Virgin Blue to shed 400 jobs ....

[Wizard of Oz]

From courier mail

[markontop]

Again from the bucket mouth; "what recession?" quote from Sir Dick.

[BPA]

The airline, which flagged capacity reductions at its annual general meeting last year, said the cuts will affect "up to 400 full-time equivalent positions" at Virgin.

It said it hoped to minimise "headcount reduction" by transfer staffing staff to its international offshoot V Australia, as well as part-time work, job sharing, and leave without pay "amongst other contingencies under consideration".

[Whiskery]

Here (http://www.news.com.au/couriermail/story/0,23739,25069178-3102,00.html) is the link. Not good, but may help out V Australia ops. If they knock out 5 aircraft that should be enough crews to ramp up the 777. Hopefully the crew won't mind a holiday in Sydney for 12 months!

[Dragun]

So are they planning on cutting any flight crew? Seems to be plenty of surplus 737 crew in Brisbane...

[jetblues]

Email from AFAP to VB members suggested pilot redundancies could be avoided if suggested re-crewing options such as VA are accepted?

[KRUSTY 34]

I thought VA had all the crew they needed.

Or are they still short of F/O's?

[oldhasbeen]

A show of hands people... who is willing to jump from the frying pan into the fire??

[Frontalobe]

:)At least you get a free 777 rating?

[BPA]

My understanding is they have crewed the first 3 aircraft (may still be short FOs), but are now trying to crew aircraft 4, 5, 6 and 7.

[KRUSTY 34]

OK, so to avoid redundancies, VB pilots take up a position with VA. All but 3 I believe, refused originally due to the deplorable T&C's. My understanding is that to qualify for an F/O's position with VA, you must have at least 2000 hours Jet above 40 tonnes. Quite probably many junior VB drivers would not have those hours yet. If the "offer" to transfer to VA is not taken up voluntarily, where on the seniority list will the forced transfers begin?

And more importantly, where will these pilots stand when VA goes T!ts up?! :ouch:

[Zero_au]

From senior management, 53 pilots are surplus. Are jungle jets still being delivered? If so, why not transfer to it and wait for the good times to come back, which I estimate is 12-18 months away. How many Captains over 63 years old are still flying for VB? I have heard that there may be over 60. I know your super is probaly stuff!d but maybe time to enjoy life without work?:hmm:

[BPA]

BA043,

My info is from within VB and VA, in fact it was only last week VB pilots received another internal offer to crew aircraft 4 and above. VA cruise FOs have been told they will sit there for a long time as VA take on a few more FOs from VB.

Krustyt hat was the requirement, however there is very strong talk that those requirements will be reduced for VB pilots who move across to VA.

[im sparticus]

what happened to the "expanding out of the recession by creating more jobs" line. good one dick! VBA 23c

[airtags]

Interesting position in that VB Cabin Crew are also getting the same story and are similarly being actively encouraged to move across to V OZ....

The contradiction though is that VB management formerly advised the CC's union this week that "shortly" there will be a need to further
re-deploy "surplus" V Oz C/crew back into the VB domestic network.

Given the limited capacity of V (even with 4 a/c), one could be forgiven for thinking that the only desperate motive may be more about moving as many pilots and c/crew to the inferior V OZ T&C's as possible which of coure provide the company with a more favourable position - especially in terms of comp. redundancies.

Certainly not chicken little time yet, but what was the word Godfrey used so unwisely in the statement to the ASX.............."pragmatic" !

The proof of the bluff/high roll gamble will be the second half results - Given the conservatively forecast V OZ operating losses during Y1 to Y4 start up are;
[quote] "underwritten by VB's strong, cashed up domestic operations" ....
I expect we will see a lot more 'seat of the pants flying' from the Exec level at the bunker. (along with some very cautious qualifications to some previous CEO statements of bravado)

AT

[MELKBQF]

Spoke to a mate whos a VB Engineer, apparently 30 engineering positions are on the chopping block.

[KRUSTY 34]

Thanks B043.

So there's no room at VA, but management are indicating a need to move people across. Either the right hand doesn't know what the left is doing (not beyond the realms of possibility I suppose), or it is a case of deflection and spin!

Not quite sure what's worse! :{

[WhirlyMan]

As an FO who is directly affected by this, the worse thing is not knowing who to listen to.

Some say, sit tight, it is just a scare tactic from management to force guys to accept conditions only favourable to them. They will always need 737 FOs some say.:suspect:

Others say, if you don't look like you're keen and willing to help the company out then you'll be one of those sacked. :(

Option 1. V Aus- Senior FO maybe, but cruise FO..... Forget it.
Option 2. E Jet FO on E Jet pay....better than being unemployed.
Option 3. Pac Bro- Too many unknowns there. Ts & Cs poor.

Only time will tell!!!! I hate having other people determine my future! :ugh::mad::ouch:

Good Luck to others in the same boat!!! Hope you get what you bid for.:ok:

[BPA]

Krusty and B043,

Currently there are 16 positions available at VA for VB pilots. Those on hold at VA will be on hold longer if VB pilots take up the 16 positions.

[Mr.Buzzy]

VA isn't a position..... It's punishment!

