Merged: Virgin Blue Share Price - how low can it go and for how long?
SYDNEY (Dow Jones)--Virgin Blue Holdings Ltd. (VBA.AU) Chief Executive Brett Godfrey said Tuesday that recent volatility in the airline's shares was the result of Toll Holdings Ltd. (TOL.AU) exiting its stake in the business and he was not aware of any other airline taking a stake in the company.
"What I understand is it's predominantly domestic institutions taking positions, I'm not aware of other airlines buying shares," he told reporters at the launch of Virgin's new lounge facility at Sydney airport.
Godfrey also said the airline's fortunes had improved since April.
"April was a little bit tough but since then it's stabilized, which is good and it's proving to be a bit more resilient than a lot of people thought," he said.
Earlier Tuesday, Virgin Blue announced plans to establish a jet base in Sydney that would employ around 1,000 people within five years.
Godfrey said the establishment costs of the base would be a minimum of A$10.5 million upfront, and that Virgin expects to house around one third of its fleet, or around 25 planes, at the new base once it is established.
"What I understand is it's predominantly domestic institutions taking positions, I'm not aware of other airlines buying shares," he told reporters at the launch of Virgin's new lounge facility at Sydney airport.
Godfrey also said the airline's fortunes had improved since April.
"April was a little bit tough but since then it's stabilized, which is good and it's proving to be a bit more resilient than a lot of people thought," he said.
Earlier Tuesday, Virgin Blue announced plans to establish a jet base in Sydney that would employ around 1,000 people within five years.
Godfrey said the establishment costs of the base would be a minimum of A$10.5 million upfront, and that Virgin expects to house around one third of its fleet, or around 25 planes, at the new base once it is established.
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Branson passes on Blue- ex the SMH
Ex the SMH today:
Branson passes on Blue
Same stake … Richard Branson
Matt O'Sullivan
September 3, 2008
RICHARD BRANSON'S Virgin Group will not be increasing its stake in Virgin Blue in the aftermath of Toll Holdings's divestment of its shares in Australia's second-largest airline.
Sir Richard declined to reveal in July whether Virgin Group intended to increase its stake beyond 25.5 per cent after Toll decided to offload most of its 62.7 per cent stake.
His emphasis at the time was for a more hands-on role to steer the airline through the sector's biggest downturn in years.
Yesterday, the chief executive of Virgin Blue, Brett Godfrey, said he was not surprised Virgin Group had not raised its stake after about 70 per cent of the airline went into a free float last month. "[Virgin Group] are probably likely to stay in and probably may not increase their holdings," he said.
"They have made it clear they don't need to hold a controlling stake - they just need a significant stake [so] that they have their interests protected. They have typically said they do not want to have 51 per cent of airlines."
Shares in Virgin fell 3c to 51c yesterday - just 4c above its all-time low reached in June. The share price has been under pressure as institutional investors, who received Virgin stock from Toll, wait to sell because it is not central to their portfolios.
A spokeswoman for Virgin Group confirmed yesterday that "at this stage there are no plans to increase the shareholding".
Mr Godfrey has also previously talked up the possibility of other airlines or investors buying a strategic stake following Toll's sell-down. But yesterday he said he "was not aware of any strategic buyers or other airlines acquiring any of the shares".
Virgin Blue yesterday announced it would base a further 1000 staff - including pilots, cabin crew and engineers - in Sydney within five years after committing to a new jet base, which will boost its workforce in the city to as many as 2000 employees.
The carrier's headquarters will stay in Brisbane, but the company said in April it would make Sydney airport its international hub.
The NSW Government lured Virgin with payroll concessions and marketing and training incentives. The Premier, Morris Iemma, declined to reveal rebate details yesterday as they were "commercial-in-confidence".
Same stake … Richard Branson
Matt O'Sullivan
September 3, 2008
RICHARD BRANSON'S Virgin Group will not be increasing its stake in Virgin Blue in the aftermath of Toll Holdings's divestment of its shares in Australia's second-largest airline.
Sir Richard declined to reveal in July whether Virgin Group intended to increase its stake beyond 25.5 per cent after Toll decided to offload most of its 62.7 per cent stake.
His emphasis at the time was for a more hands-on role to steer the airline through the sector's biggest downturn in years.
Yesterday, the chief executive of Virgin Blue, Brett Godfrey, said he was not surprised Virgin Group had not raised its stake after about 70 per cent of the airline went into a free float last month. "[Virgin Group] are probably likely to stay in and probably may not increase their holdings," he said.
"They have made it clear they don't need to hold a controlling stake - they just need a significant stake [so] that they have their interests protected. They have typically said they do not want to have 51 per cent of airlines."
Shares in Virgin fell 3c to 51c yesterday - just 4c above its all-time low reached in June. The share price has been under pressure as institutional investors, who received Virgin stock from Toll, wait to sell because it is not central to their portfolios.
A spokeswoman for Virgin Group confirmed yesterday that "at this stage there are no plans to increase the shareholding".
Mr Godfrey has also previously talked up the possibility of other airlines or investors buying a strategic stake following Toll's sell-down. But yesterday he said he "was not aware of any strategic buyers or other airlines acquiring any of the shares".
Virgin Blue yesterday announced it would base a further 1000 staff - including pilots, cabin crew and engineers - in Sydney within five years after committing to a new jet base, which will boost its workforce in the city to as many as 2000 employees.
The carrier's headquarters will stay in Brisbane, but the company said in April it would make Sydney airport its international hub.
The NSW Government lured Virgin with payroll concessions and marketing and training incentives. The Premier, Morris Iemma, declined to reveal rebate details yesterday as they were "commercial-in-confidence".
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Now 'Benjam' and 'Porch' there is no need to 'spit the dummy' when your PPrune based 'fantasy view' of reality is challenged.
Perhaps if you both read more widely you wouldn't be so sensitive and respond with such petulance!!
To give you some perspective, below is an extract from yesterdays Canadian news. This article follows the announcement by Ottawa based 'Zoom' Airlines that it had ceased all operations.
Now honestly, in such a trading climate do you really think the management at DJ are acting prudently?
MONTREAL -- Soaring fuel costs and a sluggish global economy have created a perfect storm for the world's airlines, which are expected to lose more than US$5.2 billion in 2008, according to a forecast released Wednesday by the industry.
North American carriers are expected to suffer the most, accounting for US$5 billion of the total loss, the International Air Transport Association said in a revised forecast. That doesn't include billions of dollars in restructuring costs.
That will reverse a $5.6-billion profit in 2007, IATA said.
Asia Pacific profits will be cut to US$300 million, one-third of their 2007 total.
European airline profits are expected to decrease to $300 million from $2.1 billion and the Middle East earnings should be shaved to $200 million. Losses in Latin America and Africa will increase to $300 million and $700 million respectively.
IATA director general Giovanni Bisignani calls the situation "bleak" as high oil prices and falling demand hurt the industry's profitability.
"The industry is in an extraordinary situation. We are in a perfect storm of rising costs, particularly oil, and falling demand," he said in a news conference from the association's Montreal headquarters.
In June, IATA forecast losses would range between $2.3 billion and $6.1 billion.
The revised forecast is based on an average crude oil price of US$113 per barrel or US$140 for jet fuel. The increase from US$73 per barrel a year ago has raised total fuel bills by US$50 billion to an estimated US$186 billion. Fuel is expected to represent 36 per cent of operating costs, up from 13 per cent in 2002.
Challenging market conditions in 2009 are expected to result in US$4.1 billion of additional losses as weaker economic growth expands beyond the United States.
"I think 2009 will still be a very, very difficult year so fasten your seatbelt for at least another two years," Bisignani said.
Although oil prices have recently fallen, they are still about 55 per cent higher than last year.
Airline passenger traffic in July fell 1.9 per cent compared to 2007, the lowest level in five years.
Capacity increased by 3.8 per cent, indicating that service cuts have not kept pace with falling demand.
Asia Pacific carriers saw demand fall by a surprising 0.5 per cent, partly attributable to a change in Chinese visa requirements.
Cargo demand also contracted by 1.9 per cent, with Asian carriers experiencing a 6.5 per cent drop.
Perhaps if you both read more widely you wouldn't be so sensitive and respond with such petulance!!
To give you some perspective, below is an extract from yesterdays Canadian news. This article follows the announcement by Ottawa based 'Zoom' Airlines that it had ceased all operations.
Now honestly, in such a trading climate do you really think the management at DJ are acting prudently?
MONTREAL -- Soaring fuel costs and a sluggish global economy have created a perfect storm for the world's airlines, which are expected to lose more than US$5.2 billion in 2008, according to a forecast released Wednesday by the industry.
North American carriers are expected to suffer the most, accounting for US$5 billion of the total loss, the International Air Transport Association said in a revised forecast. That doesn't include billions of dollars in restructuring costs.
That will reverse a $5.6-billion profit in 2007, IATA said.
Asia Pacific profits will be cut to US$300 million, one-third of their 2007 total.
European airline profits are expected to decrease to $300 million from $2.1 billion and the Middle East earnings should be shaved to $200 million. Losses in Latin America and Africa will increase to $300 million and $700 million respectively.
IATA director general Giovanni Bisignani calls the situation "bleak" as high oil prices and falling demand hurt the industry's profitability.
"The industry is in an extraordinary situation. We are in a perfect storm of rising costs, particularly oil, and falling demand," he said in a news conference from the association's Montreal headquarters.
In June, IATA forecast losses would range between $2.3 billion and $6.1 billion.
The revised forecast is based on an average crude oil price of US$113 per barrel or US$140 for jet fuel. The increase from US$73 per barrel a year ago has raised total fuel bills by US$50 billion to an estimated US$186 billion. Fuel is expected to represent 36 per cent of operating costs, up from 13 per cent in 2002.
Challenging market conditions in 2009 are expected to result in US$4.1 billion of additional losses as weaker economic growth expands beyond the United States.
"I think 2009 will still be a very, very difficult year so fasten your seatbelt for at least another two years," Bisignani said.
Although oil prices have recently fallen, they are still about 55 per cent higher than last year.
Airline passenger traffic in July fell 1.9 per cent compared to 2007, the lowest level in five years.
Capacity increased by 3.8 per cent, indicating that service cuts have not kept pace with falling demand.
Asia Pacific carriers saw demand fall by a surprising 0.5 per cent, partly attributable to a change in Chinese visa requirements.
Cargo demand also contracted by 1.9 per cent, with Asian carriers experiencing a 6.5 per cent drop.
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Since you like to quote sources etc with the doomsday stories, UBS don't appear to share the doomsday view of DJ anymore. Not being petulant my friend, simply pointing out that the ONLY posts you make are of doom and gloom. Especially of DJ. We know you don't like them, and that's fine. Tell me, where is QF's profit going to come from into the future, given that it is presently being made what it is through cutting everything in sight? What do you cut when there is nothing left that can be cut? I'm personally yet to be convinced that the E jet thing is really going to work. But at least they are doing something.
It is after all easy to quote financial "experts", and cite one example to support your view. Just as I have, of course. Guess I'm the just the glass half full kind of guy.
It is after all easy to quote financial "experts", and cite one example to support your view. Just as I have, of course. Guess I'm the just the glass half full kind of guy.
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Porch, thanks for the reply!
I neither like or dislike DJ, Tiger, QF or any other operator for that matter. I am not into emotion BUT I am into facts and I am into heeding the lessons of recent history.
When deregulation first occurred in the airline industry (U.S. in the mid 1980's) many many airline operators commenced trading and some of them grew quite large and successful (Southwest) and others had interesting business plans and great ideas (such as People Express), while others went for niche markets operating single aircraft types (such as Midway with DC9's out of Chicago).
Today most of these carriers are GONE!!!
All these operators expanded rapidly to try and capture passengers and market share and with the single exception of Southwest, they ignored the need to balance capacity against profitability in order to avoid going out of business by flying empty planes or planes FULL of NO YIELD passengers over extensive route networks (remember Compass in Australia?). All these operators failed due to competitive pressures.
My comments have nothing to do with personal attitudes towards airlines. My criticism of DJ is valid as their management is showing the same arrogance that has brought down many other airlines with similar plans and aspirations.
So Porch, time and tide will prove my observations right or wrong. Maybe DJ can re-write history and establish a new 'paradigm' as the academics like to say, but market conditions and DJ's market capitalisation and business plan indicates otherwise.
Your comment on cost cutting at Qantas to achieve greater profits is quite valid, however, DJ operates a low cost model where they would rather try and obtain concessions from staff and others to keep costs as low as possible, so they really have no place to go when fierce competition (Domestically, Regionally and Internationally) erodes their very thin margins and drives them from profit to LOSS, LOSS, LOSS, which Godfrey has already foreshadowed for 2009!
When that happens it is TOO LATE to reverse! Don't you think it would be prudent (considering there are thousands of employees involved) to act responsibly now, rather than being like a problem gambler and betting ALL on a few throws of the commercial dice?
I neither like or dislike DJ, Tiger, QF or any other operator for that matter. I am not into emotion BUT I am into facts and I am into heeding the lessons of recent history.
When deregulation first occurred in the airline industry (U.S. in the mid 1980's) many many airline operators commenced trading and some of them grew quite large and successful (Southwest) and others had interesting business plans and great ideas (such as People Express), while others went for niche markets operating single aircraft types (such as Midway with DC9's out of Chicago).
Today most of these carriers are GONE!!!
All these operators expanded rapidly to try and capture passengers and market share and with the single exception of Southwest, they ignored the need to balance capacity against profitability in order to avoid going out of business by flying empty planes or planes FULL of NO YIELD passengers over extensive route networks (remember Compass in Australia?). All these operators failed due to competitive pressures.
My comments have nothing to do with personal attitudes towards airlines. My criticism of DJ is valid as their management is showing the same arrogance that has brought down many other airlines with similar plans and aspirations.
So Porch, time and tide will prove my observations right or wrong. Maybe DJ can re-write history and establish a new 'paradigm' as the academics like to say, but market conditions and DJ's market capitalisation and business plan indicates otherwise.
Your comment on cost cutting at Qantas to achieve greater profits is quite valid, however, DJ operates a low cost model where they would rather try and obtain concessions from staff and others to keep costs as low as possible, so they really have no place to go when fierce competition (Domestically, Regionally and Internationally) erodes their very thin margins and drives them from profit to LOSS, LOSS, LOSS, which Godfrey has already foreshadowed for 2009!
When that happens it is TOO LATE to reverse! Don't you think it would be prudent (considering there are thousands of employees involved) to act responsibly now, rather than being like a problem gambler and betting ALL on a few throws of the commercial dice?
Last edited by THE ORACLE; 5th Sep 2008 at 03:26.
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As you quite rightly pointed out. Except for Southwest. And there is your exception to the rule. By no stretch of the imagination is Godfrey a Herb Kelleher, no way no how. Fact is tho it can and has been done. Will it happen here? F@cked if I know actually, but get onto the Pacific now before SQ and others, (and that WILL happen), they never will. As for the E jets, my thoughts on that are on another thread. At least they are trying something. Like I said, glass half full I guess....
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As an edit, you said DJ can pretty much only drive employee costs down to make cuts? What do you think QF have been doing for the last 5 years thanks to Jetstar? BTW, VB pay is pretty much in the middle of both QF and Jetstar, so really, how is that relevant?
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Porch,
Southwest succeeded and remains phenomenally successful in the U.S. because it has stuck to it's original business plan and remains as a low cost single aircraft type B737 operator.
DJ on the other hand now presents itself to the market as a 'new world' carrier (whatever that is supposed to mean) and is in the process of adding considerable complexity and cost to its operations by introducing 3 aircraft types. Southwest is a very different type of operation for these reasons!
Southwest succeeded and remains phenomenally successful in the U.S. because it has stuck to it's original business plan and remains as a low cost single aircraft type B737 operator.
DJ on the other hand now presents itself to the market as a 'new world' carrier (whatever that is supposed to mean) and is in the process of adding considerable complexity and cost to its operations by introducing 3 aircraft types. Southwest is a very different type of operation for these reasons!
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benjam,
I'll take it! 'tool' - 'anything used as a means of achieving an end'; 'a necesary medium or adjunct to one's profession' (Concise Oxford Dictionary).
Thankyou for the compliment!!
I'll take it! 'tool' - 'anything used as a means of achieving an end'; 'a necesary medium or adjunct to one's profession' (Concise Oxford Dictionary).
Thankyou for the compliment!!
Tiger may make a move at around 40 cents , stay tuned............
Most of the 737s will return to lessors and Tiger will introduce more A320s and wait for it , old 777s from SQ for the major domestic ops .
Goodbye VB...........
Most of the 737s will return to lessors and Tiger will introduce more A320s and wait for it , old 777s from SQ for the major domestic ops .
Goodbye VB...........