Virgin share price drops 17 percent

[Thylacine]

Stephen Bartholomeusz in Business Spectator - Aviation writes
Alliance winces at a Virgin earnings overshoot | Business Spectator (http://www.businessspectator.com.au/article/2013/5/16/aviation/alliance-winces-virgin-earnings-overshoot?utm_source=exact&utm_medium=email&utm_content=294547&utm_campaign=kgb&modapt=)
Has Borgetti overplayed his hand in taking Qantas head on in the business market? Could this be like Ansett reincarnated, as the first comment suggests?
As usual Sir Richard comes out smelling sweet and SIA takes another haircut.

[Ollie Onion]

I think the Virgin re-branding and move into the business market has been a 'bold' move that will take years become established before we see the true fall of the cards with regard to market share etc...

I suspect that Singapore Airlines is laughing all the way to the bank at managing to offload a controlling share in what is a bit of a dog in Tiger. It will be interesting to see if Virgin has any better success in establishing Tiger as a realistic low cost operation in Australia. This also may take years to see how it is going to pan out and will no doubt effect the profitability of the entire Virgin group in Australia for the foreseeable future.

Borgetti made a very bold move in virtually showing Qantas the two finger salute, it will be interesting to look back in 10 years time to see if that was a good strategy.

[ernestkgann]

They had to change or go broke. Now wouldn't it be handy if they had a cargo component to the business.

[KRUSTY 34]

I agree Ernie'.


What I have trouble getting my head around (and have for some time).....

Loan to SkyWest: $100 mil
Acquisition of SkyWest: Another $100 mil
Total cost of the ATR operation (35 aircraft): $500 mil+
Total cost to expand TT and to bring them to profitability (additional 19 aircraft): $1Bil?
Happy to be corrected on my beer coaster figures, but I think it's safe to say we're looking at serious dollars!

I feel the move to a full service airline was both inevitable and required. My greatest fear is that combined with all the other stuff, it may be a case of a "Bridge too far". :ouch:

[Cactusjack]

It will get worse yet. So much invested in Regionals to cash in the mining side of things yet mining has peaked friends, it won't disappear but it is declining. I think Il Deuce saw gold in them thar hills but the gold seams are running dry!
The only one laughing all the way to the bank is Alliance! MacMillan's timing was impeccable, his bank balance proves it.
Anyone in aviation wishing or dreaming of the old days where big profits and high salaries rules the airwaves is dreaming. Only an idiot would buy shares in airlines.
Oh well, Skytrans is gearing up to sell or float its lemon, so maybe Il Deuce will blow some more cash on that half baked outfit?

[Chadzat]

Its called 'leasing' Krusty! Similar to what your mob does with its engines. If I added up the cost of buying 100 odd SAAB donks then the figure would be astronomical too.....

Better get another coaster! :ok:

[KRUSTY 34]

Sorry Chadzat!

Might start my own airline. Cheap as chips if you have the right accountant. :E

[B772]

'Motley Fool' describes Airlines as places where capital goes to die, so long time investors may want to steer clear and leave it to the wanna-be stunt pilots.

[Abe Froeman]

Gets better ladies and gents:

- Deferred aircraft deliveries
- Exec level pay cuts
- Voluntary Redundancies
- Leave without pay

Interesting times ahead for VA

[my oleo is extended]

Abe Froeman, sausage king, you mention executive pay cuts? Surely not? Or perhaps something along the lines of a 10% salary cut offset by a 20% bonus increase and other little perks that remain under lock and key in the bowels of HR will be enshrined! No executive will take a 'legitimate' haircut, I can assure you that.
Then again, VA has always been fat, very very fat with a plethora of managers, specialists, all those wanky positions that contribute nothing but excess costs to the company.

Has Little John's spending spree of the past 18 months achieved nought? Or is Brett's legacy a bigger turd than first thought? Perhaps Richard The Third will come back out to Australia and dazzle us with more zany antics, or VA might revert back to flair and frivolity to enhance its industry perception and increase profits? Has putting a barrier and a purple screen up between the priveledged guests at the pointy end of the plane ( you know, 2 business travellers enjoying the fwd ****ter while 150 other guests get to enjoy the aft ****ter) not reigned in the expected profits?

[Capt_SNAFU]

If Virgin is fat with managers etc I wonder what QF is? Obese?

[virginexcess]

Yes, interesting times ahead.

Little johnny has had a pretty easy few years talking up the Virgin product while Joyce seemed hell bent on destroying 90 years of history and brand loyalty at Qantas.

You can safely bet your left one that with big Timmy Clark pulling the strings at Qantas, you will see no more undermining of that brand from within, and little Johhny Borghetti will have woken up to find he is actually in the fight of his life, rather than what seemed to be an Alan Joyce assisted joy ride to the top.

