Virgin Australia to be privatised ?

[B772]

With the resignation of Christopher Luxon of Air New Zealand from the board of Virgin Australia I suspect Air New Zealand may be paving the way for Virgin Australia to be privatised and the Air New Zealand holding disposed of.

It has been known for some time that Air New Zealand has not been happy with the financial return of their investment in Virgin Australia.

[dizzylizzy]

The business is a rudderless ship at the moment, JB's been like a GenY with a credit card, and trying to pick up the pieces of an already nonviable business. Workforce costs have continued to increase and an poor taste TV campaign revolving around the crew instead of the customer... Hmmm. Why would you use them?

[cavemanzk]

The risk would be the investor that replaces the NZ 26% has limited capital, then its hello AN

[zim2uk]

Most analysts estimate Air NZ has made a $100mil profit on its investment. A 28% return over 4 years. Not bad in the airline world.

Make no mistake, with no game change Jetstar would've confined Virgin blue to a minor company and probably driven them out of business to be replaced by Lion air Australia.

Virgin has made significant inroads against a dominant competitor, no small achievement. Their handicap is access to cheaper capital which will hopefully be remedied in due course. Meanwhile the dominant competitor has demanded hand outs from the federal government, wasted millions on a failed Asian strategy, treated its staff with utter contempt and now thanks to some fortuitous infighting amongst oil producers is enjoying the windfall of a lucky hedging policy.

All of those relishing in Virgins short term woes should perhaps consider the alternatives if in the highly unlikely event it should fold. Air Asia and lion air would only be too happy to import their business models into the highly lucrative Australian domestic market....

[neville_nobody]

Air Asia and lion air would only be too happy to import their business models into the highly lucrative Australian domestic market....

Which isn't going to work. You would have to fly to the same airports using the same infrastructure, paying the same fees as everybody else does. They won't be able to import labour that's for sure and will have to negotiate with CASA which will be an interesting experience for them.:}

[Boe787]

Agree Virgin has made inroads, but needs to concentrate on the core business, domestic flying!
Running a fleet of 5 777s, for a minor International operation must be costing them big time!

[The Bullwinkle]

Running a fleet of 5 777s, for a minor International operation must be costing them big time!

I think it's the A330s that are costing them big time!

[t_cas]

Meanwhile...... Elsewhere in the world, where traditionally buoyant domestics markets have tanked, those airlines are Judiciously growing revenue very successfully via international markets, both long and medium haul.

[CamelSquadron]

JB's strategy at VA has been a huge failure and ANZ know it and are trying to cash in their chips while there are still some fat whales with loose wallets hanging around.

JB has boxed VA into a corner and is set for a future of poor financial returns. ANZ is becoming collateral damage with a rejuvenated QF and AA starting to land punches on ANZ.

JB is the best CEO QF has ever had:) QF should still be paying JB for all the good work he continues to do for QF.

[The Green Goblin]

My how times have changed. A couple of years ago JB was the man and AJ was the leprechaun.

It's a funny business this.

[TBM-Legend]

Nero fiddles while Rome burns!

http://www.afr.com/brand/chanticleer/air-new-zealand-throws-up-potential-takeover-at-virgin-20160330-gntzx7

[AerialPerspective]

Really this is no surprise. JB was not the wunderkind he was made out to be at QF... the book that was written about the work at VA included (regardless of anyone's opinion) a very off color reference to the QF1 incident at BKK, that shocked me, coming to the book with an open mind, of amateurism and unprofessionalism. You don't make accusations like that from that position, it just sounds bad if nothing else, like sour grapes.
The way it appears from what can be gleaned is that a very large amount of money has been spent on lounges which are the most clinical, white-hospital-waiting area unappealing environments to wait in... even if it's 40 degrees I feel freezing in those lounges.
Then we had the re-branding, personally after the designer's work at QF which threw out of balance a very striking logo I'm surprised he got any work again but in he goes and comes up with a few bits of paper cut out of Virgin America, Virgin Express and Virgin Atlantic liveries moved around on a piece of paper and presented as a new image... it's the most insipid design... at least DJ you could spot from 10 miles out, like QF but not now... tail looks pink from a distance.
Then we move on to the choice of SABRE, old technology when apparently the more modern Amadeus FM/CM was embedded already at V Australia... SABRE has been a continual issue from what I've heard, less functionality than their partner's systems (except EY)... SABRE is allegedly a very good sales platform but hopeless at airports and at the delivery end - it is not easily capable of the sort of kiosk driven products that QF offers via Amadeus and even it's prior system - who's used bag drop at VA, queue up, check in, then tag bag then go to a counter and queue up again to drop your bag after showing ID - everyone in the same queue as me was asking 'what's the point when at QF I can just swipe my card get a BP, then swipe it again and deposit my own bag??? - this is part of the problem, having someone whose entire experience is sales and marketing making operational decisions such as this - I do know from the old culture in QF that airports had to fight marketing/sales for years for investment because in most sales people's mind the airport stuff 'just happened'.
On top of this, no profit for 5 years.
A few comments here have stated that the transformation has been impressive... NO, it hasn't. Non-adjustable business class on narrow-bodies results in massive disruption in aircraft changes to people who you want to keep happiest with fixed perspex screens that look cheap and it hasn't made a profit.
If it was a world class product that had increased profits then it would be impressive but all it has done is drive the airline into a debt crisis with no end in sight. You can make the best product in the world if you don't need to make a profit.

This is not saying Qantas are the be all and end all, that was once a very good airline but has been white anted but at the end of the day... public companies are required to provide a return and QF does that and VA doesn't regardless of rhetoric.

For all intents and purposes it's been a disaster and could have been done better and cheaper.
My pick would be for Delta to buy Air NZ share, maybe even increase to near majority.
BTW, Analysts are not saying NZ has made $100m dollars, they have lost approximately $100m paying $480 and share now worth $381.
Any other benefits they've received could have been obtained via marketing agreements, etc.
While I'm not defending QF either, there are some inaccuracies on this thread... both airlines benefited to an extent from lower fuel prices but QF benefited slightly more because it hedged cleverly and VA didn't, VA did hedge but not so as to take best advantage. The CEO was at QF when they were leaders in hedging so there is no excuse for VA not getting this right it would seem.
QF have taken about 3-6% capacity out of the market since the end of the 'capacity war' and VA have added .1% (WTF???).

The sooner there is a clean out at VA instead of good people being let go (sometimes because of frustration of being isolated for fighting against stupidity I'm told) the better the future will be for the good people that are in the company, many of whom are in the process of leaving through sheer frustration. Once again, anecdotal, just what I'm told as I'm not connected with VA.

As for QF, they just need a people person at the top now all the restructuring has been done.

To summarize, there's been obscene expenditure, the wrong people employed in some key positions, bad decisions on equipment and IT, lounges that are in no way competitive - I mean they had Air NZ to look at, their lounges are fine - increased debt, no profit for 5 years. All in all, not very impressive.

[AerialPerspective]

The business is a rudderless ship at the moment, JB's been like a GenY with a credit card, and trying to pick up the pieces of an already nonviable business. Workforce costs have continued to increase and an poor taste TV campaign revolving around the crew instead of the customer... Hmmm. Why would you use them?
Very true... on the subject of workforce costs, include an EBA for ground people that seems to have added millions of cost when it was supposed to remove millions... considering it took years to conclude it raises the question what is going on??? How long did the Cabin Crew EBA take??? It seems to be at the point now that QF's labor costs are now approaching, if not, less per pax than DJ/VA's were/are.

[PoppaJo]

My bets on Singapore taking complete control with the next 24 months, appointing a new executive and running it to their protocol. SIA has been focusing recently on consolidating their businesses under the one group, plus SIAs apparent involvement around the while Virgin/Tiger thing indicates they already have more input than the other two. Scoot also interlines with Virgin, happend pretty much overnight.

Singapore Airlines
Virgin Australia
Scoot
Silkair
Tiger Airways

[RU4Real]

Ah bugger, just bring back Ansett

[TBM-Legend]

Air NZ's Virgin adventure comes at a $NZ130m cost (http://www.smh.com.au/business/cbd/air-nzs-virgin-adventure-comes-at-a-nz130m-cost-20160330-gntvif.html)


Yet another good investment!

[1a sound asleep]

Many forget that JB has saved VA. IT was a LCC that was floundering. It has taken lot of time, effort and cash to transform it into a full service airline.

Mistakes include some issues with fuel hedging and perhaps some poor fleet choices. Some of these issues he inherited.

SQ owned 49% of VS. Do you really think they have the required $1B to invest in VA? Both SQ and EY are busy with their own issues

Who is hiding in the bushes. DELTA. They already bought SQ's 49% of VS. VX is on the market (as of last week)

Watch out for the Delta controlled Virgin Airline Group. Cashed up and ready to pounce

[The Bullwinkle]

Many forget that JB has saved VA.
If this is saving VA, I'd hate to see what it would be like if he was trying to destroy it!

[Snakecharma]

Many forget that JB has saved VA. IT was a LCC that was floundering. It has taken lot of time, effort and cash to transform it into a full service airline.


Interestingly enough, that floundering airline made more money then with significantly less people and significantly less debt and investment from its owners.

None of the problems JB faces are inherited, all are of his own making

[The Bullwinkle]

None of the problems JB faces are inherited, all are of his own making
Exactly! And even when others tried to advise him against certain decisions, their concerns were brushed aside, so he really has nobody to blame but himself.

[1a sound asleep]

Funny how the press 2 months ago were singing JB's song


Virgin Australia is flying high as the nation's second biggest airline benefits from 12 year-low oil prices and higher domestic airfares.

Virgin swung to a net profit of $45.7 million for the six months to December 31, with a $33.8 million benefit in the fall in oil prices offsetting a $19.2 million impact from the Bali volcanic flight disruptions in November.

The result was a major turnaround from $53.1 million net loss suffered a year earlier.

Virgin expects to book a similar gain from further oil price falls in the second half of fiscal 2016, chief executive John Borghetti said.

Virgin also remains on track to exceed its target of $1.2 billion in cumulative cost savings by the end of the fiscal 2017.

Those savings will include the sale of five Embraer 190s and six of its Embraer 170s, which are currently sub-leased to Delta Air Lines. As a result, Virgin will boast a fleet of 154 aircraft.

Virgin's underlying interim profit before tax jumped sharply to $81.5 million from $10.2 million a year ago, driven by strong revenue from its domestic operations and ongoing improvements at Tigerair.



Virgin Australia profit flying high (http://www.skynews.com.au/business/business/company/2016/02/11/virgin-australia-is-back-in-the-black.html)

[Lapon]

Maybe JB is being a scape goat and the Air NZ sell down a product of thier own doing?
The direction Virgin has taken under JB strikes me as that of a house renovation (which was needed) but along the way the inevitable cost over-runs occur and its hand it hat to the bank again and again (NZ,EY,SQ).
The house will most likley get finished but one of the bankers with the smallest pockets (NZ) has to bail out as they are in the process of getting hit hard on thier once gold mine regional routes. To make matters worse for NZ, they are about to loose thier North American grip and competition seems to be coming into the south pacific routes.

Maybe its Air NZ running scared rather than JB having failed?
If so would the irony be thats its the QF group (with AA) doing the damage? Could the Irishman be a genius afterall? Do I need to reassess what im smoking? Who knows.

[B772]

1a sound asleep

I am not confident JB has saved Virgin Australia. He certainly has dug a bigger hole for them to climb out of.

You mentioned a figure of $1B. It appears to me that Virgin Australia is only worth about half its book value if all debts and liabilities are carried forward.
With total assets of $1,586,000,000 and liabilities of $2,300,800,000 the balance sheet is a mess.

With long term debt being 68% of the companies capital and a debt/equity ratio of 256.6% some serious surgery needs to be performed before a serious suitor would be interested.

Whilst it is true Delta purchased the SQ 49% holding in Virgin Atlantic after SQ lost a total of approx. $1B on their foray. Virgin Atlantic is now a shell of its former self having dropped services to Sydney, Tokyo, Vancouver, Mumbai and Cape Town. In addition its UK 'Little Red' domestic airline has closed down.

And yes you are correct; Virgin America is on the chopping block. After a huge airfare sale recently to raise some cash it appears the major partners in the airline (similar to Virgin Australia ) have offered the airline for sale after less than 18 months as a public company. So far Alaska Airlines and Jet Blue have made offers for the airline with an announcement expected as early as next week.

A number of years ago anything to do with Richard Branson was regarded as a 'sideshow'; nothing appears to have changed.

[AerialPerspective]

Many forget that JB has saved VA. IT was a LCC that was floundering. It has taken lot of time, effort and cash to transform it into a full service airline.

Mistakes include some issues with fuel hedging and perhaps some poor fleet choices. Some of these issues he inherited.

SQ owned 49% of VS. Do you really think they have the required $1B to invest in VA? Both SQ and EY are busy with their own issues

Who is hiding in the bushes. DELTA. They already bought SQ's 49% of VS. VX is on the market (as of last week)

Watch out for the Delta controlled Virgin Airline Group. Cashed up and ready to pounce
That is absolute rubbish. Speak to any staff member and they will tell you he has destroyed it. Some of the people he has brought in (with a few exceptions) are incompetent or do not inspire any confidence. The mark of success and progress at VA is the number of times 'going forward', 'reaching out', etc. can be worked into the conversation... 'let's talk about x y or z and 'what that looks like' or 'we need to discuss the xyz 'space'... maybe it's throughout business but some people I have spoken to say most meetings are dominated by this garbage and very little is achieved. Anyone with any talent is driven out. This appears to be replicated in some of the companies that have been taken over with good people leaving as a result. The depth of expertise present even in QF and NZ and other airlines is not present, hence solutions to airline 101 problems are complicated, onerous and laughable. From what I've heard from friends in New Zealand, there is also significant frustration from NZ regarding VA's belligerence in refusing to accept industry norms for the exchange of passengers in disruptions, apparently often NZ just gives its passengers to QF in disruptions rather than have them go back and forward between VA and NZ while they argue over standard paperwork. It's a complete and utter mess by all accounts, budgets do not get met or are unrealistic, technology that could help is purchased then abandoned short-shortsightedly at the first financial blip, managers don't get reports on their budget and P/L which is unheard of in other airlines. Godfrey was a respected person and leader, he navigated to profitability and many wish he would return. What JB has done, billy the blind man's dog knows was obvious, just not with the obscene cost.

[1a sound asleep]

1a sound asleep
A number of years ago anything to do with Richard Branson was regarded as a 'sideshow'; nothing appears to have changed.
I appreciate your perspective. Originally as VB VA was nothing more than a LCC. It has taken a lot to get it to where it is. Where to from here?

Is the Virgin brand worth paying the large royalty fees for the name. Maybe it needs a new name and ditch the Virgin brand?
Is part of the problem the fact that have failed to join *Alliance ?
Way too different planes and the fleet?
Lack of investment from the likes of NZ to really be able to grow to become a true QF competitor?


The way I see it with no alliances or services to most international destinations its better to be a QF customer for loyalty and network of destinations. I think it is under capitalised as well as mismanaged to a degree

[Agent86]

....The way I see it with no alliances or services to most international destinations...

Funny ... I guess code share with Etihad to most ports in Europe, Singapore airlines to most ports in Asia, and Delta to most ports in USA aren't the same as QF code shares with Emirates :zzz:

[Brakerider]

Does anybody else wonder how much they might save if they didn't buy all their pilot's RM Williams boots?

[mattyj]

The leather jackets, no ties, and red jets were rock n roll..white jets and black suit and tie are elevator music...yawn

[TBM-Legend]

Southwest Airlines have stood the test of time with an all-737 operation likewise Ryan Air and Easyjet [A320] etc...

Virgin should have blackened the skies with 737's and not worried about trying to match QF..

[neville_nobody]

Virgin should have blackened the skies with 737's and not worried about trying to match QF.

And then be crushed by Jetstar as QF threw unlimited cash into the Jetstar black hole? Which is basically what has been going on since 2000.

[TBM-Legend]

So either way not a good deal then??

The recreation of Ansett is what has occurred without tight cost controls and top airline guys running it...

Reminds me of Robert Amman saying after he won the then Coastwatch contract from Skywest that "I know I'll be successful because I know nothing about this industry!"

[hyg]

JB's refusal to look for a chinese partner isn't going to help VA ....

Yes China's economy may be on a fall, but yet it's still got heaps of dirty cash coming out of its people, while QF is enjoying those 'dirty money', VA is just falling behind....

[AerialPerspective]

Funny ... I guess code share with Etihad to most ports in Europe, Singapore airlines to most ports in Asia, and Delta to most ports in USA aren't the same as QF code shares with Emirates :zzz:
I think the point was that QF has membership of a major alliance (oneworld) and thus has codeshares everywhere whereas VA is relying on selected carriers and ownership partners. So what about EY, the flight is often late (not EY's fault apparently, it's to do with an ATC congestion out of AUH... but when the flight arrives late, apparently SABRE is dysfunctional in terms of transferring passengers or there are problems with who 'owns' the booking, etc.).
These problems DO NOT exist in other alliances. Jesus, QF had this sorted with BA, AA, etc. in the 90's, it's not rocket science, just requires the correct systems and processes and a realisation it's a whole industry not just the other airlines having to play by VA's rules. There are other issues as well, I've heard from some passengers that they check in then get to the gate and they're not on the flight so have to sit somewhere else, a seat they didn't want.
I really think what VA need is someone like NZ or DL to take full ownership who will shake the crap out of it and implement the right processes and systems and have the will to say get lost to those who don't agree.
There appears to be reading between the lines, a lot of 'pre-conceptions' amongst VA management and many of these are wrong and stops the airline clicking into place with partners... this is anecdotal of course, just based on talking to people in the industry. I gather part of it seems to be a) insufficient capability in systems to deal with disruption and b) the tools not at the coalface in comparison with, say, QF where most disruption management is automated and/or available to the coalface and requires 2-3 clicks and all passengers are re-accommodated on first available flights. I haven't used their systems so I don't know for sure but that certainly seems to be the centre of a lot of problems. Anyway, it would certainly be interesting to be on the inside and know what is true and what is rumour. It does say a lot for the media though, they have been fawning all over the CEO for years and totally ignored the realties because of jazzy TV commercials, etc.

[Boe787]

Hello,

Bullwinkle, Cant understand your logic, the A330s are utilised approx 16 hrs per day, 777s with the long layover LAX approx 10hrs per day.
777s fly with at least 3 cockpit crew or maybe 4? to LAX and AUH, 330s 2 cockpit crew.

Borghetti knew full well from his days at Qantas how much revenue Qantas derived from 330 operations to/from Perth.

[coaldemon]

I think your numbers need to be reversed. 4 crew on B777 Ops as well

[Going Boeing]

The Townsville refueller's assistant says that a Chinese carrier is to buy the Air NZ (not the bank ANZ) share package and will take a very active role in the direction that Virgin Australia goes in the future.

[Icarus2001]

http://crudeoilpeak.info/wp-content/uploads/2014/02/Virgin_Australia_net_profit_after_tax_2003_2013.jpg

Remember the heady days when the shares were issued at $2.00?

[bangbounceboeing]

Not if EY gets in first..........

[LeadSled]

Privatised ???
And when was Virgin nationalised?? I must have missed that one.
Tootle pip!!

[Icarus2001]

Government.

NGO.

QUANGO.

Public company.

Private company.

keep up LeadSled

http://www.companydirectors.com.au/director-resource-centre/organisation-type/organisation-definitions

[SHVC]

Word has it that the ATR will be gone, they are already making plans on pulling the operation out of QLD apparently starting with EML and GLT to wet lease to Alliance, there was a top secret Union meeting last week where this was discussed along with that a reduction of crew. Some turbulent times ahead for VA.

[AerialPerspective]

And when was Virgin nationalised?? I must have missed that one.
Tootle pip!!
It's a publicly listed company, 'privatised' means taking it private - i.e. buying up all the shares and making it an unlisted company.
Qantas was NOT privatised, although it was referred to as that, it was publicly floated - e.g. it went from being (legally) a company owned by the government, although structured and operated like a private company (i.e. it was not a division of the Australian National Airlines Commission like TN) to being a public company.
Air NZ originally could be more correctly referred to as being 'privatised' as it was sold in blocks to a consortium consisting of Brierly Investments Limited, Qantas Airways Limited, Japan Air Lines Ltd and American Airlines LLC with some shares publicly floated.

[Going Nowhere]

My guess is VARA WA to be replaced with Alliance as part of the recently inked 'Alliance'.

A320's to go.

The company that owns the A320's and ATR's currently has 1 A320 for sale and a heap of 2011/12-built ATR's for sale.

https://www.planespotters.net/airline/Virgin-Australia-Regional

avation PLC - Available Aircraft (http://www.avation.net/aircraft_available.html)

[BPA]

And the A320 they have for sale (S/N 1922) is one the A320's (VH-YUD) operated by VARA.

[Chadzat]

Going Nowhere - please explain just why you think that VA would gift a fair amount of revenue (VARA WA) to another company (Alliance) who they have no equity stake in or ability to gain from that gifting. If you actually think about it for more than 5 seconds before posting you'll realise that doesnt make sense.

The tripe you read on here is amazing sometimes.

[RENURPP]

Who said "gift"?

[BPA]

Anything is possible at the moment with Virgin Australia, but I can't see them disposing of the ATRs yet, given they have just been transferred from VARA to VA.
Perhaps they may relocate the Brisbane based ATR's to Sydney so they can finally expand the NSW regional market. If this occurred then I can see Alliance operating (under wet lease) the former QLD ATR routes using their F50s and F70s.

[Berealgetreal]

http://http://australianaviation.com.au/2016/02/virgin-alliance-announce-strategic-partnership-for-fifo-charter/

Chadzat anyone's guess really. I'd be very surprised if the atr (apart from the old ones) were to be scrapped. Pretty expensive putting them on the VAA aoc to then scrap the whole fleet. There is certainly a market for turbo props. I think the 146 operation being suddenly outsourced completely stands out a bit.

Alliance F100 crews are much cheaper and the mining boom is over.

[VH-FTS]

http://http://australianaviation.com.au/2016/02/virgin-alliance-announce-strategic-partnership-for-fifo-charter/

Chadzat anyone's guess really. I'd be very surprised if the atr (apart from the old ones) were to be scrapped. Pretty expensive putting them on the VAA aoc to then scrap the whole fleet. There is certainly a market for turbo props. I think the 146 operation being suddenly outsourced completely stands out a bit.

Alliance F100 crews are much cheaper and the mining boom is over.

Ok, I'll bite. How are Alliance crews cheaper than in house ATR crews? Sounds like typical manangent spin blaming pilot's wages and conditions. Any workforce savings would be because Alliance is lean across all personnel levels, and doesn't have the layers of management and 'specialists' that VARA/VAA have created.

Regarding the 146, rumour has it CASA wouldn't approve another type on the VARA AOC.

[CurtainTwitcher]

Virgin shareholder spat sparks aviation shake-up



Several weeks ago Air New Zealand's chief executive, Christopher Luxon, stood up in a private meeting and called for Virgin boss John Borghetti to resign. He has no such plans.



Apr 1 2016 at 6:00 PM
Updated Apr 2 2016 at 1:12 PM by Michael Smith (http://www.afr.com/business/transport/aviation/michael-smith-j7geb.html)


It is not unusual for big personalities to clash in the high-octane world of aviation, but things have been particularly tense among Virgin Australia's shareholders lately.

Things came to a head several weeks ago when Air New Zealand's headstrong chief executive, Christopher Luxon, stood up in a private meeting and called for Virgin boss John Borghetti to resign.

Virgin chairman Elizabeth Bryan, who is said to run a tight ship, was having none of it and is believed to have stared down Luxon, who this week quit the board and has put his airline's 26 per cent stake in Virgin up for sale.

But the motivation for Air NZ ending its five-year relationship with Australia's second-largest airline runs far deeper than a personality clash between two airline chiefs.

Air NZ has been disappointed with Virgin's financial performance for some time, and was becoming increasingly concerned it would be asked to stump up more cash when Borghetti completes a capital review in two to three months.

At the end of the day, Air NZ needs the capital locked up in Virgin to battle intense competition on home soil – which was the key reason behind its decision.

Unable to get the other shareholders on side, Luxon decided to step down. That meant Air NZ had little choice but to go public on plans to put a significant chunk of Virgin Australia's tightly held share register into play. Former Air NZ chief Rob Fyfe oversaw the initial investment in 2011.

Air NZ folk grumpy
"It is no secret the Air New Zealand folk were grumpy. If you push for management change and can't bring others with you, you either exit or shut your mouth," says one observer.

Air NZ chairman Tony Carter flew to Sydney on Wednesday to meet Bryan at Sydney's Intercontinental Hotel. Because the hotel was so close to Virgin's head office near Circular Quay, Borghetti also joined the discussion. They agreed at that meeting that the existing code-share arrangements with Air NZ would remain in place.

It was a busy day for Borghetti, who was preparing to travel with journalists to Los Angeles over the weekend to showcase the airline's new business-class product, a trip he has since cancelled. He was already scheduled to lunch with another key stakeholder, Etihad's Australian-born chief executive James Hogan, who was in town for a series of events.

"There have been a lot of tough weeks. Whenever you are trying to create something worth fighting for you will have detractors trying to pull you down. This week is just one more week," Borghetti told AFR Weekend in his only interview since Air NZ announced it was reviewing its stake.

The move paves the way for a new player to enter the market, or for Virgin to be taken over entirely, in what would be the biggest shake-up to Australia's aviation market since the collapse of Ansett in 2001.

But it has also thrown the spotlight on Borghetti's near six-year tenure at Virgin, the former budget carrier known as Virgin Blue which he has taken upmarket and turned into the first serious competitor to Qantas since Ansett.

Air New Zealand, and many in the investment community, and Borghetti's enemies at his former employer Qantas, believe cracks are appearing in his capital-intensive strategy. Like Qantas boss Alan Joyce two years ago, it is now Borghetti's turn to wake up to headlines suggesting he step down.

Support of other stakeholders
However, the son of Italian immigrants who started his career in the Qantas mailroom says he is not going anywhere. Importantly, he appears to still have the support of his three other key stakeholders – Etihad, which owns 25.1 per cent, Singapore Airlines with 22.2 per cent and Richard Branson's Virgin Group, with 10 per cent.

"I don't intend to go anywhere; I've still got things I need to get done," Borghetti, 60, says.

He can't deny it has been a tough week though. A day after The Australian Financial Review's Street Talk column reported there was dissent in the Virgin ranks, Air New Zealand announced it had appointed Credit Suisse to review its stake in the airline, and ratings agency Standard & Poor's revised its outlook on the airline to "negative" from "stable".

"The media has been under the impression that Borghetti is good but we just sit here and say … he has no idea. It is probably better for Qantas he has stayed there because he has just muddled around," said one analyst, who did not want to be named.

Virgin last week obtained a $425 million unsecured loan from its four big shareholders, including Air NZ, as part of a broader review of its capital structure that is expected to be completed in two to three months.
While Virgin returned to profitability in the first half, analysts say the concern is that the money now being raised is being used to repair the balance sheet rather than fund growth.

Standard & Poor's says Virgin faces a "potentially sizeable funding requirement" over the next 12 months, including refinancing the $425 million loan.

Criticism of Borghetti, who is believed to have offered to retire a year ago but was asked to stay on by Bryan, has only surfaced recently, as Qantas's spectacular turnaround put the spotlight on Virgin's weaker financial position.

Supporters take long view
But he still has plenty of supporters who say his tenure needs to be judged with a long-term view.

"Virgin would have been out of business if they had stuck with being a low-cost carrier. He secured the survival of the airline and getting a cornerstone investor like Singapore Airlines is much better for aviation in Australia," according to one former airline executive.

Another industry veteran says: "Don't forget there was a point when Alan [Joyce] went to Canberra cap in hand. I think that emboldened Virgin to say 'We have got them on the ropes. If we keep pushing they will cave in.'"
The bitter capacity war with Qantas two years ago, which saw Qantas responding aggressively to defend its 65 per cent domestic market share, hurt both airlines. Joyce went to Canberra in 2014 seeking financial assistance, incensed that Virgin had been able to tap its cashed-up airline shareholders for funds which Qantas's ownership structure prevented it from doing.

In the end, Virgin suffered the most from the capacity war and its ability to recover was more limited than Qantas's, setting back Borghetti's turnaround plan by about a year.

Borghetti joined Virgin almost six years ago with an ambitious plan to transform the airline into a serious second-player in all segments of the aviation market – premium, low-cost, regional, frequent flyer and cargo.
He set about changing everything from the aircraft livery, staff, uniforms and lounges, introduced business class and made two major acquisitions – regional carrier Skywest and budget airline Tiger Australia. He wants 30 per cent of the corporate and government travel market by next year and is growing cargo operations.

Remarkable turnaround job
"It is a far better place to work at than it was years ago. He has done a remarkable job turning Virgin around – there are no two ways around it," says John Lyons, the president of the Association for Virgin Australian Australia Group Pilots, which represents about 50 per cent of the carrier's pilots.

This has come at a cost, though. The company's cash balance at December 31 was $544 million, down from $839 million a year earlier. The airline also took out a $US125 million loan in the first half and is working on a capital review which may hit shareholders up for hundreds of millions of dollars more. This proved too much for Air New Zealand. Virgin makes up about 30 per cent of its balance sheet compared to 3 per cent for Singapore Airlines, which has far deeper pockets.

Still, Borghetti says he has largely achieved everything he set out to do and cannot understand the criticism at a time when the airline has returned to profitability.

"When we were losing $300 million no one said so much as Boo. And now we have posted the biggest profit in the front half since 2010 and everyone is coming out of the woodwork. You kind of scratch your head a bit," says Borghetti. In February, Virgin posted a first-half profit of $81.5 million.
"Ever since Day One there have been people that have not believed we could achieve things. Analysts in particular because of their short-term thinking are focused on the next reporting period and we always said from the first day I walked in this is a long-term game."

Kiwi carrier major distraction
As Borghetti turns his attention to streamlining the airline's fleet to lower costs and the next round of balance sheet repair, he faces a major distraction in the form of the Air NZ stake.

The Kiwi carrier could sell its shares on-market, to one or more of the existing shareholders, or to a third party such as a Chinese airline or US airline Delta.

Virgin Group, which is in the process of selling Virgin America, would also have the cash, but Branson is more likely to sell down than buy.
The most likely scenario, though, looks like either Singapore or Etihad, or both, acquiring the shares. While Singapore and Etihad are competitors operationally, their sovereign wealth fund owners are said to have a close relationship.

Several sources who know Hogan say he still supports Borghetti and has no plans to launch a takeover for Virgin, particularly when Etihad faces its own challenges in its key markets in Europe and the Middle East.
Borghetti is also close to Singapore Airlines, which wasn't saying much this week, except that it has a "strong relationship" with Virgin Australia.

"Neither of them want another airline on the register. It was combative and unhelpful and un-productive. If I was Singapore or Etihad I think they are more likely to work it out between them," a senior aviation executive says. Source AFR (http://www.afr.com/business/transport/aviation/virgin-shareholder-spat-sparks-aviation-shakeup-20160331-gnvds9)

[The Bullwinkle]

It is a far better place to work at than it was years ago.

Really? :rolleyes::rolleyes::rolleyes:

[Snakecharma]

Interesting statement from VIPA, wrong but interesting nonetheless

[TBM-Legend]

The "male-room" is getting a bit crowded!

[RampDog]

Absolutely (there's a catchword ;)) no truth in the rumour that LinFox would take a stake in VA!
Seriously, it's common knowledge Singapore (airline and State) has always coveted an Australian domestic operation, it just makes total sense that they would take the opportunity now that it is presenting itself.
Never say never to any Oz Government, someday in the future allowing 100% foreign ownership of any Australian asset. They'll spin it by saying its good for the economy and the consumer, the usual BS.
The general population has no idea what level of investment Singapore (the "State") has made in Australia already. I can name Optus and REX as just a few of companies, but tried Googling Temasek Holdings for more info.

[Snakecharma]

There is nothing stopping Singapore from taking 100% ownership of virgin if they wanted to (apart from the current shareholders).

[LeadSled]

Aerial Perspective/Icarus 2001
Gee, thanks for that!!
I have only been a director of a number of public (Ltd.) companies, and private companies (Pty Ltd) with the AICD (and common sense) recommended knowledge(I hope) of the Corporations Act 2001 and predecessors, so what would I know??

There has been no suggestion that the status of Virgin will change, in particular that one shareholder will buy out all/other existing shareholders, and "take it private", (ceasing to be a public company) which has a completely different accepted meaning to "privatise/privatisation".

<https://stats.oecd.org/glossary/detail.asp?ID=3287>

Privatisation refers to transfer of ownership and control of government or state assets, firms and operations to private investors.

There are plenty of other dictionary definitions that say the same thing.
Tootle pip!!

PS: From about 1949, when Qantas was delisted, it had the status of an unlisted public company, because it did not have the spread of shares required for listing, it did not become a Pty Ltd company,which made the subsequent sale of shares in the company by the Federal Government straight forward. .
By contrast, the National Airlines Commission, t/a Trans Australian Airlines, later Australian Airlines, was "privatised", when it was sold to Qantas Airways Ltd. There was a little more to the transaction than that, but you get the drift.

[cavemanzk]

Seems to be some word that NZ is looking at operating the golden triangle its self

[Anotherday]

The Australian view: An amazingly well run Aussie company that Air NZ have no choice but to exit from due to needing capital to fight tough competition in its home market.

The rest of planet earth including analysts and Air NZ view: another Aussie dog of a company that, in spit of restructuring is still basically a pennies in the dollar LCC. Changing the collar doesn't mean you have a new dog. Blowing through $150 mill in cash reserves to make $60mill profit doesn't make sense in any other first world country.

Air NZ sell, take a $200mill write down and move on. 10 yrs from now they'll be glad it was only $200mill.

We're about to find out what VB is really worth, I'm guessing not much.

[B772]

Based on latest financials the NTA of a VAH share appears to be around 12c.

[porch monkey]

You guys should all be financial advisers. Your talent is wasted here.

[BPA]

Further to SVHC comments above, A mate from Alliance told me today that they are taking over the EML flying and most likely GLT as well. So it looks like the Brisbane ATR base is about to get smaller.

[Icarus2001]

Leadsled...

Privatization Definition | Investopedia (http://www.investopedia.com/terms/p/privatization.asp)

https://en.wikipedia.org/wiki/Privatization

Why Public Companies Go Private | Investopedia (http://www.investopedia.com/articles/stocks/08/public-companies-privatize-go-private.asp)

Why Public Companies Go Private | Investopedia (http://www.investopedia.com/articles/stocks/08/public-companies-privatize-go-private.asp)

Yawn.

[AerialPerspective]

Thanks Icarus, exactly what I was trying to say and Leadsled can try and wriggle his way out of it by leaving one of the definitions out, not to mention turning a discussion into some sort of competition

[billyt]

Leadsled is not wrong though.

When I first saw the thread title I was somewhat amused.

It is terminology usage.

[billykid]

BPA - Is this likely to be for all EML flights?

I fly this route regularly so wonder if i should be expecting to see an Alliance plane sitting at the gate soon!

[AerialPerspective]

The Australian view: An amazingly well run Aussie company that Air NZ have no choice but to exit from due to needing capital to fight tough competition in its home market.

The rest of planet earth including analysts and Air NZ view: another Aussie dog of a company that, in spit of restructuring is still basically a pennies in the dollar LCC. Changing the collar doesn't mean you have a new dog. Blowing through $150 mill in cash reserves to make $60mill profit doesn't make sense in any other first world country.

Air NZ sell, take a $200mill write down and move on. 10 yrs from now they'll be glad it was only $200mill.

We're about to find out what VB is really worth, I'm guessing not much.
It's worth billions if you listen to the hype within the bubble but outside it's a case of cold reality. It has been one of the most hyped up companies I've seen for a long time, every article for the last 3 years has lauded over what a genius the mail room boy is and fueled the rather ordinary book 'game change' which was not worth the money and all along some of us have been asking 'but what about the return on shareholder's funds' 'when are they ever going to make a profit' and 'how long can the mail room occupant retain the job while spending without earning' and now the chickens are coming home to roost... it was all hype after all and now the real accounting starts...

[Conniver]

CurtinTwitcher, thanks for the post, reminded me of a previous article with the same union making comment, yet from a different angle.

What an amazing turnaround in engagement in such a short period of time.

On March 21, the AFR quoted:

In the latest newsletter from The Association for Virgin Group Pilots (VIPA), union president John Lyons said the level of disengagement was "astonishing" and short- and long-term illness was at an all-time high. He blamed a lack of co-operation and communication between departments.

Virgin Australia aims for $500 million balance-sheet fix | afr.com (http://www.afr.com/business/virgin-australia-aims-for-500-million-balancesheet-fix-20160317-gnlo8q)


Fast forward to April 1, the AFR quoted:

"It is a far better place to work at than it was years ago. He has done a remarkable job turning Virgin around – there are no two ways around it," says John Lyons, the president of the Association for Virgin Australian Australia Group Pilots, which represents about 50 per cent of the carrier's pilots.

[WipperSnapper]

Singapore just did a little deal to up their ownership, interesting times.

Singapore Airlines boosts stake in Virgin Australia (http://www.smh.com.au/business/aviation/singapore-airlines-boosts-stake-in-virgin-australia-20160406-go0bab.html)

[flamingmoe]

Any truth that VA are in a negative cashflow situation, and various creditors are unpaid? All unfounded rumours, but certainly not a sustainable position if this is even close to accurate.

[MELKBQF]

Singapore Airlines boosts stake in Virgin Australia (http://www.smh.com.au/business/aviation/singapore-airlines-boosts-stake-in-virgin-australia-20160406-go0bab.html)

[Dewa_Gede_70]

Yes that is correct flamingmoe

[Berealgetreal]

Conniver, have you got a link to the 1 April quote? I find it hard to believe as it completely contradicts everything I've read from VIPA to date.

Lot of first time posters on here. Few of the lads coming out the woodwork!

[Keith Myath]

Berealgetreal

You could go back to Curtain twitcher's post number 50,

Virgin shareholder spat sparks aviation shake-up | afr.com (http://www.afr.com/business/transport/aviation/virgin-shareholder-spat-sparks-aviation-shakeup-20160331-gnvds9)

Your shocked that VIPA is contradicting itself??

[Berealgetreal]

Cheers Keith, I missed it.

An incredible turn around indeed! Confusing to say the least.

[rexxxxxy]

Air New Zealand sale could mean big payday for Virgin Australia's John Borghetti (http://www.smh.com.au/business/aviation/air-new-zealand-sale-could-mean-big-payday-for-virgin-australias-john-borghetti-20160415-go7aqu.html)

Air New Zealand's failed attempt to oust Virgin Australia chief executive John Borghetti could have the ironic result of the airline boss receiving a payout of around $8 million if Singapore Airlines makes a successful takeover bid

Air NZ CEO quit the board because he didn't have the numbers to sack JB.

[Falling Leaf]

Since Mr Borghetti's appointment in May 2010, Virgin shares have fallen by 27.6 per cent while shares in rival Qantas have risen by 60.5 per cent.

And that, ladies & gentleman, is why these people get paid the millions they do...:ugh:

[porch monkey]

What, so they can employ the most creative accountants they can, and manage to manipulate the stock price, on which their bonuses are based? Neither of them are worth the money they are paid. Not even close.

[B772]

With the share price back to 31c and a published NTA of 15c the outlook is not 'rosy'.

[PoppaJo]

China Southern and Hainan are quoted to be interested.

Singapore really needs to take control of this mob. Money doesn't appear to be an issue.

[B772]

With the Virgin Aust (VAH) share price now at a historic low and a corresponding low market capitalisation it would be interesting to know if VAH are in breach of any lease or loan covenants.

[B772]

The Virgin (VAH) share price was up 12.82% today to 22c after confirmation by the chairwoman the airline has explored privatisation.

My lips are sealed !

[Icarus2001]

Perhaps they should "explore" actually making a profit.

[TBM-Legend]

Going private hides the numbers> Again the CEO and another heads get a bonus and the investors get another trip to the barber shop....

[Buster Hyman]

Always thought Virgin should've kept their original "theme" & rather than changing/upgrading the brand, brought in a new premium carrier to compete with QF. I would imagine that when non airline people are asked to classify the type of carrier it is, they'd still put it in the Jetstar, Tiger bucket.

[TBM-Legend]

Southwest and Easyjet have made a huge success of sticking to the LCC model..

[CurtainTwitcher]

Southwest and Easyjet have made a huge success of sticking to the LCC model..
True, however the circumstances were a bit different. The 100lbs gorilla in the local market with deep pockets started a competitor to wedge them in the low cost space.

Not sure of the history of Easy, however SW grew very slowly and evolved into it's market niche (see NUTS! (https://www.amazon.com/Nuts-Southwest-Airlines-Business-Personal/dp/0767901843)). Every new city pair it started had to be profitable from the first flight. If they couldn't make it work, they waited and figured out a way to make it profitable or never entered the market.

This isn't the history of Virgin, or Jetstar for that matter.

edit: One the the NUTS! book reviews (https://www.amazon.com/gp/customer-reviews/RKTRDMDPVX5IJ/ref=cm_cr_arp_d_rvw_ttl?ie=UTF8&ASIN=0767901843) mentions another interesting book on the formation of SW: Southwest Passage: The Inside Story of Southwest Airlines' Formative Years (https://www.amazon.com/Southwest-Passage-Inside-Airlines-Formative/dp/1571687394)

[TBM-Legend]

Southwest was at first a carrier only in Texas operating the triangle of San Antonio, Houston, Dallas with three B737-200's. As traffic grew they added a B727 [more seats] but quite quickly ditched it and looked for efficiencies with the B737 and are the largest operator of the type in the World. In other words as is said, they stuck to their knitting...unlike some other we know..

[bangbounceboeing]

You really hate anything and everything about Virgin don't you TBM

[OzzyOzBorn]

Well, having recently flown with both Ryanair in Europe and VOZ in Australia, I have a suggestion to improve the passenger experience and profitability simultaneously. RYR famously cram 189 seats on a B738 with the majority being 30 inch pitch. But those seats are actually brilliant from a passenger perspective. They are ultra-slimline giving the user a sense of extra legroom. And they don't recline ... no chance of crunched knees and a mop of big hair in your face. On my recent VOZ sector BNE-PER config 168 seats at 31 inches plus 8 premium at 38 ins the seat experience was horrific. Technically one inch more than RYR, but the reality is unnecessarily fat cushions, crippled knees, and a recline into your space far exceeding tolerable limits on a 31in pitch. Five hours of that is torture. Maybe I should sue!

But seriously, only closeted airline executives are deluded enough to believe that reclining seats are a good idea. Maybe it's because they always fly premium themselves? Most passengers detest reclining seats with a passion. The torture inflicted on the recline victim far exceeds the incremental 'comfort' enjoyed by the selfish reclinee.

So here is my tip for VOZ. Acknowledge that the much-maligned RYR are the ones who have got it right on this. Copy their seat choice. Ditch recline torture. Make the majority of your pax happier. There will even be space to install an extra seat-row and sell six extra fares per sector. A self-financing improvement. What's not to love?

BTW, kudos to VOZ crews on both my recent sectors. Great service, credit to the company. Only the worst-of-breed seats let VOZ down.

[porch monkey]

What makes you think you represent "most" passengers? Jetstar tried the no recline thing on some of their A/C years ago. Anyhoo, let's do away with the whole **** seat debacle, and have you stand. MOL would love that, too.

[Icarus2001]

Most passengers detest reclining seats with a passion.

So you have determined this how exactly?

I detest non reclining seats.

[TBM-Legend]

I detest the person in front reclining as soon as they can. Impossible to move when locked in..

[OzzyOzBorn]

I have made no claim to 'represent' other pax and I acknowledge that the subject of reclining seats is contentious. Nevertheless, I stand by my point that reclining seats on aircraft are more loathed than loved. Even on the recent BNE-PER sector which prompted this discussion, it was remarkable how few pax availed themselves of the option to recline. I have noted similar behaviour on many similar longer sectors too ... I notice stuff like that 😄. Perhaps part of that is down to courtesy and consideration towards others; perhaps many have personal experience of being a recline victim themselves? Whatever the reason, the majority opt not to recline. Check it out when you next fly.

Ask afew other pax their views on this subject too. I have. The vehemence of the responses may surprise you!

No airline should offer a recline option in a high-density economy cabin.

[TBM-Legend]

You really hate anything and everything about Virgin don't you TBM

Not really, I fly on them if I have too. Their LAX service is very good. I look at it as a business model that's all that is being propped up by the shareholders constantly and the use of double-speak when it comes to numbers. I know quite a few shareholders who now wish they'd bought QF shares in lieu of VA...

This is not hate...

[Buster Hyman]

I detest the person in front reclining as soon as they can. Impossible to move when locked in..
I usually lock my knees in behind a seat early on so they can't recline. Drove a French guy mad LHR-LAX once! If I miss the opportunity & I'm looking at their scalp, I usually get up often & use their seat as leverage. It's quite a challenge to see how high you can get their head to bounce.

[*Lancer*]

Seriously Buster?

Always reassuring how professional and mature Australian pilots can be :ugh:

I've always viewed my personal space as being whatever is left behind a reclined seat. You'll find getting through a flight (or life, no doubt) is much easier when you stop sweating the small stuff!

[porch monkey]

You ever noticed how many get reclined on a red eye or evening flight Ozzie?

[Buster Hyman]

Thanks Mother Theresa, but your faith in Aussie pilots can be restored somewhat.

[maggot]

On that note, had someone arrested recently stemming from their defence of "their" knee space
But you do you, buster

[das Uber Soldat]

I usually lock my knees in behind a seat early on so they can't recline. Drove a French guy mad LHR-LAX once! If I miss the opportunity & I'm looking at their scalp, I usually get up often & use their seat as leverage. It's quite a challenge to see how high you can get their head to bounce.
What a twit.

[grrowler]

What a great discussion...

[slice]

Do you piss on the toilet seat as well Buster?:rolleyes:

[Buster Hyman]

Ha! Being scolded by people who probably don't know where Economy is. Classic.

[Fliegenmong]

....back to trolling I see....Ill take my hat off to you....you are a consummate .stirrer....

respond at your peril people....BH knows no scruples...:hmm:

[Buster Hyman]

Oh look who the cat dragged in! I'm honoured that a true believer posted in the thread just to have a go at me. True to form...:zzz: