Virgin Australia faces financial crush.

[The Bullwinkle]

https://australinea.com/virgin-australia-faces-financing-crush/

[B772]

Earlier in the year I suggested Virgin Australia were on the road to privatisation. Nothing has changed.

The financials are still a mess even after the recent $1,000,000,000 (1 Billion) raising.
Total current assets are $1,713,700 with total current liabilities of $2,779,800. The shares are trading at around their book value but the NTA per share is 8c.

Virgin Australia are caught between a rock and a hard place.

[TBM-Legend]

A friend's wife works in VA accounts. Regales us with stories of having to become a Las Vegas quality juggler! No cash even after the constant injections. Some major creditors are tightening up too...

[dragon man]

A friend's wife works in VA accounts. Regales us with stories of having to become a Las Vegas quality juggler! No cash even after the constant injections. Some major creditors are tightening up too...
I just hope that they survive. Firstly the staff and secondly that last thing Australia needs is a virtual monopoly to an ever increasingly arrogant Qantas. Privatisation won't fix the underlying problems IMO.

[kev2002]

So despite what many on this forum suggested, perhaps Luxon was right to pull the plug. Time for new governance and executive team me thinks

[Vorsicht]

So despite what many on this forum suggested, perhaps Luxon was right to pull the plug. Time for new governance and executive team me thinks

There should be no question now that Luxon was right, the question is, why has the board continued to support Borghetti?You would expectt that Elizabeth Bryan would be second person out the door, right behind Borghetti if this analysis is even close to being correct.

It shouldn't be lost on employes either that Borghetti's fixed pay went up 400k for the 15-16 financial year.

330's anf ATR's were intended to be the saviour of the airline, instead they may well be the death of it. One can only assume the Chinese had access to all the financials before they bought in and therefore are committed to the long term. Without them, Virgin will indeed be in dire straights in the very near future.

[B772]

Virgin Australia has just released their trading update for July, August and September. The statutory loss after tax for the 3 months was $34,600,000.

It appears the interest by Singapore Airlines in taking over Virgin Australia has waned since the Chinese have come onboard possibly after being approached by John Borghetti.

[romeocharlie]

Chairman of Caltex can't seem to get fuel hedging right either, what a joke.

[B772]

romeocharlie.

I am no fan of Elizabeth Bryan but to be fair I have to point out that she resigned as Chairman of Caltex in late 2015.

She is still getting big bucks from Westpac (10 years) and is Chairman of IAG. This is in addition to a $400,000 package from Virgin Australia. Not bad for a 70 year old still putting icing on the cake.

[romeocharlie]

One would assume despite her resignation from the position, she was still responsible for the 18 month/long term hedges still in place though yes?

I did mean to initially write ex-chairman too, my apologies.

[zim2uk]

So the company that published that article has been found to be a fake. False facts mixed in with an element of truth to give it credence.Care to reveal how you found the article Bullwinkle?

The hint should've been that not a single reputable analyst has cited that article

Pretty disgusting to put a few hundred employees through a sleepless night, so who has the most to gain from this kind of scare mongering?

[Icarus2001]

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

The story may have been fake but this chart is not.

[zim2uk]

No one disagrees Virgin has a lot of work to do. However what kind of individuals go to this much effort to spread misinformation? That article was well written with just enough truth to make the falsehoods believable. And to what end?

On the basis of your statement Icarus if an organisation mixes truth and lies it's ok? As long as there's a little bit of truth? What that article alluded to regarding cash flow turned out to be false. It was almost impossible to find that article without that link. Back to my original question, how did you come across it Bullwinkle?

[The Bullwinkle]

It was passed on to me from a colleague.
I'm not sure where he got it from, but there's plenty of other Aviation related articles on their website, not just that one article.
Not too hard to find at all really.
Don't try to shoot the messenger!

https://australinea.com/category/austraday/

[zim2uk]

Actually really hard to find. I was told about it and tried googling it in several different combinations, nothing came up. It was only once I got the link that I accessed it.

[Icarus2001]

Get back in your box...

How does this...
The story may have been fake but this chart is not.

explain this response?

On the basis of your statement Icarus if an organisation mixes truth and lies it's ok?

[zim2uk]

And I dispute that 10 articles is plenty.....

[B772]

zim2uk

What evidence do you have that the company that published the article has been found to be a fake. Have you called their number or visited them at Level 10/20 Martin Place Sydney. I notice their email server is in San Francisco but that is not unusual

BTW here is today's report.

https://australinea.com/austraday-report-2-november-2016/

I agree with Icarus2001 and removing access to Air New Zealand lounges and charging for spirits at the replacement lounges shows how desperate things are becoming.

Virgin Australia (VAH) are walking a financial tightrope.
Operating margin is 9.9% (QF is 19.8%)
Return on capital is 11% (QF is 19%)
Return on equity is 22.8% (QF is 39.3%)
Last financial year VAH lost an average of $5,000,000 per week. QF made an average profit of $19,800,000 per week.
VAH being the underdog has enjoyed the support of the financial community who want them to succeed. VAH were built on a poor financial foundation.

[zim2uk]

Get back in your box...

How does this...


explain this response?


Get back in your box mate.

This thread is about an article that has been proven to be based on a falsehood. Rather than criticise the authors or article you instead regurgitate a graph from another thread that has already been robustly discussed. As if that graph somehow justifies the article

[B772]

Icarus2001

To update your chart you need to add the following.

2014 Red -355.6

2015 Red -110.8

2016 Red -260.9

John Borghetti has thrown his last dice.

John Thomas will have to pick up the pieces with the support of a new dynamic Chairman.

[mattyj]

Let me make a couple of suggestions;
-paint all your aircraft cheerful red
-aim at the leisure market and low cost traveling public
-dress your staff in casual uniforms to create a point of difference (suggestions would be leather jackets, no ties, light brown trousers and boots)
-get your staff to make jokes with the passengers to make the airline feel upbeat and fun

[RodH]

Things don't look too bright for VA although having said that it won't disappear because I reckon there are several Asian Carriers who will gladly come and take them over or join them.
I guess it's a bit like Rugby- The Aussies will never beat the All Blacks
and in the Airline Game - VA will never beat or be able to compete with QF.
So in both cases they may as well enjoy playing the game albeit as the loser every time.
The Kiwis have had years of practice at chasing sheep so can run faster and QF have had years of being protected by the Govt. so how can anyone beat them !!!
Its just not possible unfortunately!!!!!!:{:{:{:{:{:{:{:{:{:{

[MACH082]

It all comes down to Qantas is 'our' airline etched into collective history. It's as Australian as football, meat pies and a Holden Kingswood.

Virgin isn't.

[LostProperty]

As an aviation outsider and without considering any underlying management issues I've wondered at times whether VA even has the right name to take it up to Qantas. I realise that the Virgin group put money in to get it going and I think they still have a minor shareholding but it obviously costs dough to use the Virgin moniker. Branson is far from everyone's cup of tea and perhaps the money might be better spent contributing to the cost of a re-brand. The ideal time probably would have been when they repainted the aircraft and went international but of course that horse has long bolted.

[Keg]

A new name? Ansett?

[B772]

Recent research polling shows there is still some stigma attached to flying with VA by business people especially Monday to Friday. This has a huge impact on the yield and the financial returns.

This has been put down to the early antics of Virgin Blue with face painting, singing etc etc. Pilots that dressed like Scout Masters. Then we had the Blue Room. I think it is now called the Lounge. The list goes on and on. Not everyone is a fan of Richard Branson and his antics. Qantas still appear to be resting on the laurels of years gone by.

A similar situation in the USA. Virgin America is/was regarded as a great airline to fly with. Great service on the ground and in the air but they do not attract the non Disneyland crowd. I have just checked the Expedia cost for SFO to JFK on 24 Nov and a return on 1 Dec.

Virgin America are AUD369

American are AUD618

United are UAD464

Whilst Virgin America have lower costs than the legacy carriers they need a better financial performance, especially if the takeover by Alaska Airlines does not proceed.

[Captain Dart]

Naming an airline after a person who hasn't had sex always was a bizarre concept.

[Stanwell]

Cap'n,
Vergin' on the ridiculous?

[Ken Borough]

JB has created what I think is a poor imitation of Qantas with little product differentiation. Not only that, the market in thus country is too small for two full-service carriers that are both profitable. The cost of repositioning Virgin must have been crippling. Add that to the myriad of introduced types and trouble is invited. Simplicity will return profits, but it's too late.

[Lookleft]

Keg, I think it is Ansett in all but name only.:ok:

[MACH082]

The reason for QFs success with multiple airlines is they are all independent companies managing their own affairs. Whilst you could argue the duplicated management structures cost, it's no different to a country. Imagine if there was no state governments? The votes would be in the population centres, the rest would wither and die.

I personally think the current strategy is flawed and whilst a group seniority list is a great thing for incumbents, it royally sucks for the new hires with plenty of experience looking at the right seat if an ATR for a spell when they're probably already captains elsewhere.

[Keg]

Keg, I think it is Ansett in all but name only.:ok:
True mate. Let's just hope the don't suffer the same fate!

[JamieMaree]

It is no co-incidence that JB didn't get the CEO gig at QF. He's taken all his theories that were a problem at QF and introduced them at Virgin. Look at the cumulative results.

[viewsonic]

http://www.afr.com/brand/rear-window/virgin-boss-john-borghettis-resultsday-hoax-headache-20161102-gsgjrl

[PLovett]

What most of you are ignoring was that when VA was started it was a low cost airline. Now even before Brett Godfrey left they were in the process of changing into a full service airline and John Borghetti has continued the transformation. That does not come cheap.

If you care to look at the more reputable of financial reports, you will see that much of the quarters loss was due to costs of the restructure. You may care to note that even QF has taken a hit in the last quarter with a reduction in revenue.

VA may well be walking a financial tightrope but it is one that it had to take as there was no future where they were. The battle for them is to complete the change before the inevitable downswing in the economy.

[Berealgetreal]

One thing is to get on a forum like pprune and have a bleat. To spend, what must have been a considerable amount of time, formulating a report with a combination of truths and falsehoods, is not only malicious to the company but to the hard working men and women that built the place. As if the staff and their families needed the extra stress, distraction and sleepless nights they aren't already having with the changes afoot!

I have to wonder sometimes, if some enjoy seeing colleagues under this type of stress or even worse out of a job. I can't say I've ever wanted to see an opponent hurt or out of a job, maybe it's just me. If anything, I say "good on them, we should lift our game.".

I'm hopeful that things are turning the corner. Amongst a sea of negative here are some positive points:

The latest fuel hedging should pay off some debt, let's hope the price of fuel stays low.

Fleet rationalisation (as painful as it is for many) is under way.

Increased utilisation of the 330 is on the horizon.

Repositioning of widebodies on profitable routes with the help of the owners.

HNA and Nanashan buying in.

I think and hope things are improving time will tell.

[CurtainTwitcher]

Naming an airline after a person who hasn't had sex always was a bizarre concept.
Even more so considering the image of aircrew in the mind of the public...

All jokes aside, a GP at my practice also lectures General practice. One of the GP final exams has a scenario of a flight attendant returning from overseas with a laundry list of symptoms. Over 30% of candidates go straight for an STD, when the correct answer is actually malaria. But I digress...

[framer]

So nearly 70% don't consider the laundry list of symptoms could be caused by an STD? I hope your mate puts them straight .

[CurtainTwitcher]

Well played framer...

[TBM-Legend]

1st qtr results....more red ink it seems
http://www.google.com.au/url?url=http://australianaviation.com.au/2016/11/virgin-australia-posts-first-quarter-loss-as-subdued-domestic-market-hits-revenue/&rct=j&q=&esrc=s&sa=U&ved=0ahUKEwiNuIPkxYzQAhVGppQKHZ2aBP8QqQIIFygAMAE&sig2=6mhkL-CWROcpxDCAQZOkUg&usg=AFQjCNFoCJn3vyFsxxA3tTNR3MKbye37kg

[downdata]

Why hasn't shareholders kicked JB out onto the curb yet?

[Vorsicht]

If you care to look at the more reputable of financial reports, you will see that much of the quarters loss was due to costs of the restructure. You may care to note that even QF has taken a hit in the last quarter with a reduction in revenue

The problem is that when you remove the restructure costs it was still a loss, and the only mitigator is subdued conditions! QF also contended with subdued conditions and made a healthy profit. Why isn't Virgin able to run at an underlying profit when most metrics are quite favourable? Profits in JB's world always seem to be just that tiny bit further down the road; at the end of the rainbow perhaps.

Heaven forbid a real financial challenge the like of SARS or the GFC!

The simple facts are that Virgin is still reliant on increased debt and capital raising to remain solvent. Until that changes and he can reduce debt from cashflow rather than increased debt and equity dilution, Virgin has to be considered to be on life support.

[B772]

I agree Vorsicht; if a black swan event was to take place it could leave Virgin Australia in a vulnerable position. Let us hope there are no black swan events that affect VAH.

In the not too distant future I believe the board of Virgin Australia will have to consider re-branding the airline to widen its appeal and terminate the licensing fees paid to Branson companies. In better time these fees could amount to almost $2,000,000 per month.

To achieve the above VAH may have to be privatised.

[Icarus2001]

Why hasn't shareholders kicked JB out onto the curb yet?

To achieve the above VAH may have to be privatised.

Putting those thoughts together the low price and little being done about reassuring the markets suggests the main shareholders would be happy with a low price ready for a buy back.

Remember the institutions circling QF a little while ago?

With that said, the business is losing money every week, I am not sure private ownership would change that in any significant way.

I believe the board of Virgin Australia will have to consider re-branding the airline to widen its appeal
They have just been through that expensive process!

Let us hope there are black swan events that affect VAH.

I hope that there are not.

[cee cee]

Came to this thread late and discovered that the whole website https://australinea.com (https://australinea.com/virgin-australia-faces-financing-crush/) no longer exists, let alone the article in question.

For the whole website to only last 2 weeks suggests to me that it was not genuine, but was set up to do a hatchet job. Looks to me like zim2uk was right.

[LostProperty]

website no longer exists

Interesting to hear, because since the thread started every time I've tried I've received warnings, I assume from the protection software on my computer, that the site was unsafe on several counts and don't go there.

[cee cee]

Not that unsafe in this particular case. The original website was set up with a secured link (https). That requires a security certificate valid for the web domain australinea.com (which is not much of a big deal in itself, anyone can create a self-signed certificate). However, now that that site no longer exists, the page request gets forwarded to the hosting company which has a certificate valid for itself (hosting-services.net.au). So the warning is only your browser telling you that the certificate it received from the web site does not match the name of the website. This can be serious if you are going to log in somewhere or do something secretive, but opening a supposedly publicly available news web page is fine.

If you ignore that mismatch and push through, you get a 404 web page not found message. Now while it is possible for a particular web page to get lost because of culling or website restructure, it is extremely unlikely in the normal course of events for the domain home page (https://www.australinea.com/) to disappear as well. ie, you may not be surprised if a particular webpage that you bookmarked a year ago from news.com.au to give a 404 not found message, but you would never expect news.com.au home page to ever disappear while that company still exists.

If I was to follow the money, I would suspect that someone created a fake news web site to manipulate the stock price. Very unethical and very illegal.

[Tommy Bahama]

If I was to follow the money, I would suspect that someone created a fake news web site to manipulate the stock price. Very unethical and very illegal.

With such a small free float highly doubtful. Considering the never ending tsunami of bad news directly from the company itself why would you bother???