Wouldn't mind betting JB exercises his right to spend more time with his family in the nexrt year or so and hands a steaming dog turd over to the next poor b*stard who's given the opportunity to boost his retirement savings courtesy of the highly regarded (by those who have access to it) Virgin executive bonus scheme.

How much did JB get paid last year? 5m or so with bonuses? Not bad for a business whose after tax profit was around 20m.

[CaptCloudbuster]

If Virgin is fat with managers etc I wonder what QF is? Obese?


A timely question indeed.

As the QF SH EA is currently under "negotiation" AIPA commissioned an economics consultant to compare key metrics between Virgin and Qantas in order to present a professional, reasoned and justifiable position.

Pilots / Airframes QF737 8.75 vs Virgin 11.65 -33.1%

Staff / Airframe. QF 155 vs Virgin 70 -121.4% :eek:

One of QFs 3 Chief Pilots whilst explaining QF again rejecting justified, measured and rational changes stated we need to keep our competitive advantage

The austerity measures shall not evidently apply to the inhabitants of the Qantas Campus

[The Green Goblin]

So we have come full circle.

3-4 years ago the sky was falling in at Virgin. Rumours were going around about their imminent closure.

JB comes along, breathes new life into the place.

Now we are back where we started.

The boys at Tiger were breathing easy. I think Tiger will be the drag on the group and will be dropped or absorbed, and the frames used via Skywest.


There is an old saying about spreading yourself to thinly.

History repeats......

[virginexcess]

Not quite the full circle i would say.

Significant difference now is several shareholders with deep pockets and vested interest.

With QF's alilgnment with EK, Virgin's survival is now paramount to EY and SQ and NZ.

Whether this is a good thing or a bad thing is yet to be seen. Clearly there is potential for substantial conflict of interest amongst shareholders.

Interesting times ahead.

[pull-up-terrain]

It will be interesting to see what happens when qantas receive the 787 and if the final 8 a380's ever arrive and what routes they will be used on because that will really kill off virgin.

[The Green Goblin]

Shareholders and deep pocket?

Singapore is in decline. We know it. They know it. As Asia develops there is more competition for 'hubbing' in cheaper places. Great product, great airline, but shortly irrelevant which is why they keep on putting money into overseas ventures.

Air New Zealand is a basket case. If it wasn't for the tax payers purse, they would have closed down long ago. While the product is great, the airline proud, and the staff loyal, it's always going to be a niche market spoon fed from the public purse - a bit like Tasmania. Same strategy as Singapore, invest in other markets and hopefully remain relevant.

Etihad.

Well the dynamics are the same as Emirates, there is only room in any market for two main players.

Expect to see a merger of two of the middle east carriers in the next few years. Where that leaves VA? Who knows. I'm guessing Qatar and Etihad will join forces to take on Emirates.

So yes, Virgin does have some interesting shareholders, but it is akin to tossing a bag of chips into a playground of thirty kids. Not everyone is going to get a taste, and there are going to be some tantrums!

[nitpicker330]

Crap crap and more crap


Where do you think all the money ( Oil ) is in the UAE???

It's not in Dubai that's for sure.....

Yep it's all in Abu Dhabi the home of ETIHAD......:ok:

Who bailed out Dubai a few years ago???

Yep Abu Dhabi, the capital of the UAE and the home of ETIHAD.....:ok:

Dubai ain't the capital and doesn't have all the money. :ugh:

[The Green Goblin]

But Emirates has the brand, the critical mass, and the order books booked out for years to come.

While Emirates are not the perfect employer, they are a saint compared to the stories you hear from the other gulf carriers.

[astinapilot]

GG, Air NZ would be one of the most profitable airlines in the world per revenue these past few years. Not many years AirNZ does not make a profit. Can't see how that is a basket case?

Wait for QF's figures, not good is the expectation, ie worse hit than VA.

Interesting times ahead.

[Chocks Away]

Yep I think you're onto something GG.
The days of all being in Gulf Air (one carrier) won't return but I suspect some re-alignment to occur, even though they all want to beat their own drums it simply won't be feasible, having 3 actively expanding global carriers (plus 2 not so active) all hubbing within 300nm.

[breakfastburrito]

What I am about to post is completely "out of my arse thinking".
Emirates looks like a gigantic property play. The money isn't in the airline, but converting sand at "cents per acre" into "thousands per square foot" of hotels / retail / office / adventure parks. This process depends upon visitors to continue to support the growth of this process. How they get to Dubai is probably less important than the fact they need to pass through it for this scheme to work.