"Off to the salt mines! Nurse those stomach ulcers you worthless jetlagged gits...... mush mush...... If you don't like it there will be floggings, lots of floggings and more L.A returns with less rest.... mush mush!.... More days off?...... Mooooore?.... did you say moooore?.... How does a quick Asian trip to fill in the days off sound?..."

"I just spent 6 days with a dutch yarpeee.... teo yeo yaaa... yana yana ooh yana yaa yaaaa"

bbbbbbbbbbbzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

[piston broke again]

Who knows? Maybe this was a long term plan all along.

No one at VB wants to sign the poor T's & C's at VA so from a company perspective...let's wait until we say to crew "you're being made redundant unless you can move to VA or take a pay cut as a E-JET FO" - of course it will force people to succumb to one or the other. I'm not saying it's a good thing, it sucks as$!! But unfortunately, I think it's going to happen.

There have been some good ideas floating around though from other VB crew...maybe a large scale meeting is due...

Stick together all VB crew!

[Mr.Buzzy]

maybe a large scale meeting is due...

Now that is the funniest thing I've heard in ages.

During the last EBA negotiations the Feds told everyone that the sky would fall down, everyone would go to jail, it was against the law, the sun would explode, cows wouldn't milk, if anyone dared even talk about such a meeting!

Sadly, the only way to arrange such a meeting would be to attend a weekend social BBQ and piss-up between the mates club of airline management and the "you know who"

I look forward to reading more terse letters and hollow threats from the 1% collectors!

bbbbbbbbbbbbbbbzzzzzzzzzzzzzzzzzbbbbbbbbbbbzzzzzzzzzzzzzzz

[piston broke again]

Who said a large scale meeting would involve the Fed's? Of course it would involve alcohol...every pilot meeting I've ever been to has had a booze up at the end of it.

Now where did I put my red wine....

[Pedota]

As reported by Stephen Creedy in the Australian . . .

Virgin Blue executives to take pay cut and remove five planes

VIRGIN Blue executives will take a pay cut of up to 30 per cent as the airline sheds 400 jobs and removes up to five planes from service by the start of May.

The airline announced today that it planned to cut domestic capacity by 8 per cent by removing five aircraft from operation.

It said the ``prudent interim capacity management plan'' was in response to a continued forecast deterioration in domestic demand.

The reduction in aircraft means Virgin must shed the 400 full-time positions but chief executive Brett Godfrey has told staff involuntary redunancies would be the carrier's ``very last port of call''.

He has called on the airline's general managers to instead reduce staff by redeploying them to other businesses such as international start-up V Australia, leave without pay, job sharing and a recruitment freeze.

``To start the process, our general managers and executive management have unanimously elected to take a pay cut of 20 to 30 per cent of their annual incomes,'' he told staff in a newsletter.

The aircraft will be kept as operational spares until Virgin believes conditions have improved enough to return them to service or the airline can find viable alternative uses.

Mr Godfrey said the airline's strategy would allow it manage through the downturn as well as ``power back up'' quickly when the economy recovered.

``While we are not pessimistic about the the future, we are pragmatic about how this outlook could impact Virgin Blue, particularly in the Australian market, if we do not stay ahead of the curve,'' he said.

[coaldemon]

It is always interesting to hear the old conspiracy theories coming out about manipulation of events to reduce conditions. The Mining sector has shed over 50,000 jobs over the last 6 months and I bet that was just so they can rehire them on lower conditions. No the real reason is that the mine is unviable because the commodity prices have tanked along with the world economy. Looks like there are too many seats in the domestic market so reducing capacity would be a smart idea for a board to implement. Unfortunately people will lose their jobs because of it. So what would you learned people do then? Lose your job and go on unemployment or take a V Oz FO/CRFO position to at least have something?

[airtags]

Pedota - sorry but Steve Creedy is far too close to the institutions these days (VB/QF et al) to offer any objective reporting. His story is so close to the VB prepared release and the accompanying "personalised" covering email that it's scary. (sorry Steve I got one too)

Reality is that VB Execs are in deep sh*t - Godfrey & Co has shot from the hip in more than one ASx statement - esp on the op losses for Y1 & Y2 of VOZ's ops and the propensity for VB to cover it. Sandilands and others (for all their tendancy to look for the tabloid element) have been tracking it all and it's not a good posi for VB.

There's an internal memo today doing the confidential rounds in the Brissie Exec bunker that underscores the reality - VB can't make wages w/c 26/4/09 if the decay continues. Plus VB certainly can't cover the VOZ op losses as reported to the ASX & the ever hopeful (wishful) shareholders.

It's a highly over geared biz that has almost zero NAV (nett asset value) to the point of not even owning the employees uniforms. As for parking 5 x 737's for "operational spares" let's not guild the lily - the lease agreements on the regos indicate otherwise.

Backing the boss, Tanner and the HR flunkies are desperately trying to minimise the damage by soliciting part time LWOP and xfer as many crew as possible to the less than appealing VOZ T&C's - they are bullying the Y gen CC into thinking that they can save VB by sacraficing themselves and playing games with Capt & F/O appointments.

Baseline is that VB needs to become a lean LCC again however those in the Exec suites have their sights set on a higher plane.

That word "pragmatic" continues to be used in VB statements - it may well prove to be prophetic - it is at best a warning to all those considering betting their family, their endorsement and their future on management spin.

PS: The VOZ safety demo video is an absolute emabarassment to any professional pilot (and pax with half a brain) - esp the BS with a pax getting Branson to sign his book - in many ways this underscores the myopic mantra of the VB Exec's and yet again shows they are grasping more foreskin than foresight.

[dragon man]

One wouldnt want to hold ones breath to see if Qantas executives follow Virgin Blues example with a 20 to 30% pay cut for senior management. That would require leadership, something that has and continues to be missing at Qantas.

[apacau]

does anyone know what routes the capacity is being cut from? And exactly what aircraft are involved? 73G? 73H, E90?

[Skybus_319]

does anyone know what routes the capacity is being cut from? And exactly what aircraft are involved? 73G? 73H, E90?
Well, Adelaide-Hobart-Adelaide is no longer it seems after from April

[ANstar]

There's an internal memo today doing the confidential rounds in the Brissie Exec bunker that underscores the reality - VB can't make wages w/c 26/4/09 if the decay continues. Plus VB certainly can't cover the VOZ op losses as reported to the ASX & the ever hopeful (wishful) shareholders.


Surely if their cash position has been depleted so much they would had to have advised the ASX?

[fence_post]

If what ‘airtag’ says is correct then the CEO is required to report to the ASX asap, otherwise I imagine the director's could be in serious trouble, legally?

But, out of all of this, where is the AFAP? The AFAP took Virgin Pilots to court recently over the VIPA issue and it was supposedly ruled that the AFAP would be the recognized union. So, where are they when jobs are on the line and if what ‘airtag’ says is true about no money to pay wages from w/c 26/4/09 what is the AFAP doing? With other employee groups in other industries, their respective unions have made statements, but nothing has been seen in the media from the AFAP. Even, with respect to this issue, the TWU has made a statement regarding its members. Still, if it keeps going there will be no pilots to pay union fees and the union officials too may find themselves out of a job.

It seems like Ansett all over again with V Australia siphoning VB funds to survive. VB runs two other airlines Pacific Blue and Polynesian Blue. I have travelled regularly on VB and have found 80% or more full on each flight. So, they either have some unprofitable routes or they are propping up one or more of the other airlines. Maybe, they shouldn’t have continued with V Australia? In the end, the one who ends up fighting for survival is VB. Just as happened with Ansett.

[DJCCGuy]

What do you think the chances of V Australia actually not being successful and collapsing?

[ebt]

I highly doubt that DJ are facing near insolvency. There's still cash coming in from the punters buying tickets, and as far as I can tell a fairly good cash balance. If it weren't so, we would have seen DJ go to the market to get some more cash, like QF has done. Hmmm, maybe QF are going bankrupt? :suspect:

[43Inches]

DJ go to the market with a share price at 25cents. The amount of shares required to be sold to raise a reasonable, worth while amount would dilute the existing shareholders so greatly it would not be in their interest (as they have already stated).

I think only the accountants and management would have an idea of the companies cash position, that is until they release the papers next week. Hopefully its reasonably good news.

[airtags]

just to clarify - regarding the wages issue I understand from the source that the end of April date in the email relates to funding wages from reserves as opposed to cash flow & profits (which are of course two very different items.) It seems that a similar line was used in a staff communication giving the leaked email some cred.

ASX notification would not be required under such circumstances (esp as they already have painted a bleak picture in the 'pragmatic' statement earlier this week.)

Just a sign of a very highly (over) geared business that is about to wear a massive V OZ debt - hitting some very rough turbulence.

Might expect to see some frantic website promos for seats in the July-Sept period in order to pull the cash in pre June 30.

[markontop]

Should I be concerned buying tickets on VB? Maybe check my travel insurance to see if it covers airline collapse. Coming up on another seven year anniversary.:(

[Dale Hardale]

What is insolvent trading ?

http://www.worrells.net.au/library/insolvency/What%20is%20Insolvent.pdf

Not quite as simple as some may believe. Cash flow alone may not provide an absolute indicator of solvency. You can bet that VB's legal advisers will be right across (one hopes) the issues involved. The lack of any substantive advice to the ASX would indicate that the company is still trading within the definition of solvency.

I just can't imagine them doing anything that was not legal. The punitive provisions are significant, both on the part of the corporate entity and individual directors.

[wirgin blew]

All we can do is wait for the 23rd of Feb when I believe VB will report to the market what is exactly going on. I dont think it will be good, QF and SIA have already posted quite gloomy figures. With VB unable to raise any money from the market what other options do they have? Will they petition the government for a hand out like other sectors have already done.
--
It seems that nothing will stop VOZ, they are advertising staff travel specials and plan to use the grand opening of VOZ as a fundraiser for those in the South and North.
--
Meanwhile back at "The Village" there have been no redundancies that anyone has been made aware of, just a lot of hot air as usual. Perhaps all this is being done to soften up the market so they don't over react and send VB's share price down even further. I wonder which banks are getting nervous about loans they have with VB.

[ANstar]

just to clarify - regarding the wages issue I understand from the source that the end of April date in the email relates to funding wages from reserves as opposed to cash flow & profits (which are of course two very different items.) It seems that a similar line was used in a staff communication giving the leaked email some cred.



They had $600M in cash reserves whent hey releaed their last figures.

So excluding their cashflow/profits, you mean to tell me they have lost nearly $600M in 6 months?

Any major depletion in the cash levels would need to be reported to the ASX as would a more than 15% movement in the guidance of their profit/loss fromt heir last announcement.

This smells of scaremongering to me.

[Led Zeppelin]

ANSTAR

From 2006 to the last annual return in 2008, total current liabilities nearly doubled. Current assets increased by 1.4.

Cash reserves as at 06/2008 were shown at ~ $ 603 m. I wonder what that is now.

Go figure.

[HOBAY 3]

Well, Adelaide-Hobart-Adelaide is no longer it seems after from April

Is this true? I don't know whether to believe you Skybus_319 given that it is your first post! The flights have disappeared from the booking engine, but so have plenty of others (like some CBR-ADL for example). Given that DJ are still updating their schedules for NS09, I don't think we can say that the flights are gone yet. Well, I hope not anyway; EWL will be ramming humble pie down my throat if they do go :{.

Looking at availability on ADL-HBA in the next few weeks, they appear to be very full. Lots of days where you can't get a flight for under $400 in either direction. I would be surprised if DJ did drop this route; they've just added a HBA-CBR, so if they can fill 70 seats a day to CBR, they should be able to fill 70 seats a day to ADL! Given that DJ have spent four and a half years building this route up and growing the market, I doubt that they would just throw it all away! Also the NS09 inbound and outbound HBA schedules aren't matching up overly well currently, so maybe there are some E-Jets replacing 737s to HBA for the winter period, and so there might be something like MEL-HBA-ADL flights in the pipeline?

I think the 8% cuts are being announced tomorrow, so I guess we'll find out then.

[coaldemon]

Wirgin Blew redundancies started happening last Wednesday at Bowen Hills. It's not as if you will read about it in the Fcon.

[On Guard]

Airtags - you are talking c**p.

What I am guessing is that the cash reserves would run the airline until 26 April IF no other income was to come in from the day the memo was released and all flights continued operating. Ie full expenses but no revenue. Days operating revenue was about 3 mths late last year so it has slipped by a couple of weeks which is prob not good.

I am sure they would be required to report to ASX if there last statement said 600mil cash reserves and they have eaten through that in 6mths. When the wage bill is say 7000 employees by 80k/yr = 560 mil /yr the company would be in trouble if they had lost all of that in 6 mths while still operating. Hardly plausible.

Only my opinion

[Tidbinbilla]

There were a number of posts on this thread relating to route structures. These have been moved to the pertinent thread.

Please stay on topic.

TID.

[WhirlyMan]

Yesterday the V Australia mins were updated officially for internal applicants.

Senior FO- Min 1000 hrs VB aircraft
Cruise FO- Less than the above.

It was also announced that 12 Cruise FO's would be needed. Considering that there are at least 50 VB 737 FOs with less than 1000 hrs on VB aircraft, it would be interesting to see who takes the CRFO slots. Especially when you consider that you can earn as much on RO-RO.

The worse part is waiting to hear of your fate.:(

[nohumbug]

Whirlyman, yep i hear you. It's like waiting outside the principals office all over again. Seems funny that just over a year ago i was again waiting anxiously to find out if i was sucessful in getting the job...

Being at the end of the credit rope after years in GA, I opted for the salary sacrifice for the endorsement. I still have a few payments to go...

Whats going to happen if we get the trapdoor?? Do they expect us to pay it out ?

[Mr.Buzzy]

And the AFAP are going to support the cull by fleet and not by date of joining.

Exactly! Just who said they could spend members money fighting the startup of another union? Wouldn't be surprised if that money is a whole new conspiracy theory in itself!

The Tiger had the last of it's teeth pulled in '89. Why so many are still so loyal is beyond understanding!

bbbbbbbzzzzzzzzzzzzzzzzzzzzzzz

[QF DRIVE]

VB bleeding $5m per month. The aircraft groundings and staff cuts are only there to try and stop the flow.

Won't be here come June unless sold.

[Dehavillanddriver]

QF Drive

If they are bleeding 5 million a month they could go for 10 years without exhausting their cash reserves.

Perhaps by June 2018 you might be right!

[hoss]

qf drive, a very positive post! even though you did not allude to it, if your revelation is correct then things could get very interesting with 851 pilots on the open market. how fast can they expand and reorganise jet connect?

i'd say fairly quickly.

[WhirlyMan]

nohumbug, I think I read somewhere that if we are given the trap door then the cost of the endorsement is no longer our problem. If we volunteer however, then we are expected to pay the balance.

I too was waiting just over a year ago to see if I get to drive a red jet, but unfortunately my previous employer's Chairman and BG made a deal to not take any of us for a while, thus now there are about 150 FOs ahead of me and probably in a safer position than me. I'm in the bottom 50 now and in the firing line.:mad:

It's interesting that, many have said that management have been offering deals for the last 6 months to avoid getting to this position, but as I understand it...None of those deals I (nor many others) could qualify for. I.E. E Jet command, PB command. :mad:

The honeymoon is definately over! :ugh::oh:

[QF DRIVE]

Sorry. It was $5m per WEEK

[KRUSTY 34]

$5m per week!

That'll rise once VA (sorry VB) start paying for Fuel, Airnav/Airport charges etc.... What did the VA prospectus say. 3-4 years to turn a profit?! :ouch:

[Betsy]

QF DRIVE, where's your source from?

$5m is a hella money to lose every week..

[rescue 1]

...None of those deals I (nor many others) could qualify for. I.E. E Jet command, PB command.

Unfortunately, as is often the case in aviation, those at the top of the seniority say "I'm OK", and have no real interest in acting to support those at the bottom.

This forum always raises the question on unity, sticking together, team work and importantly (in this case) helping each other out. I'm still to see it...

[Led Zeppelin]

Betsy,

Not really so much at all - as a percentage of last years's (06/2008) income, it only represents (5m*52)/2.134 bn = 12 %.

Most airlines would be experiencing at least this order of reduction in trading income - QF would have to be experiencing similar results.

VB's problem is the lack of long term cash and debt facilities. That's what will undo it.

VA can only make things worse for the Virgin Blue group.:{

[Ratter]

QF Drive,

It would seem to me that it is financial suicide to have an international start up continue if you are bleeding $5m per week. Whilst theose in the BNE Ivory tower often make silly decisions i cannot see such a one, that will cause the unemployment of 5500 people, being made.

I am sure that if they were in such a dire situation the ASX would have to have been notified some time ago.

Being blunt i think your informant is either full of s@%t or the information you are relaying is grossly inaccurate. Just my humble opinion.

Ratter :ok:

[On Guard]

QF - 5mil/wk still gives it 2+ yrs.

As for the AFAP supporting fleet not LOFO, well I seem to recall all you guys spouting on about management talking rubbish and they were only out to lower TC's. Cuts were alluded to in several memo's, was excess leave taken? I heard very little was and not much else to help was done.

[cunningham]

I have never seen management types take double digit pay cuts, let alone 20% to 30%.
It doesn't really matter what angle your looking from, I'm sure all would agree that they must be in deep cow confetti.

[dirty deeds]

Cunningham,

How is this for an angle,

VB managment spread doom and gloom to its staff, Flight Attendants EBA to be voted shortly, more EMB's to come and too many 737 FO's (get them crewed), last few B777 that cannot be crewed (crap deal) shift 737 FO's to VA, and finaly shift 5 B737 to PB and there you have it (PB DEC's or the door), aircraft crewed at lower pay and conditions. Management have always portrayed a bumb facade, but they are very sneaky and very cunning at times, and know how to manipulate a situation.

Ask crewing at VB, they reckon they need these 65 pilots and more 737 captains. They are still calling out pilots on their leave and days off. Something does not add up here!

Managment taking a pay cut, its still easy to live of $1M instead of $1.3M!

The lads at VB are taking this hook line and sinker!

Or maybe QF is right, the place may be gone in 6 months, time to keep the ear to the ground.

[coaldemon]

Ah Dirty Deeds, sorry to tell you but V OZ have enough B777 rated people on the books to crew through to plane 6 completely. I always love a conspiracy theory it always sounds so good in the bar when the reality is that management just aren't that organised generally. To assume the conspiracy theory is correct means that they saw the crisis coming and have still continued on with V OZ as they obviously know when it will all end. Ah yes it was so obvious. :}

[Dehavillanddriver]

This is why pilots make sucky managers.

The -600 isnt a replacement for the Embraers.

The block costs of a 600 are remarkably similar to those of a 700 for less revenue.

whether you love or hate management, there is no way anyone can manage a company by saying - I wont buy this capacity now (insert embraer, airbus, boeing) I know the economy is going to go arse up in a few years time and I will pick up a gaggle of cheap -600's.

the embraer fleet is making money - it is profitable.

As for starting V lets just assume for a minute that in 2 years the economy has turned around and things are on the improve - do you wait until the economy is on the turn then start the process to move into that market? If they did do that - there would be people here scoffing and saying that they are missing out on ****loads of profit because they didnt have the foresight to get prepared earlier....:ugh:

the facts are that no-one - and I mean no-one - predicted that the world economy was going to go the way it has, as quickly as it has.

the decision to start up V was made at a time when there was time pressures - do you think the Australian government was going to keep Singapore out of the pacific if V hadnt decided to enter the market?

Arm chair quarterbacking isnt going to solve anything, if you work for VB or V or PB - then YOUR job is dependent upon you doing everything you can to make the business successful.

It might be sucky but it is better than the dole.

At the end of the day if you work for VB/V/PB and you are that unhappy about the way things have panned out - get out now while you can - if you are indeed correct there is little point waiting until everyone is out of a job and you are one amongst thousands - go now while you dont have as much competition.

[KRUSTY 34]

Quote:

As for starting V lets just assume for a minute that in 2 years the economy has turned around and things are on the improve - do you wait until the economy is on the turn then start the process to move into that market?

ABSOLUTELY! In 2 years time there will be no VA, no VB for that matter if DJ persist with this folly.

Christ! It's not Rocket Science! :rolleyes:

[FFRATS]

I hear QF is going to have a contingency plan ready just incase VB fall over.
FFRATS

[Sunstar320]

I hear QF is going to have a contingency plan ready just incase VB fall ove
what?..to gouge pax like ever before...back to the old days again:hmm:

[Dragun]

I hear QF is going to have a contingency plan ready just incase VB fall over.

In all seriousness (and in the highest hope that that would not happen), what would Qantas do to respond to a situation like that? I realise they've just announced their own capacity reductions (albeit international ops) but would it be fair to assume that would be fantastic news for the Qantas group?

I'm assuming something along the lines of when Ansett collapsed however there's no VB like airline to help out...

[breakfastburrito]

Owen, you were almost correct, the Four Corners Mortgage Meltdown - view online (http://www.abc.net.au/4corners/special_eds/20070917/subprime/default.htm) aired on the 17 Sep 2007, almost 18 months ago. No one could say the alarm bells weren't ringing given the risks involved in a new start-up to the US. Surely this is a managers job to view such publicly available information.

The alarm bells have been ringing, loudly for quite some time.

[AN Flyer]

Sorry. It was $5m per WEEK

QF DRIVE - While very dramatic, I very much doubt the above statement is true without more information. This would equate to roughly the same amount of money AN was supposedly bleeding a week in it's last year of operation. Given the complexities of their problems compared to VB, one would argue that there would have to be a very critical problem from within Virgin Blue for this kind of cash loss to be even remotely realistic (and I aint referring to V).

I dont suppose you could be more specific? ;)

[rescue 1]

$5m is a hella money to lose every week..

Guess the facts will be out this week, with the release of the half yearly results.:uhoh:

[Enema Bandit's Dad]

How much are cruise FO's being paid? :hmm:

[Cunning_Stunt]

The half yearly report has just been released to the Stock Exchange. Ouch!

[Led Zeppelin]

Hardly any surprises - cash reserves down to 526 m. Profit for 6 months to 12/2007 was 113.3 m. Corresponding period to 12/2008 - (101.4) m. A downward change of 214.7 m.

Over the 6 month period to 12/2008, this loss is 3.9 m per week. That is a real issue for future management of this company. And VA's operating losses are not even in the figures yet.

I wonder what the real operating position is right now, given the severity of the downturn since 31 December.

[ANstar]

Hardly any surprises - cash reserves down to 526 m. Profit for 6 months to 12/2007 was 113.3 m. Corresponding period to 12/2008 - (101.4) m. A downward change of 214.7 m.


That is still a decent amount of cash to be sitting on. About $80M of that was forex losses.

So even with the 3.9M loss a week - they would still be able to go for around 2 years.

[43Inches]

Most of the equity/asset base is made up of the cash balance. Total equity actually dropped $320m. If they didn't have the cash/equivilent reserve they would be close to negative equity.

[Dale Hardale]

ACMS -

It was a loss for the 6 month period to 12/2008 of 101.4 m

43,

That's the point at which creditors get real nervous. Asset realisation may not be enough to preserve debt recovery.

It would only take one creditor to make a demand payment for the house of cards to collapse.

[porch monkey]

Loss. Shown thus ( ) . Sometimes direct cut and paste without the detail is decieving.

[Zero_au]

A demand payment was made to Macair one month before they collapsed. It was a Singaporeon leasing company that then called ASIC to liquidate same company

[Mstr Caution]

Hardly any surprises - cash reserves down to 526 m. Profit for 6 months to 12/2007 was 113.3 m. Corresponding period to 12/2008 - (101.4) m. A downward change of 214.7 m


And when did the Global Economic Downturn start to bite.....around October 08.

[wirgin blew]

"Ineffective cash flow hedges and non-designated derviates" totall $(114.5) million. Foreign Exchange Losses total $(54.6) million.
--
Of that grand total of $170 million $141 million is unrealised which could potentially turn around, it could also potentially worsen given what has happened with the market since 31DEC08.
--
I hope those incharge of that have been sacked and someone hired to fix up that mess. As BG has been at the helm through all of this you would have to say its time to move on. However who is going to want to take on this mess as it does appear that things will only get worse before they get better.
As zero has said someone might call ASIC and make a grab for whats left over. I hope that BG and RB will talk anyone out of that as I don't want to see 5000+ people looking for a new job.
--
As far as assets to liabilites go have VBA written down the value of the aircraft yet or are they valued at purchase price? You would hardly pay full price at the moment for used 737's.
--
These financial statements offer more questions than answers. Smarter people than I will work through them.
:confused:

[airtags]

take away all the non reportable off balance sheet liabilities and any money that is left should be spent on recruiting a new CEO, CFO and Treasury committee on the the board.

A plan for VB would be good .........

Hope it gets back to being a great LCC and forget about all the other stuff that buggered its potential to ride out tough markets.

[6100]

Could someone more financially savvy than me explain what this all means.

From what i can see, the VA startup and the fuel hedging are one off costs, therefore whilst the average loss maybe 4mil per month, that should not carry forward as these costs have already been written down. It looks to me that the underlying 60m profit and forecast 50m for the full financial year are valid assessments.

Am i missing something?

[KRUSTY 34]

How long before VA realises a profit?

The bleeding of cash through VA will make the startup costs pale by comparison. You still have to run the thing. If I won a million dollars tomorrow, and then went out and bought my dream boat, I would still go broke because my income would not allow me to run anything except the Gen' set! :{

[Cravenmorehead]

I think 6100 is right.
I think if you take out the cost of V-Australia set up it looks reasonable, but certainly nothing to be proud of. Pax numbers have been heading south for awhile now ie at least for a third of the 6 month reporting period to end of 08So it is not that bad. Virgin is doing the right thing by cutting routes, parking aircraft and trimming staff (unless you are one of the staff trimmed of course), they have to; unfortunate as it is.
The market as of midday had the shares unchanged, so the market had factored all this in. The clever boffins as one poster said will poor over these results but I think they are not surprised by it all, even the lack of interim dividend, I suppose this was to retain cash on hand for the old war chest.
The next 6 months now that could be ugly for Virgin and indeed everyone. We seem to lag behind the rest of the world by 6-8 months so whatever you see happening there now will be going on here around September; and that is all rather nasty. Guess it is a case of wait and see.

[horserun]

Is it really that bad??
I dont know much about the business world, but the company has so much market share in Aussie, new planes, and a very cheap share price.

When the end is in sight of this economic down turn, wouldnt there be a long queue of large companies wanting to snap them up???

[im sparticus]

rumour has it the fuel companies wont sell to vb on credit can anyone confirm??

I think its funny they are reducing their hedging from 80% at present and when fuel was at its historical high, down to 30% for 2010 when fuel is at its historical lows, they still havent quiet grasped the concept of hedging have they.

[Romulus]

I think its funny they are reducing their hedging from 80% at present and when fuel was at its historical high, down to 30% for 2010 when fuel is at its historical lows, they still havent quiet grasped the concept of hedging have they.

Perhaps the fuel suppliers won't accept or even offer to hedge at current prices. In order to hedge there must be a point at which both sides of the table see some value in fixing a price. Usually the buyer hedges to provide some cost certainty and teh seller to lock in some guaranteed level of production.

Very rarely does the agreement have to do with the actual price because if that was the case then one side or the other would be locking in a less than optimal position because both parties generally have access to the same information and forecasts and react accordingly. Hedging is a "certainty" strategy, the ariline knows how to budget for fuel costs, the oil company builds in a baseline volume and price and knows what it has to achieve for the time period.

[denabol]

Interesting to see what the papers will make of the VBA results. I was surprised the market didn't punish them, but maybe Simon Bartholomeusz is on the money in his item in Business Spectator.

http://www.businessspectator.com.au/bs.nsf/Article/Virgin-battens-the-hatches-$pd20090223-PJ8PC?OpenDocument&src=sph

Crikey quoted Godfrey as saying he didn't think all 400 jobs would go but from what others have said here a fair few of them might have gone already so that might be window dressing.

The same reporter in Plane Talking had a bit more to say and quoted some nasty figures which tally with the copy of the interim results you can get on the ASX site at Australian Securities Exchange - Stock Market Information, Stock Quotes - ASX (http://www.asx.com.au) which I found a bit more worrying than reading Bartholomeusz.

Ben Sandilands picked up Godfrey's claim that the 777 would undercut the A380 too.

His blog on this is at Virgin Blue is red, but far from dead - Plane Talking (http://blogs.crikey.com.au/planetalking/2009/02/23/virgin-blue-is-red-but-far-from-dead/)


I still think Qantas was mad not to get 777s and that Virgin's biggest mistake was stuffing around for several years longer than they should have to get theirs.

I reckon V Australia would have made a great head start if they had done this in 2007.

[Arctaurus]

BG on Lateline Business last night:

On further headline losses:

"Oh, look, we've said that - we've said that the guidance we've given right back in August of last year, reaffirmed in November and still in play today, is that it will be a challenge to make a profit this year for us, primarily because of the $65 to 70 million attributable to V, which was always planned, even at inception, to lose money for some 18 months. It's a heavy investment. It's an investment that we believe will still pay off for us. But it may not pay off in the next 12 months. It may be 18 months down the track before we start to see that really work. I think it'd be nice if you're trying to get me to say let's turn back the clock, absolutely. But we'd do a lot of things differently if we had that advantage of hindsight."

.....And on further capital raising

"Oh, look, there's a shareholder out there who holds over 25 per cent of the shares. He's made it very clear that he's not interested and doesn't believe that we need to look at a capital raising. I think I share that view. I certainly share it today. There are other avenues that are in train to ensure that we build on that cash position which, you know, is still fairly healthy. So, from our point of view, a capital raising is not on the backburner as we speak today. But, you know, to your point, I can assure you that if we see substantial and continued market redeterioration, every airline, every airline in this country will be looking to do the same thing again."

[6100]

I think its funny they are reducing their hedging from 80% at present and when fuel was at its historical high, down to 30% for 2010 when fuel is at its historical lows, they still havent quiet grasped the concept of hedging have they.
Yesterday 10:03


As i understand fuel hedging, which is in effect an insurance policy, much like options in the equity market, BG had no choice. If he had not hedged, and oil had continued to rise, as just about every analyst and CEO in the world predicted, then VB would be dead in the water as we speak, due to unsustainable fuel prices.

As it turned out, oil dropped, against all expectation and the hedge (insurance) was not required. But that is no different to the insurance most of us pay on our houses. For most it is a waste of money (in hindsight) but in the event that your house burnt down and you were uninsured, your personal company would left with a huge debt and no asset, therefore insolvent.

Hedging guards against this possibility, and it is expensive. Airlines are in the business of making money from flying aircraft, not hedging. Once management start factoring hedging in as a profit centre rather than an operating cost, you will know the company is in deep trouble.

[im sparticus]

6100, if hedging is like insurance perhaps you can explain why vb reported a $200mil mark to market loss against there fuel hedging positions, according to your definition they should have only lost the premium, the setup of the hedge was very cheap maybe even free or maybe even gave them a net credit in exchange for increased or all of or even multiples of downward market risk!

anyhow fuel hedging is not an insurance policy, its about fixing and smoothing the cost of fuel, not freaking out and locking in when fuel gets unbearably expensive and throwing the strategy away when its not, for it to work your hedge has to be consistent throughout the price cycle.

[tsalta]

Hey Sparticus,

Remember having the conversation with me about hedging on the 'VB, how low can they go' thread'.

We were prattling on about options, swaps and collars. I thought collars were odd then and still think so. For VB, they didn't use them but swaps and the the swaps have come home to roost.

That is why there is such a dramatic loss on the hedged positions. Swaps = an unproteced short or long but with No premium. Massive downside if you get it wrong.

To get naked with shareholder funds in this way is about as bad as what happened over the road with the Allco deal.

tsalta

[airtags]

It's one thing to hedge fuel - it's another to do it so late in the game at a level significantly higher than others - the other 'miscalculations' again prove that fiscal responsibility and governance are not attributes of Godfrey & the VB Board.

I have a family member who next month has been forced onto leave without pay ....in order to help "save the business".......

In receiving this news she also rec'd yet another "message from Brett" playing down the company's financial situation. Then she had the delight of watching the ferret Branson chirp in with his mindless meanderings ....[quote] ..."what recession"

To top it all off, while VB drivers and crew are hammered daily about cost cutting, taking leave without pay and the need for financial prudence ahead of more big losses - Godfrey & Co are spending up big hiring Cockatoo Island in SYD for a launch party tomorrow night.

Maybe the first of the 400 to go should be Godfrey. :mad:

[priapism]

Virgin are in deep **** and lack the management talent to steer them out of it.
The trans Pacific operation is going to be expensive.

Ripe for takeover.

[Stationair8]

How many staff do Virgin Blue actually employ?
I thought most of the ground staff were employed by Aerocare and the engineers employed by Jetcare.

[Wizard of Oz]

6100 / Spartacus

Hedging is not insurance .....

Options are a little like insurance in that you will collect if your option "goes ïn the money"

Straight forwards contracts are really just "fixing" the price for future consumption ... and yes Airtags nailed it when he mentioned VB came to hedging way to late in the game!!! What they should have done was lock in fuel prices against reasonable known forward revenues ....... to lock in a reasonable known profit forecast .......

A good airline, IMHO, would do a some fixed price forwards, a little options (including collars to reduce the option premiums), and leave some unhedged (say an amount equivalent to parking a few planes if you don't happen to fly them ... theres nothing worse than paying on a hedge for fuel you don't actually use!!)

And I bet they didn't even hedge the FX exposure of having the fuel hedges in USD .....

[im sparticus]

tsalta,

short put + long call (same strike) = synthetic long swap, same same does the collar still seem odd now?

to the hindsight economists, der VB hedged late so what its in the past, what we should be questioning is there hedging plan for the future and theirs is to reduce when the price of fuel is low and probably take out hedges again WHEN fuel takes off and they get squeezed by unbearably high prices, which by the book is not a hedging plan at all as you pay through the nose when prices drop of the highs and miss out on the savings when the price takes off again.

imo the key to getting the most out of hedging is not how much you hedge (%) or by what strategy (options/swaps/futures or straight out fuel hoarding) but to be consistent with your plan throughout the cycle.

[tsalta]

Hey Spart,

Yep, still seems odd to me.

The premium paid on the longs was definately more than that raised by going short puts.

Why pay a premium for a synthetic version of something which can be had for free? i.e. a swap.

tsalta

[im sparticus]

because they wanted a price band not one fixed price, shesh, face it there is nothing that suggests they were only using swaps and that was the only cause of there mtm losses.

the facts are (we have been through there statement) that they used both swaps and collars (mainly collars) both setups have downside price risk so both are a contributing factor (mostly the collars) to there hedging losses.

so unless you have any real evidence to suggest otherwise besides "they didnt use collars take my word for it im a part time options trader" stop harping on about swaps.

[tsalta]

Hey Spart,

You are a bit highly strung aren't you?

I don't really give a toss whether they used swaps, collars, condors, swirly swizzle sticks or any other exotic method of hedging.

The point is that the intention of hedging is to control the average cost of jet fuel. What VB embarked upon was gambling with shareholder funds on the futures market and is typical of the cavalier attitude displayed by the company.

If you have been through the statement so closely, would you mind explaining to me where the 60 million profit is? You are a better man than I if you can find it.

tsalta

[Flokkered]

Time to bring back BG's nemesis CG from the Patrick days when things were orderly......it was a good balance...until Toll crashed the party:ugh: