

Steven Townend, chief commercial officer and deputy MD of BOC Aviation, said the company was pleased to increase its presence in Australasia with this transaction.

“Virgin Blue is an established name in the Australian market for business and leisure travel,” he said. “We continue to deliver on our expansion plans and are happy that the airline can partner us as we grow our fleet.”

Brett Godfrey, Virgin Blue CEO, said the financing of these aircraft amidst the challenging economic environment is an affirmation of Virgin Blue’s strong reputation in the market.

"We look forward to a long-lasting business relationship with BOC Aviation.”

BOC Aviation is the leading Asia-based aircraft leasing company with a portfolio of 104 modern aircraft operated by airlines worldwide. In addition, the company has 70 aircraft on firm order for delivery through to 2013. BOC Aviation has one of the youngest fleets in the industry with an average aircraft age of less than four years.

BOC Aviation is 100% owned by Bank of China

[tsalta]

Dude, stop grasping at straws.

Revenue in isolation does not matter.

Revenue minus outgoings, well that is another story.

Revenue can keep going up until the cows come home, however if outgoings keep rising at a faster rate then, well, that can only go on for so long.

Is there anyone else out there saying that VB did not have an underlying profit of 60 million, that their cash position is precarious, that their annual and half yearly reports are declining in the clarity of information provided?

errrr, no. Strewth, maybe the opinions I'm writing are...mine? What a novel concept.

I have an emotional bias for VB to survive, however, I don't belive it will. Just because I argue that fact does not indicate anything. What I really want is for someone to prove me wrong. That would make me extremely happy, however all that comes back is vitriol like the statement below.

Are there any REAL (not tsalta) aviation accountants here that know these issues in any depth ?

I would love to debate the specifics, truly I would, if anyone would care to.

tsalta

[Skystar320]

Don't worry Slice..... At the end of the day we are all armchair experts, each and everyone of us...

[ANstar]

Happt to be corrected, but I'm pretty sure their latest figures had a positive cash flow from operations.

[Led Zeppelin]

sale and lease-back on purchase of a new aircraft is not an uncommon way to finance them. I wouldn't read anything into this

I would. In this instance, it reeks of a company that is well aware of it's hopeless forward cash position.

VB was locked into aircraft purchases that just can not be supported in terms of finance repayments in this depression like market with plummetting yields. I suspect it was either sale and lease back now to delay the inevitable or close the doors immediately.

abc1 - Have a closer look at the last VB and Rio reports. You are comparing apples with oranges.

[tsalta]

Don't worry Slice..... At the end of the day we are all armchair experts, each and everyone of us...

Still nothing to contribute. What an amazing surprise.

Skystar, if you would like to provide a dissertation on why you belive VB is in such a great position, I would love to read it.


regards
tsalta

[43Inches]

ANstar - net cash flow was negative $79.6m, this was propped up by $266m in loans and $18m in tax refund, hence why equity has dropped off. Operating cash flow was positive but the balance sheet is very complex at the moment due to the losses and tax fiddling going on. The core company would not have made $60m net because they would have had to pay tax on it, but because of the losses tax was refunded.

abc1 - Rio is in trouble if it can not reduce its debt levels, this is why they are contemplating massive asset sales to the chinese (or anyone else) at the moment.

[tsalta]

Assuming the previous post will be deleted:

Please, all I would like:

PLEASE...........


SOMEONE..........


Show me where the underlying 60 million profit was.....................


PLEASE..................................................


ANYONE..............................................


PLEASE.....................................................

(without emotion, just math, where the F##K, is the underlying profit????)


tsalta

[tsalta]

Led and 43Inches.

People who have a brain and don't just swallow the 12ml which VB spew forth.

Thanks guys.

I appreciate it.

regards

tsalta

[ANstar]

Virgin Blue are mulling an aircraft order.

Unusual given their position

http://www.flightglobal.com/articles/2009/03/02/323239/virgin-blue-mulls-order-for-up-to-60-180-seat-aircraft.html

[BackInTheSaddle]

Anstar,

You are a hypocritical clown.

One minute you are into Tsalta for calling VB's true state.

The next you are commenting on their position. (with a negative connotation)

Good God, I hope I never fly with you in QF. I'll never know where you stand.

[ANstar]

Hypocritical ... No.

I have just tried to post info about Virgin that does not suggest they cant pay their bills after next month.

I never said it was all rosey with them. just not as bad as everyone here is making out. (Some people seem intent on hoping 5000 people become unemployed)

Now as for placing a new aircraft order - I would think QF/DJ would all be stupid to do so right now given the current downturn in travel.

[43Inches]

As stated in the article this is purely a fleet renewal purchase. VB appears to have a 10 year timeframe for equipment, which was alluded to a few years back that fleet renewal was to commence in 2010-11. This to me is the greatest threat to the airline as having low time modern airframes is key to their marketing and strategy. Also with the rapid expansion of the group there are a lot of aircraft to replace in a short timeframe.

[tsalta]

So you have nothing...

Not withstanding my rebuttal to your post, you have nothing of substance to offer.

Would you like to challenge me to show my reasoning that VB does not have a 60 mill underlying profit?

Would you like to challenge me to show my reasoning that VB is in a precarious cash position?

Would you you like to challenge me to show why VB's reports have been decaying in the veracity of the inforamtion provided?

I know the answers to the above, so I am not going to give them to you. I am more than happy to lead you to the conclusion, but you must arrive there yourself.

I understand you are a loyal VB employee. I get it. I really do.

I admire that. I really do. I know you don't believe me, but I do!

I DO NOT WISH VB TO FAIL. I HOPE IT ENDURES, HOWEVER IT THE CURRENT FORM, WITH THE CURRENT BUSINESS MODEL, IT IS DOOMED.

So, how many times can I ask......................................debate the issue.

tsalta

[Betsy]

Back to the original topic of this thread.. it touched 22c this morning. That's what - 90%+ written off its IPO value?

[Section28- BE]

Yes Betsy- they finished the day (Tue 3 Mar 09)- at 22.5 cents.

Below is the 2 yr monthly chart ex the ASX site:

VBA, VIRGIN BLUE HOLDINGS ORD

The chart of monthly prices over 2 years for security VBA
http://hfgapps.hubb.com/asxtools/imageChart.axd?s=vba&pi=Stock&ct=3&tf=M2&ovs=XJO&si=Index&tima1=0&tima2=0&bi=2&bima=0&comt=index&ds=vba&dovs=XJO&val=1&stmp=20090303193250769

ASX excludes all liability arising out of any inaccuracies in this Chart, except where liability is made non-excludable by legislation. Chart values may be adjusted for changes in a company's capital structure or to link historical values that represent the company's primary equity security.

Many have previously expressed their concerns for those involved, regarding their well-being and welfare if this situation does get too close to the breeze....... none of us here will solve or influence this, unless you actually have a chair at Breakfast Creek- anyone,,,,,,,,,,,,,,,, anyone............

For what it's worth (as angels retire to safer ground, aware of the caveat on this forum)- this thread does have longevity over what will prove to be (yes- that is my opinion, alone) a significant period of time on the journey that is VB- being the Toll Dilution (for want of a term) and the prosecution of the New World Strategy....

Without being altruistic- could we not leave the Moderators of this forum with no option, but to close it- as they have been forced to do in recent times- if you want to play the man could you do it off the paddock.............. the baiting and name calling really does not enhance your contribution or the value of input.

You may actually be surprised at what experience you have/and will contribute here as this unfolds.................. Maybe, Maybe:eek:

Hat, Flak-Jacket, Coat, Door, Bunker, Fuel Missiles:hmm::rolleyes::E

Just thought I'd have a go- as it is starting to look to me like 'not professional Aviation'- Rgds S28- BE.

[Led Zeppelin]

If Tiger gets their 30 aircraft Australian fleet by 2014 as the MD, Shelley Roberts, has suggested, how will this affect Virgin Blue ?

Tigers' costs are supposedly lower than Jetstar and much lower than VB.

[tsalta]

abc1,

Once again a nothing post.

My contention is VB did not make an underlying 60 million dollar profit, their cash position is a whole lot worse than is indicated, and their reports are presented in such a fashion to make it difficult to discern the above.

If you or anyone else would like to put forward a 'valid opinion' counter argument against those, then I am all ears and will answer with reasonableness and dignity. However when you post drivel such as your last post I'll treat it with the contempt it deserves.

Have you actually read your last post? What are you on about? Where did the EBA reference come from? What is the consensus you are on about? It is complete and utter nonsense.

tsalta

[horserun]

what aircraft are you on tsalta??

[mrs nomer]

abc1 or whoever you are.

This topic IS about VB's share price and the reasons it's where it is.

It is VERY valid to talk about VB's profit and loss statements and what they mean, as it is a fundamental part of the company's financial performance.

I have no idea who tsalta is, and don't really care, BUT he is talking to the topic directly and makes valid comments about the true net profitability of the Virgin Blue group.

The latest balance sheet is very cleverly "constructed". Some insiders are asking is it a smoke and mirrors job ? I actually read the numbers in terms of a negative cash flow of over $70 m.

Would you care to give us your opinion on this last set of figures, as your response would certainly address the topic directly.

[biton]

Tsalta, et al,

From a practical point of view some pilots have already started looking overseas to contracts, etc. Not a mass exodus yet but some guys are keeping their options open. The company has decided that 65 pilot positions redundant on the 737 should see them through at least the next 12 months, assuming of course that the economic situation doesn't deteriorate massively from where it is (they are trying for no involuntary redundancies by the way, most will be displaced to the e-jet, V-aus, part time, LWOP, etc). I'm sorry if I sound Naive, but I'm genuinly interested to hear from someone with a bit of business nous;

1) If the business situation is so bad at VB why didn't they go for a bigger redundancy number than 65? If they want to they have over 800 pilots to choose from and countless support staff.

2) As previously touted on this website, would VB not be ripe for a takeover? It has large domestic market share, bottoming share price, reasonably low cost basing and now has approval to conduct operations on the lucrative Pacific run. I know money isn't exactly in abundance at the moment, especially amongst Airlines but surely this has to be considered.

I too have a vested interest in VB's success but I'm not going to wait forever.........

[wirgin blew]

There are plenty of other Aussie assets ripe for the takeover. Unfortunately VB doesn't appear to to be one of them. As previous posters have suggested buying into a company were someone holds a 25% share would make things interesting when deciding the future of the airline, especially if he didn't agree. Let alone the way airlines are going worldwide. tsalta is focusing on VB as his target for some reason. Perhaps you could look over the QF books and give some of your insight on that thread so people didn't view you as just another VB basher.

VB will only have outgoings over the next 10 years as they have to start replacing aircraft. They are commited to 6 more Embraers + 5 more 777's + 15-20 more 737's. All of which would be fine if the economy recovers quickly but that is a big if. The last time the USA stock market went down this far percentage wise was between 1929-1932. Even though Australia seems to be going ok on its own at some stage the rest of the world will drag us down into the shizen.

:ok:

[Capt Claret]

I don't know if I've read all of tsalta's posts on the subject and I'm not about to re-read all 26 pages but from what I have read I don't get the impression that tsalta's wishing VB ill, just asking questions.

A colleague of mine was roundly criticised by many some years ago, and vilified as being stupid. Turns out he was correct, even though what he was saying wasn't well received, and most of the critics were off the mark. Caution not to shoot the messenger just because you don't like the message, seems prudent.

[43Inches]

biton - re q1; Vb is walking a tightrope at the moment of controlling cost vs losing market share. If they pull back too much they stand to gift passengers and profit to tiger (aus domestic) & jetstar (nz ops). They also have a lot of debt and leasing costs which need to be covered which requires them to maintain a certain level of operations and cash flow. Also on the routes at which they have chosen to compete with QF (LA and Sth Africa) i don't think they'll get another chance as good as what they've got at the moment, GFC aside. QF is well into the final phase of restructuring and in a years time once all the reliability issues are forgotten about will be very tough to compete against, especially at business travel level. The last few BTRE stats show QFs OTP and cancellation rate both heading in the right direction as opposed to VB which was on the slide.

re q2; Wirgin is pretty much on the ball, the virgin group have proven to be a very stubborn business partner. Untill they relinquish the 25% holding most investors will stay away, this is probly the main reason TOLL dumped its stake. Secondly no one would fathom buying an airline in the current economic environment. And finally potential buyers like SQ have already invested heavily in their own LCC (tiger) which is waiting eagerly for VB to start reducing schedules which they will quickly fill. Why buy into a fleet of leased older 737 when you already have orders for 30 brand new a320 over the next few years.

[coaldemon]

Is this the same Tiger that was losing money when times were good? If they are waiting for VB to collapse as their business plan then they are in for an interesting time. Tiger have the cheapest cost base but at this stage have made little to no impact within Oz. THe people that I know have bought tickets and flown with them rate them below Jetstar which is not a good thing.

[Under Dog]

Tiger won't threaten VB's Business till they come into NSW which they seem to be avoiding at all costs.(seems a bit strange considering its the most populated state)

The dog

[tsalta]

Hi wirgin blew,

I would be upset to be considered a 'VB Airline' basher, however I am happy to be labeled a 'VB Management' basher.

What has really annoyed me with VB is how they have portrayed their position in the half yearly report. You can't blame them for being a victim of the current financial climate. So many companies got it wrong that there should be no ill will for that. However, there is no excuse for trying to delude themselves and investors into portraying a better picture than actually exists.

Eating your greens is a far better way to go than what they are doing.

I have compared QF's reports to VB's. There are stark differences between the two, mainly, one is profitable the other is not. QF are doing OK, but are definitely not the healthiest company on the exchange. As a QF employee, it would be impossible to not be biased but I am quite concerned about the health of the company. I would however, be more concerned if I were flying for VB.

In the next day or two I'll have a refresh and throw my 2 cents in on the QF thread.

cheers
tsalta

[Freehills]

Best guess on how they got 60m "underlying profit" (vs the 1.1m operating profit) is by adding back the forex losses? (55m or so)

Which is a bit like saying "well, if the dollar was worth more, we would have made more money!"

[DJCCGuy]

one late-2008 vintage aircraft and three new Boeing 737-800 aircraft.


Can someone please clarify what exactly is a 'late 2008 vintage aircraft?'


Monday 2 March, 2009: Virgin Blue has closed a sale-and-leaseback deal with BOC Aviation for one late-2008 vintage aircraft and three new Boeing 737-800 aircraft. The aircraft will be leased for an average lease term of 10 years, with delivery of the three new aircraft scheduled for the fourth quarter of this year.
Virgin Blue Chief Executive, Brett Godfrey, said: “The financing of these aircraft amidst the challenging economic environment is an affirmation of Virgin Blue’s strong reputation in the market. We look forward to a long-lasting business relationship with BOC Aviation.”
Virgin Blue, Australia’s second largest airline with a 32% market share, will use the aircraft for domestic services and international flying in the Pacific region.
Steven Townend, Chief Commercial Officer and Deputy Managing Director of BOC Aviation, said the Company is pleased to increase its presence in Australasia with this transaction.
“Virgin Blue is an established name in the Australian market for business and leisure travel,” he said. “We continue to deliver on our expansion plans and are happy that the airline can partner us as we grow our fleet.”
BOC Aviation is the leading Asia-based aircraft leasing company with a portfolio of 104 modern aircraft operated by airlines worldwide. In addition, the company has 70 aircraft on firm order for delivery through to 2013. BOC Aviation has one of the youngest fleets in the industry with an average aircraft age of less than four years.
BOC Aviation is 100% owned by Bank of China, the third largest bank in the world*.

[porch monkey]

One that was delivered in late 2008 to the company, I dunno, VUN, VUO or one in that ballpark, the other 3 airframes mentioned are yet to be delivered.

[VBA Engineer]

Zk-pbl. .

[KABOY]

The sale and leaseback that VBA are conducting can be paralleled to you going to the pawn broker when you need cash. They are releasing assets at market value for cash flow, better now then never.

[ANstar]

The sale and leaseback that VBA are conducting can be paralleled to you going to the pawn broker when you need cash. The are releasing assets at market value for cash flow, better now then never.


True. Air NZ, Singapore & Qantas have all done similar deals in the past 6 months also, so it is not just a Virgin Blue thing.

[43Inches]

Don't know about AirNZ and SQ but wouldn't QF have had to disclose to ASX if they had done a similar deal. Can not find any reference to it in the QF asx announcements for the last six months. I can believe AirNZ may have as they have hit financial difficulties of late.

I think its actually closer to selling your house then paying the new owner rent to live in it.

[KABOY]

QF were about to do it had the private equity deal got up! By receiving cash for assets they are avoiding going back to the banks who would have knocked it on the head.

A further share offering was also ruled out, make of it what you want but to me it is one of the last options that was left for cash raising.

[coaldemon]

Didn't Qantas raise $500Million in a share placement late last year? If they need more cash they can sell and lease back the A380s if they want . If any bank will touch them (the aircraft that is ) :p

[Tankengine]

coaldemon : "Didn't Qantas raise $500Million in a share placement late last year? If they need more cash they can sell and lease back the A380s if they want . If any bank will touch them (the aircraft that is )"


No, they announced it late last year, this is it.:rolleyes:

[Section28- BE]

They descended through 20 cents on the opening today- Fri 6 Mar 09.

Rgds
S28- BE

[B772]

Tankengine. My understanding is the QF A380's are leased, not owned.
--------------------------------------------------------------------------

The VB share price is down today. The shares have lost 85+% of their value in the past 12 months. Market capitalisation is not much over $200M so they are looking vulnerable in the present financial outlook.

[mrs nomer]

Currently trading at 0.195 (11:20 AEST).