Ask yourself, who owns the airline, who owns the land, and who would benefit from the conversion process from cents to $$? It is all about the "network effect". The aim appears to be to generate sufficient activity in Dubai to reach a critical mass, so that it becomes valuable because everyone wants to have a holiday or do business in Dubai. Thus creating scarcity from abundance, precisely because they have limited oil & gas reserves.

Just a thought from afar, & I could be well be off the mark...

[goodonyamate]

Wait for QF's figures, not good is the expectation

wouldnt be an EBA being negotiated would there???

WHilst I was very positive for the folk at VA when Borgs took over.....surely you should be seeing some better results by now.....a lot of money spent for not much gain?

Oh yeah, if any management tell you that Tiger wont be replacing you on any routes, dont believe them for a second. (Jetstar will never be more than 4 aircraft...) If my memory serves me correctly, some of the main players in the Jitconnict sham are now at VA......

What's the work environment like over there? A few buddies have said it was really good for a while, but everyone is getting pissed off again. A non flying mates wife is CC for VA, her reviews of the company are not glowing to say the least....lots of backstabbing and dobbing etc....please say it isnt so!!

[Chocks Away]

Etihad just increased their Shareholding in VB oops sorry VA.

[nig&nog]

Tough times are ahead for both main players in this ever increasing unsettled environment. Only time will tell what happens next but I had a good mate tell me he is worried for his QF737 slot on the classic, as it looks like the B717 are coming to replace some of their flying (CB & SYD base) and he hasnt any idea what may lay ahead for him. Thats one way for QF to improve their bottom line using contractors. Probably same thing that may occur at VA in the future with the likes of Tiger and Skywest now available to be moulded how they like.

[virginexcess]

Those who predict consolidation in the ME do not understand the model and/or culture.

The joint venture of Gulf Air failed, in part, because Gulf States do not work well together. Everyone has the "my dick is bigger than yours" syndrome and have a burning need to be seen to be the biggest, fastest, tallest etc.

There will be no voluntary consolidation. Qatar and Abu Dhabi have all the money amongst the big 3 carriers, so there will be no short/near term financial pressure for either of those to merge with anyone. Dubai have the brand and the network, but are pretty thin on finances, relatively speaking. There is no way they will be able to buy out EY. Firstly they couldn't fund it and secondly, Abu Dhabi would simply not allow it. Further more, those familiar with the ME will know that the changing of the name of the Burj Dubai to the Burj Khalifa, sent a pretty clear message as to who is in charge.

Lastly, it doesn't matter how close their hubs are because it is not about bringing people to the ME. It is simply about moving masses of increasingly wealthy people from East to West and back. Given the massive numbers involved and the perfectly located geography of the ME, there is likely to be more ME based carrier rather than less, and that can be evidenced by the expansion of Turkish.

sorry for thread drift, but it is relevant to earlier posts

[Buckshot]

I had a good mate tell me he is worried for his QF737 slot on the classic, as it looks like the B717 are coming to replace some of their flying

Don't QF drivers fly the -400 and -800 interchangeably?

[nig&nog]

I think he was getting at that if they lose any -400 flying and not many new -800's coming they will be overstocked. I will ask to clarify.

[ramius315]

QF 737 pilots fly both the -400 & -800. There is no such thing as "QF737 slot on the classic."

The orders for the 738s cover the loss of the 734s. There are currently 12 734s and 59 738s (71 jets.) The last press release in Feb announced a further 5 738s, stating that the fleet will "ultimately grow to 75 738s"

[MASTEMA]

Sometimes you bite the Tiger...

This time the Tiger will bite back. :(

Sad to say but, JB will need to write it off to save the ship.

Or was that always the plan??

[wheels_down]

Only 7 of the 734's left now.

Should be all gone by the end of the year.

[Cactusjack]

Cull the 'excess baggage' working in HR plus remove The Tanned One's bonus and downsize his salary. That would be a good starting point.

Burrito, you say 'out of my arse thinking'? Don't stress about it, VA (VB) have been thinking out of their ass for years, nothing new in that! It's one of their 'must haves'!

[Chocks Away]

Yeh good point V'excess.
Ethiopian have latched onto the mass movement principle too.

Share price only 0.35cents.
The big 3 Airline Alliances come under question now too I guess, as to their value... though VA now have by default, direct reaches into SkyTeam & Star Alliance with other Interline agreements with One World carriers.

The wicked witch from Werribee certainly 'aint helping the climate for travel!

[breakfastburrito]

Burrito, you say 'out of my arse thinking'? Don't stress about it, VA (VB) have been thinking out of their ass for years, nothing new in that! It's one of their 'must haves'!
I guess the difference is that I admit it, upfront no less!

[virginexcess]

The big 3 Airline Alliances come under question now too I guess, as to their value

Back in the late 90's and early 2000's when all the alliances were courting EK, Flanagan and Clark were adamant that EK did not need any alliance, and that the EK model would prevail. Sounded pretty arrogant at the time but now that EK is biggest on the block, it is starting to look like EK management were more visionary than most gave them credit

Anyone betting against the QF-EK tie up might come under a little bit of pressure. JB?

[wch]

I left Virgin a few years back when it was a circus without direction. My partner still works there.

Borghetti has done wonders for the place, and it's clear the staff now actually have some pride in who they work for. The british clown has toned down and reduced his appearances, and those face-painting star-jumping clowns in the cabin have hit their mid 30s/40s, realised that snagging a pilot isn't likely/worthwhile and have either left or grown up.

Having flown for work a lot on QF, and a lot on VA for leisure - the comparison is becoming stark.

VA is doing very well compared to QF - the attitude of passengers says it all. The QF converts seem to be easily pleased at VA.

That said, VA seems to be a major basket case in other areas.
This month's inflight magazine says it all - almost like it's a badge of pride. Check out the fleet:

Fokker 50, ATR 72, Fokker 100, Embraer 190, 737-700, Airbus A320, 737-800, Airbus A330, 777-300.

Once you've worked out just what you're flying on (let alone exactly WHO), the next challenge involves finding out exactly what the inflight service actually involves:

Turns out it matters what seat you're in, what ambiguous booking class you have, what the heading is on the FO's indicator, what altitude you're at, what time of day, who the actual operator of your flight is (cause every-joe-blow knows that your 'Virgin Australia' flight could be infact operated by a myriad of other airlines/subsidiaries). Flying PER-BME? Are you on a F100 or an E190? Over 4hours? North South or East West? My most recent encounter was a bit like the cheese sketch from Monty Python.

Now you're on your way, what are you going to do during your flight. Well, you'll need your Jeppesen sized inflight magazine to determine whether you'll get Foxtel, Wifi, RedTv, or bugger all - before you determine if the movie 'Kenny' is showing on your flight!

The whole thing reeks of the worst years of Ansett when there was just no standardisation - and it pisses people off.

Before you lot at QF start feeling big (i've worked there too!), it's just as bad over there.

The winner will be the one who standardises their whole operation - QF almost did it a few years ago, but now that Virgin seem to be calling the shots service wise, they're both as dysfunctionally impulsive as each other.

[Servo]

WCH, well said. Then you have Flight Ops :ouch:

[The Green Goblin]

And then in the broader Qantas fleet you have:

717, A320, 737 classic and NG , Q200/300/400, F100, EMB120, B767 (RR & GE) A330 200/300, A380, 747-400 RR and GE + ER, 787 on the way......

VA are getting rid of the 50s and 100s in the near future and I'd say will consolidate with one regional type (EMB or Bombardier).

[RodH]

Over the last few years I have been able to fly Business Class on both VA and QF. I travel every 2 months and after a couple of trips with QF decided to give VA a go.
What a difference , VA is streets ahead in my opinion and I have travelled a lot Internationally in Business Class and VA is right up there amongst them.
Sure the B737 is not all that flash but considering the room they have to provide Business Class in it's fairly good.
On the other hand the A330 is very good indeed . I really enjoy flying Business in that , the A330 is a beautiful aeroplane to travel in , it leaves the B767 for dead.
The share price drop is not that much different that of quite a few other Companies given this Economic Climate and under those Clowns who run this country or try to and succeed very badly.
I have watched VA grow over the years and I feel that they will go very well under the Leadership of John Borghetti.
Let's hope so for the sake of the travelling public and the staff of VA.
:ok::ok::ok::ok::ok:
P.S. I don't work for V.A , never have nor do any of my Family.

[Stiff Under Carriage]

wch. All I can say is…:D:D:D

[Abe Froeman]

Yes I might be new, and thinking about it, it was a leading first post but have a few close buddies at va and they are saying thinks are interesting at va at the moment, just a lot of thinks on hold or cancelled

Be interesting to compare the schedule of va, believing they have cut a lot of capacity of late, and check out all the spare aircraft sitting around on a weekend, that can't be making va money, but I guess your saving on fuel, maintenance and crew costs.

I hear tunes of a 400m saving scheme going on, but your right doubt execs will see any reduction in pay.

Interesting under Brett there were 6 or 7 execs, now think there is 14, or more?? Getting a bit top heavy!

[wch]

Not sure what you're talking about Abe. I'm new too. My other half has just deleted yet another text message asking for crew to work days off.

And with the shift in focus from Leisure to Business - there's bound to be more aircraft sitting around on weekends.

I operated several flights at QF on saturday mornings with less than 10 passengers on a 737 in the golden triangle - nature of the beast.

It's certainly not doom and gloom. Try staff travelling just about anywhere!