Virgin Blue Shares Crash and Nosedive
Join Date: Mar 2002
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I owe a night of beers for an investment mate who talked me out of buying VB shares at issue.
He suggested $1.50 - $1.75 was all the shares were worth. Moreover, the usual Branson hype adds 25%.
Look at the UK authorities did to the recent Virgin Mobile float.
Non-performing customers were added to the figures to pump-up figures (free sign ups or customers with no activity for 12 months).
Locally, future aircraft orders and capacity was used the same way to over inflate the share issue price along with the gold-plated Branson image.
I've no doubt that VB will remain profitable and well run but not in the league of QF and esp. not in the league of $2.25 a share.
Look for future changes:
- Loyalty programs or FF points.
- Business/Govt. traveller incentives.
- Entry into the AKL market trans-tasman.
Watch Corrigan - he's a smart cookie. As long as he stays around VB will be steady.
He suggested $1.50 - $1.75 was all the shares were worth. Moreover, the usual Branson hype adds 25%.
Look at the UK authorities did to the recent Virgin Mobile float.
Non-performing customers were added to the figures to pump-up figures (free sign ups or customers with no activity for 12 months).
Locally, future aircraft orders and capacity was used the same way to over inflate the share issue price along with the gold-plated Branson image.
I've no doubt that VB will remain profitable and well run but not in the league of QF and esp. not in the league of $2.25 a share.
Look for future changes:
- Loyalty programs or FF points.
- Business/Govt. traveller incentives.
- Entry into the AKL market trans-tasman.
Watch Corrigan - he's a smart cookie. As long as he stays around VB will be steady.
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Join Date: Feb 2002
Location: Sydney, Australia
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Big Hairy Potatoes, this thread is not about why Ansett fell over or apportioning blame thereof.
The fact that Ansett fell over is history and books have been written about who/when why.
The point made about VB is that when your opposition falls over (for whatever reason) and you are there to take up the slack, then it's a no-brainer so to speak.
Rapid expansion is always frought with danger, but if well handled and done in a cautious fashion then VB would reap the rewards.
This is not apparently the case according to Terry McCrann, Peter Switzer and all of the financial journalists that have listed a series of serious flaws in management decisions that VB have taken of late with their rapid expansion.
They also spoke of the dangers of taking on Qantas by expanding rapidly rather than accepting profits at an existing level.
Rich-Fine-Green, good point made about the realistic share price expectations with the Virgin Float and spot on.
And yes, Chris Corrigan is a smart cookie, but from what I read even he didnt have the nerve to directly take on P&O Ports (equivalent of Qantas but only larger!) in the shipping game.
It appears that VB has done just that and it could cost them not only future expansion but also the jobs of alot of good people in the interim.
Riding the gravy train is easy, but knowing where to get off is even more important.
The fact that Ansett fell over is history and books have been written about who/when why.
The point made about VB is that when your opposition falls over (for whatever reason) and you are there to take up the slack, then it's a no-brainer so to speak.
Rapid expansion is always frought with danger, but if well handled and done in a cautious fashion then VB would reap the rewards.
This is not apparently the case according to Terry McCrann, Peter Switzer and all of the financial journalists that have listed a series of serious flaws in management decisions that VB have taken of late with their rapid expansion.
They also spoke of the dangers of taking on Qantas by expanding rapidly rather than accepting profits at an existing level.
Rich-Fine-Green, good point made about the realistic share price expectations with the Virgin Float and spot on.
And yes, Chris Corrigan is a smart cookie, but from what I read even he didnt have the nerve to directly take on P&O Ports (equivalent of Qantas but only larger!) in the shipping game.
It appears that VB has done just that and it could cost them not only future expansion but also the jobs of alot of good people in the interim.
Riding the gravy train is easy, but knowing where to get off is even more important.
Join Date: Oct 2003
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Well, its clear that the professional investment market has indicated what it thinks about Virgin's existing management. Not a lot!
Any guesses as to the future? Try this:
If profit = revenue minus costs
and you can't magically increase revenue then the only thing to focus on lowering costs.
Therefore forget market diferentiation between Virgin and Jet*, Virgin has to get its cost base down. That means adopting true Low Cost Carrier procedures - just like Jet*. Being a hybrid clearly has not worked and it can't continue at these rates of losses.
My guess is:
1. Reducing terminal staffing costs by converting to unallocated seating.
2. Cutting back on advertising.
3. Senior management perks, sorry bonuses.
4. Any other guesses as to what they must be sweating on as the new idea to rescue their margins?
You can bet the institutional shareholders will be making some big hints to the directors about all of this.
Interesting times coming.
Pug
Any guesses as to the future? Try this:
If profit = revenue minus costs
and you can't magically increase revenue then the only thing to focus on lowering costs.
Therefore forget market diferentiation between Virgin and Jet*, Virgin has to get its cost base down. That means adopting true Low Cost Carrier procedures - just like Jet*. Being a hybrid clearly has not worked and it can't continue at these rates of losses.
My guess is:
1. Reducing terminal staffing costs by converting to unallocated seating.
2. Cutting back on advertising.
3. Senior management perks, sorry bonuses.
4. Any other guesses as to what they must be sweating on as the new idea to rescue their margins?
You can bet the institutional shareholders will be making some big hints to the directors about all of this.
Interesting times coming.
Pug
Join Date: Nov 1999
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Silberfuchs,
You are spot on. It didn't take much to see that when the shares came out, VB were approaching the crest of the wave. There was only one direction for their share price to go!
I know some staff bought up big at the time, I hope they got out early and didn't get caught up in the company hype!!
You are spot on. It didn't take much to see that when the shares came out, VB were approaching the crest of the wave. There was only one direction for their share price to go!
I know some staff bought up big at the time, I hope they got out early and didn't get caught up in the company hype!!
Join Date: May 2004
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If VB shares were such a great buy you would have seen frenzied institutional buying in the last few days.
My gut feeling is that they will wait and see just how they trend in the coming weeks and slowly start to dump their shares in small packets to avoid rapid fluctuations.
Must agree that yes, they would be a great buy at around $1.30-$1.40 or so as forecasted.
My gut feeling is that they will wait and see just how they trend in the coming weeks and slowly start to dump their shares in small packets to avoid rapid fluctuations.
Must agree that yes, they would be a great buy at around $1.30-$1.40 or so as forecasted.
Join Date: Feb 2004
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What's the big deal!
So VB's expected profit is down by 22% from $210 mil to $165 mil, big deal. VB is going to make a substantial profit. All of this garbage about selling beer for below cost, and not being able to continue losing money is really quite funny.
Now let's have a look at the mathemetics of the market capitalisation fall of $300 mil on the basis of a reduction of profit of $45 mil. How does that add up?
The real winners from VB is the travelling public. JQ have also stimulated the market as well, though have had some bad luck in the early days.
I believe that what we are witnessing is a complete changing of the RPT scene in AUS, and the crusty old die-hards clearly don't like it, and to be honest if I was a crusty old die-hard I wouldn't like it either.
Remove the blinkers guys, JQ is expanding, VB is here to stay, QF is slowly changing.
Cheers
Now let's have a look at the mathemetics of the market capitalisation fall of $300 mil on the basis of a reduction of profit of $45 mil. How does that add up?
The real winners from VB is the travelling public. JQ have also stimulated the market as well, though have had some bad luck in the early days.
I believe that what we are witnessing is a complete changing of the RPT scene in AUS, and the crusty old die-hards clearly don't like it, and to be honest if I was a crusty old die-hard I wouldn't like it either.
Remove the blinkers guys, JQ is expanding, VB is here to stay, QF is slowly changing.
Cheers
Join Date: May 2002
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gazumped made my point for me. Living in the land of airline carnage(aka U.S.), ANY profit made by an airline is laudible.
Sounds like a lot of people are taking their pound of flesh for the past gloating of the VB'ers...
TC
Sounds like a lot of people are taking their pound of flesh for the past gloating of the VB'ers...
TC
