Virgin Blue announces losses

[greenslopes]

Virgin have just announced an expected loss. Extremely tough economic times for airlines.
I hope this doesn't shift focus for the longhaul QF Pilots trying to shore up job security.


AAP March 23, 2011 11:22AM
VIRGIN Blue shares have taken a big hit after the airline said high fuel prices, adverse weather and natural disasters would result in a before tax loss of up to $80 million for 2010/11.

The airline group, comprising Virgin Blue, Polynesian Blue, Pacific Blue and V Australia, said it expected to post a full year before tax loss in a range between $30 million to $80 million.

"This assumes no further significant increase in fuel prices and no material deterioration in the trading environment," Virgin Blue said.

The guidance excluded hedging ineffectiveness, Virgin Blue said.

At 10.15am (AEDT), Virgin Blue was down 2.5 cents, or 7.58 per cent, at 30.5 cents, the lowest since August 26, 2010.

At the airline's 2010/11 first half results presentation in February, Virgin Blue chief executive John Borghetti said the second half would be "challenging", but declined to issue specific earnings guidance, saying it was too early to do so.In a statement today, Mr Borghetti said: "We have witnessed an unprecedented number of significant events in an extraordinarily short period of time, including natural disasters and a sharp spike in fuel prices."

"These events have severely impacted consumer confidence, resulting in a slower than usual recovery in tourism."

Virgin Blue said that since February, soaring jet fuel prices had added an extra $50 million to costs for the second half of 2010/11.

The airline also estimated the impact of the Christchurch earthquake at $15 million.

It had previously announced that the impact of Cyclone Yasi and devastating floods that swept through Queensland over the Christmas and New Year period would cost $50 million.

"While VBA has initiated an action plan which identifies cost savings and revenue initiatives, including fuel surcharges and capacity reductions, this will only partially offset the impact of these events on FY11 profit."

Virgin Blue posted profit before tax of $34.4 million in 2009/10.

Mr Borghetti said the current market conditions validated the airline's plan to wean itself off the heavy reliance on the leisure market and look for a larger share of corporate and business travellers.

"We are more confident than ever that our strategy is the right one," Mr Borghetti said.

[Artificial Horizon]

I know that J* has put out an email to staff cutting all non-essential spending and capacity cuts due to the Japan, Christchurch disasters and also the fuel price stating that the Qantas Group performance is now looking pretty poor. Good time for J* and Qantas to plead poverty and will result in lots of negative press for the Qantas pilots as the whole 26% payrise claim is out there in the public domain whether it is true or not. :eek:

[Mr. Hat]

Pretty hard to make a reasonable dollar when you have the hands of the Government permanently around your throat everywhere you go. Add to that consumers that expect $49 fares in the year 2011.

It cost me $70 to get a busted arse filthy cab from town to the airport the other day (and I had to navigate). Fair go. Get real.

When is the industry going to get a fair go?

[The Bunglerat]

One of the questions Sen. Heffernan has constantly raised in the Inquiry is how the industry can survive without a reality check on fare structures, & that the public need to be re-educated on what it really costs to fly from "A" to "B." Of course, fat lot of good it would do now to raise prices to a more realistic level, because Joe Public will simply vote with his feet & go down the road to whoever is offering seats at $20 cheaper. I know that when I get mates asking me how our loads are at the moment, I respond by telling them they're asking the wrong question; what difference does it make if we've got a plane full of bums on seats - if they all bought their tickets at fire sale prices!

Whilst it's not encouraging to hear of reduced profits or, heaven forbid, posting a loss for the year, JB has got it absolutely right with the strategy to go after the corporate "cream" & reduce our current over-reliance on the leisure market. In this regard he has my full vote of confidence. In the short term things will get worse before they get better, but I believe they will. Until the next time. :E 'Tis a fickle business, this aviation thing.

[Servo]

Not only the industry being given a fair go, how about income earners? Being taxed into oblivion with very little in return, such as schools, hospitals, police and roads.

The obscene amount of money being spent at the moment by both major political parties here in NSW on radio and tv is disgusting. Instead the money should go into the above :*

My wife works with special needs children in state primary school. A young boy with a motor neurone disease is not getting funding for special assistance.

When asked a local member said what is the use, they will not amount to anything anyway :(

He will probably be more blessed than that oxygen thief.

As to VB announcing a loss watch all the naysayers come out and yell the sky is falling, dust off your resume, blah blah blah. You know what get over yourselves.

We need a complete shift in living our lives and society as a whole. Me I am going to try and find a way in helping this young boy, maybe if we all helped just one other person in our lives the world would be a better place.

[newsensation]

Mr Borghetti said the current market conditions validated the airline's plan to wean itself off the heavy reliance on the leisure market and look for a larger share of corporate and business travellers.

Note to the Qantas Board, stop wasting money on J* and get back the premium business....

[The Green Goblin]

When is the industry going to get a fair go?

When fares are fixed prices between locations, and airlines start competing on service, rather than price.

Capitalism is great in theory, but like communism, does not work when put into practice. Something or someone always has to give.

[Mr. Hat]

Don't get me started Servo or I'll be here all day and night going off about the allocation of taxpayer dollars. In short my solution? Its not popular but I say reallocate the money spent on able bodied people not willing to work or travel to find a job and give it to people that can't fend for themselves such as the disabled or the severely injured/unwell. Take the hard line: "You have 12 months to get a job after that the money is going to the disabled."

As for our industry I personally see it as part of the infrastructure of our economy and therefore it should be levied taxed and bullied less.

[crocodile redundee]

Hey Missa Hatt - You no picka onna my Cab, Buddy, I getta my Mate Missa Gaddafi onto you Bigga time, soon. My a Yella Forda Foulcan issa Nice Ride , you getta cheep ride Missa Hat , xxxx

[psycho joe]

Funny how things are always doom and gloom in an EBA year. :D

[TBM-Legend]

Quote:
Mr Borghetti said the current market conditions validated the airline's plan to wean itself off the heavy reliance on the leisure market and look for a larger share of corporate and business travellers.
Note to the Qantas Board, stop wasting money on J* and get back the premium business....



I wouldn't want Qantas to use the JB business model. More big CC losses to come..:{

Tonight's news:

THE worst six months in Virgin Blue's 10-year history will send the airline well into the red this year as it battles soaring oil prices, a string of natural disasters and weak demand in its core leisure market.

The airline warned yesterday that it expected to post a pre-tax loss for 2011 of between $30 million and $80 million, its fourth profit warning in the past 12 months.

Analysts said the warning implied a second-half pre-tax loss of between $100m and $150m, making it Virgin's worst-ever half year. Virgin shares closed 6 per cent lower at 31c.From The Australian:

[Mr. Hat]

Funny how things are always doom and gloom in an EBA year.

You could set your watch on it. Forget the GPS clock in the flight deck it drops out occasionally.

[Unregistered User]

Where is the "Like" button (as in Faceb**k) for what Mr Hat said?

[runesta]

Note to the Qantas Board, stop wasting money on J* and get back the premium business....

why wouldn't they spend more money on J* now when Borghetti is trying to move up-market?

Borghetti is forcing too many changes in DJ in too short a period. They've been caught in no man's land - trapped between the bottom and the premium end of the market

DJ's entire legacy is based on low cost - this includes their operations, systems etc. It will take some major shakeup to get to where he wants - he's rocking the boat too hard and taking in a bit of water!

[Artificial Horizon]

I have to agree, Virgin was always set up to operate at the low cost end of the scale, I can see exactly what they are trying to do by attracting more business customers but at the moment they are in the 'middle' of the two markets. Along with business customers comes the need for better product, lounges etc, not to mention a big uptake in staff numbers i.e at a time when most airlines are trying to cut costs Virgin is going to have to invest and raise costs. It will be interesting how it pans out, hopefully it will be sucessful, the more competition the better.

[denabol]

As a self funded sometimes business traveller, around once a month and overseas to Asia or Europe no more than four times a year, Virgin Blue usually gets my domestic business out of CBR. I like the E-jets if they are on the route at the right time to Melbourne, and to Brisbane.

Just don't see them having ever been like Deathstar. A decently good fare for a regular flight, no buggering around, does it for me, and Qantas is something I'd go back to if they get rid of the old tatty 737s. Never fly to Sydney, too easy to drive, so don't see any risk of having to fly the DJ turbos when they turn up.

[TBM-Legend]

Virgin hedged on crude rather than Jet fuel.


In an effort to mitigate the possibility of rising fuel prices, Virgin Blue sensibly took out hedging contracts. Unfortunately, most of its hedging is against crude oil price rises. Even worse, it hedged against prices rises in the American benchmark, West Texas Intermediate.

While the American benchmark grabs all the headlines when it comes to oil prices, Australia prices most of its oil against a Singapore benchmark that is based on a Malaysian crude, Tapis, while Europe benchmarks its prices against a blend of North Sea oils known as Brent.

There have been some remarkable differences in those prices in recent months. West Texas Intermediate yesterday was nudging above $104 a barrel. Brent crude, on the other hand, was above $116. And Tapis was trading even higher at $120.

For Virgin Blue, that spells trouble. With Singapore jet fuel now trading at a huge margin above American crude oil, the airline has become seriously exposed to fuel price rises. It has hedging against that margin too, but only for about half the difference.

[porch monkey]

Who says JB made that decision? He hasn't been there long enough.

[GAFA]

Looking at VB have stuffed up their fuel hedging in the past I think you will find it was the previous CEO's work again. It's going to take a few years to unwind the mistakes of the last 10 years in this is just one many.

[airtags]

I think like all changes there are many things you only discover once you get in the job.

With all the off-balance sheet shunting that was the hallmark of the Branson-Godfrey style of thinking, my view is that we are actually seeing a clearer picture of the business. (eg the write down in JB's first weeks etc).

Setting aside the 'auto-react' mode of the market, I believe the fiscal reporting offered since Borghetti's appearance is atually giving a degree of confidence, even when the news is bad.


AT

[VBPCGUY]

Is the airline in any danger or these losses attributed also to the amount of money currently being spent by the airline on unfiorms, lounges terminal refurbs, aircraft menus etc?

[Mr. Hat]

As JB said : "There was no option to leave as is". "The terminals are tired the uniforms out of date, it needed to be done anyway, the time is right".

The branding needs an overhaul. Everyone would be calling him a hero if it were not for

1. IT Outage.
2. QLD Floods
3. NZ Earthquake
4. Japan Earthquake/Tsunami/Nuclear meltdown
5. War in Lybia and unrest in middle east.

It's a pretty bad start to the year.

I can see one more thing that might have THE biggest effect:

Dollar returns to 70 cents.

[TBM-Legend]

The Dollar has two sides.

High dollar means cheap leases/part/reserves/insurance/purchasing/fuel/ etc

Low dollar encourages more tourism from overseas and possibly domestic...

Godfrey "sold" JB a pup I would say....:{

[Cactusjack]

Boohoo.
What a shock, an airline makes a loss! Airlines are the most unstable, low return, high risk investments you cold sink money into. You get what you pay for...end of story.
The price of oil will keep on climbing and more pressure is yet to come.I might even snap up some of those shares myself once they reach $0.05 per share !!

[inandout]

Best thing VB can do is buy into Airports as is happening in Euro, only problem no money. Syd/Bne/Akl/Mel airport makes 80% Gross while Vb makes a loss, things need to change.

[Mr. Hat]

Bravo inandout:D:D:D

Raping our industry and not investing a cent in it (apart from foodcourts and shops).

Thank you John Winston.:yuk:

[gobbledock]

The lesson in all this ? Don't invest in airlines unless you buy the shares ate sold what they are actually worth - at cost value, around $0.05 per share.
The actual airport corporations (if floated) are a bigger money spinner than the airlines so they would be a better option to invest in.
Remember, airlines are subject to rapidly changing markets caused by economic downturns, natural disasters, accidents, oil pricing instability and so forth.......good luck.

[The Kelpie]

Airports are just Retail Malls.

The significance they have is that they have a captive customer base once through security where the normal commerce rules of pricing levels dictated by supply and demand do not apply......oh and they happen to be next to a runway!!!

Nationalise the Airports and the entire aviation industry will be able to be equalised and made sustainable.

More to Follow

The Kelpie

[havick]

Kelpie, good suggestion... The wheel turns, yet again!

[Mr. Hat]

Hmmm and privatising them worked a treat didn't it? Love the private trainline to Sydney airport.

Mascot - Syd Domestic: $15 (for a 30 second train ride). Privatising that worked a treat! Good one son.

Who gives a F&*k about a payrise how about just basic 1st world facilities for a start. God knows we sure are paying 1st world taxes for it!

No idea.

[S70IP]

Mascot - Syd Domestic: $15 (for a 30 second train ride).

It's actually $5. But I get your point.

Just look at that greedy sod who owns CB airport. It more of a business park than an airport.

[Mr. Hat]

They must have finally realised nones going to pay 15 for it.

[maui]

S70IP

The last time I tried it, it was $4.50 if you had a boarding pass. How many crew have one of them.

I was told, no boarding pass no concession $13.50 thanks. "I'm crew, I came off an international flight on the GD, and I am on travelling on a ticketless airline." Your problem arsehole, no boarding pass no concession. A while has passed and I imagine $15 is probably the latest figure.

The thing that really got up my nose was that international travellers going to the wizz bang automated ticket machines are asked for full tote odds. The concession is only available at the ticket counter. The unknowing would pay the $13.50 /$15.00 and be none the wiser until a few days later when they understood the value of the local currency,and then would realise they had paid an extrordinary amount for a very short ride.

Took it up with the authorities, but they really didn't want to know about it. Probably in the pay of those theiving pricks at Mac bank (nsw inc).

Just another Sydney rip off in the ripoff capital of the country.

I'm with Sunfish, abandon the joint.

Feel much better, now where is that glass of red.

Maui

[ferris]

revert to socialism You mean; like what western governments have been doing for the banking industry over the last couple of years?
Nationalising assets that make money (like airports)? Why would the public want that? ;)

[S70IP]

The last time I tried it, it was $4.50 if you had a boarding pass. How many crew have one of them.

Wow. I was based in SYD and commuting to Mel until about Oct last year. I was renting a shoe box in Mascot and often caught the train to and from Mascot station and Domestic terminal. It was $5 but had to get the ticket at the window like you say.

I remember my holiday to the states last year. Flew into Ragan National Airport.,$2.90 for a train ticket into the city.

If you are Brisbane based the sky train is free from the city if in uniform.

Sydney blows.

[flyingfrenchman]

Sorry if this has already been mentioned. Is the talk of communications to do with redundancies true or just that, talk?

[Cactusjack]

'Change Plan' doesn't seem to be working yet. The airline is still bleeding money and the latest profit forecast seems to be sitting in the same ball park as in previous years - minimal to deficit. Perhaps the structure of the organisation with its myriads of 'specialists', 'team leads' and 'managers' is blocking the road going forward ? The place still has a plethora of nimwits in charge of departments and these nimwits have been around for the past decade, it is time for JB to weild the final axe blow on these incompetents if transformation of the airline is to be completed properly and successfully.

[The Bunglerat]

'Change Plan' doesn't seem to be working yet. The airline is still bleeding money and the latest profit forecast seems to be sitting in the same ball park as in previous years - minimal to deficit.

Cactus, do you mean to say that you were expecting things to change in the blink of an eye? Surely you're not that ignorant. This is something that'll be another couple of years before the change is really noticed. The trick, in the meantime, is to keep it from going off the rails until things actually do start to improve.

[VBPCGUY]

Cactus, do you mean to say that you were expecting things to change in the blink of an eye? Surely you're not that ignorant. This is something that'll be another couple of years before the change is really noticed. The trick, in the meantime, is to keep it from going off the rails until things actually do start to improve.

Problem is more and more bubble heads day by day are put in charge of key front line decisions, they arent worth wiping the dog**** off your shoes on in reality, makes it very frustrating.

[Dehavillanddriver]

So Cactus - if it can be done without revealing your secret identity (sounds like a super hero :O ) how about telling us about your extensive experience in airline management.

It seems to me that there are plenty of people here ready to call others nitwits and other colorful names when they themselves have not the slightest idea about managing their own small part of the world let alone managing a department.

Think about what you would do differently, and the have a think about maybe why the person in the role cannot do things differently. It isn't a matter of snapping your fingers and making it happen, everyone, even JB, has a boss and everyone is accountable to someone else, so unless you can turn each department of the airline into a dictatorship that has the ability to TELL not request them to do something, you are not going to achieve half of what you would like to achieve.

[Cactusjack]

Problem is more and more bubble heads day by day are put in charge of key front line decisions, they arent worth wiping the dog**** off your shoes on in reality, makes it very frustrating.
Exactly my point VBPCGUY. It won't happen successfully, not even slowly, while the same deadwood exists from the past decade. If they couldn't fix it then they may not be able to fix it now.


So Cactus - if it can be done without revealing your secret identity (sounds like a super here :O ) how about telling us about your extensive experience in airline management.
The thread is about DJ, not about my work experience.


It seems to me that there are plenty of people here ready in call others nitwits and other colorful names when they themselves have not the slightest idea about managing their own small part of the world let alone managing a department.
If you think that after 10 years of operating they have achieved a sound business model then you need to go to management school Dehavillanddriver.


Think about what you would do differently, and the have a think about maybe why the person in the role cannot do things differently. It isn't a matter of snapping your fingers and making it happen, everyone, even JB, has a boss and everyone is accountable to someone else
No excuses. If you are the CEO or accountable person at the top of the tree then you make things happen, that's why you get the big bucks. If you cant do it you can't bring your senior managers into line then you should pack your bags and leave as you have failed and you are not the right man for the top role.


so unless you can turn each department of the airline into a dictatorship that has the ability to TELL not request them to do something, you are not going to achieve half of what you would like to achieve.
No dictatorships are required. That is 'management 101 old school' old timer. Unfortunately JB has inherited some tripe. He has already made some big moves and cut loose some of the trash and I applaud him for those positive steps, but sadly some of the existing 'hangers on management' are tasked to steer the place forward, and under the direction or influence of those buffoons the job will be a slow and messy one. I think however that Sean and JB will sort that one out in the months ahead (hopefully), both are very smart men.

[Sunstar320]

Would be hard for any carrier in this country to make money at the moment considering Jet fuel has just passed $US140.

It will hit carriers like Jetstar harder because of their limitations of pushing fares up, Tiger also, they only have 10 aircraft in the country so impact wont be as bad obviously.

I get a feeling we will be seeing significant aircraft groundings and alot of reduced capacity if the price continues to soar.

[gobbledock]

Would be hard for any carrier in this country to make money at the moment considering Jet fuel has just passed $US140.
Depends what price the airlines have hedged their fuel at and what percentage of their overall fuel is hedged. Any long lasting fuel price at this level will strip any remaining profits by the literal hour. Virgin are not in any position to wear prices that high for any long term period and as for groundings it would be most likely they would ditch some older aircraft. Qantas are not in really good shape themselves but they too are in the market to ditch some older ****boxes while awaiting new aircraft types on order so it may actually work into their favour, and as for Tiger, well their parent company can handle the price hike well and truly.

[big buddah]

Airlines fight a constant battle with fuel price volatility. Since the industry spends about a third of its operating costs on fuel alone, airlines employ an arsenal of financial instruments like derivatives, options, and caps, to hedge against wild swings in the energy market.

And it’s serious business: in some instances, a company’s hedging book could be the difference between a profit and a loss in a quarter.

So, who’s the best?

According to analysts, it’s Alaska Air Group the predominantly western US carrier that operates Alaska Airlines and Horizon Air.

The company's CFO Brandon Pedersen told CNBC that its hedging program has “been very, very good for us. We’ve saved roughly $380 million, up through December 31st. And that’s even approaching $400 million through the first couple of months of this first quarter."


This is an impressive figure considering the company’s roughly $2 billion market cap and the fact that its entire hedging team totals only 3 people.

Full article
News Headlines (http://www.cnbc.com/id/42463121)

[Chinstrap]

I have seen the latest offering on the books. All looks good friends, we have turned a corner.....

[TBM-Legend]

I have seen the latest offering on the books. All looks good friends, we have turned a corner.....


as a public company they'd better keep the whole market "fully" informed for the good and bad....:=

[Roger Greendeck]

So is it good enough to start recruiting again?