Merged: Virgin Blue Share Price - how low can it go and for how long?
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And I wonder what qantas's share price will hit if they announce a profit downgrade????
The increasing price of fuel will have a major impact on airline revenues over the next year or 2 .
OPEC has the world by the testicles and it seems every 10 years or so it gives them a good squeeze.
The increasing price of fuel will have a major impact on airline revenues over the next year or 2 .
OPEC has the world by the testicles and it seems every 10 years or so it gives them a good squeeze.
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HF3000, you actually prove my point. The trend on VBA shares is down. In the short term world of the sharemarket they are more likely to be down than up in a months' times.
I speak as a trader, not an investor... two very different things. The trend is your friend.....(until it bends...)
I speak as a trader, not an investor... two very different things. The trend is your friend.....(until it bends...)
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Ratter,
$215m then $100m then what is next? Its like a QF physc test question!
This is what Shares in Virgin Blue Holdings fell 18.5 percent to a record low on Monday after Australia's second-biggest airline warned its profit would more than halve as it faces higher fuel costs and competition.
Virgin Blue, in which transport group Toll Holdings owns a 63 percent stake, said after the close of trading on Friday that its net profit would drop to around A$100 million (US$93 million) this year, from A$216 million a year earlier.
It could also incur an extra A$120 million in fuel costs next year and faced an increase in capacity as new carriers enter the market.
"It is sobering to note the guidance implies the business just breaking even in the second half," said a research note from analysts at UBS, who cut the stock to sell from neutral and lowered their forecast for next year's earnings by 36 percent.
Virgin Blue stock, which traded above A$2 in February, was down 18.5 percent at A$0.91 in the morning session. Shares in Toll were 12 percent lower at a 19-month low of A$8.31.
UK entrepreneur Richard Branson's Virgin Group owns about 25 percent in Virgin Blue.
The carrier, which competes with Qantas Airways, appointed Goldman Sachs JBWere in February to review its future amid reports it could sell a controlling stake to another airline. On Friday it said buyer interest did not reflect the airline's underlying value and it was reviewing alternatives.
Separately, Qantas said on Monday that Pacific Airlines, Vietnam's second largest carrier in which Qantas has an 18 percent stake, will be renamed Jetstar Pacific.
Jetstar Pacific planned to introduce up to 30 Airbus A320 aircraft by 2014, Qantas said. The first A320 is expected to start in August, initially growing services within Vietnam, before international expansion from late this year into markets likely to include Thailand, Singapore, Malaysia and Cambodia.
Qantas will increase its stake to 30 percent in 2010.
The numbers don't lie!
$215m then $100m then what is next? Its like a QF physc test question!
This is what Shares in Virgin Blue Holdings fell 18.5 percent to a record low on Monday after Australia's second-biggest airline warned its profit would more than halve as it faces higher fuel costs and competition.
Virgin Blue, in which transport group Toll Holdings owns a 63 percent stake, said after the close of trading on Friday that its net profit would drop to around A$100 million (US$93 million) this year, from A$216 million a year earlier.
It could also incur an extra A$120 million in fuel costs next year and faced an increase in capacity as new carriers enter the market.
"It is sobering to note the guidance implies the business just breaking even in the second half," said a research note from analysts at UBS, who cut the stock to sell from neutral and lowered their forecast for next year's earnings by 36 percent.
Virgin Blue stock, which traded above A$2 in February, was down 18.5 percent at A$0.91 in the morning session. Shares in Toll were 12 percent lower at a 19-month low of A$8.31.
UK entrepreneur Richard Branson's Virgin Group owns about 25 percent in Virgin Blue.
The carrier, which competes with Qantas Airways, appointed Goldman Sachs JBWere in February to review its future amid reports it could sell a controlling stake to another airline. On Friday it said buyer interest did not reflect the airline's underlying value and it was reviewing alternatives.
Separately, Qantas said on Monday that Pacific Airlines, Vietnam's second largest carrier in which Qantas has an 18 percent stake, will be renamed Jetstar Pacific.
Jetstar Pacific planned to introduce up to 30 Airbus A320 aircraft by 2014, Qantas said. The first A320 is expected to start in August, initially growing services within Vietnam, before international expansion from late this year into markets likely to include Thailand, Singapore, Malaysia and Cambodia.
Qantas will increase its stake to 30 percent in 2010.
The numbers don't lie!
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Hit the nail on the head...
"Shares in Virgin Blue Holdings fell 18.5 percent to a record low on Monday after Australia's second-biggest airline warned its profit would more than halve as it faces higher fuel costs and competition." 
I thought that one day this might happen. IMHO a few basics;
1. VB based its initial model roughly on Virgin Express; THE loser in the Euro LCC wars and now quoted by experts as how NOT to set up an LCC.
2. VB is no "miracle" of OZ aviation. It looked very shakey until by pure luck Ansett fell over and created massive market space.
3. VB grew and succeeded for a while because the only competition was QF (High cost legacy carrier). That was tempered by Joke* (IMHO a subsidised LCC) and now will be squeezed by Tiger (A hard core Ryanair style LCC with mondo backing).
4. VB's response has been to break every rule in LCC cost control; multiple aircraft types, lounges, multiple products (inc a quasi biz class) etc, etc.
5. From what I've read here and the opinions of mates inside VB the past strength of its once great esprit d'corp and positive relationship with management has gone. That kills productivity. Well known fact - just ask South West (USA) and their legendary President / CEO Herb Kelleher.
To me its like BG is trying to make VB all things to all people (LCC & Legacy) and not surprisingly failing at both (not as cheap or simple as a real LCC nor offering the network, luxury or prestige of a legacy carrier).
I was once told; "theres no such thing as compromise, only sacrifice".
In my view VB now has none of the strengths of an LCC or a legacy giant. IMHO its lost direction and is easy meat, lacking the support of mega carriers like QF or SIA and facing mega oil prices and stiff (and likely increasing) competition.
In my view its pretty simple; VB's strengths in the market are percieved by the players as almost nil, (cute F/A's perhaps?
), its strategy is unclear and so guess what; Toll can't sell its stake for any decent return; (What serious player would want it?) and the market knows it. Result - shares plummet! Not rocket science.
Mind you QF's board might not be laughing too hard. Their oil hedge is rumoured to run out soon and then their shares will be under pressure too...
Maybe if Tricky really can buy back in and give some pizazz and leadership its stands chance as a reborn "value" carrier a'la Easyjet UK. But even then their current op is way off that mark too... Remodelling required IMHO...
I for one hope they sort it out. Lotta good people's jobs and families depend on it!
I thought that one day this might happen. IMHO a few basics;
1. VB based its initial model roughly on Virgin Express; THE loser in the Euro LCC wars and now quoted by experts as how NOT to set up an LCC.
2. VB is no "miracle" of OZ aviation. It looked very shakey until by pure luck Ansett fell over and created massive market space.
3. VB grew and succeeded for a while because the only competition was QF (High cost legacy carrier). That was tempered by Joke* (IMHO a subsidised LCC) and now will be squeezed by Tiger (A hard core Ryanair style LCC with mondo backing).
4. VB's response has been to break every rule in LCC cost control; multiple aircraft types, lounges, multiple products (inc a quasi biz class) etc, etc.
5. From what I've read here and the opinions of mates inside VB the past strength of its once great esprit d'corp and positive relationship with management has gone. That kills productivity. Well known fact - just ask South West (USA) and their legendary President / CEO Herb Kelleher.
To me its like BG is trying to make VB all things to all people (LCC & Legacy) and not surprisingly failing at both (not as cheap or simple as a real LCC nor offering the network, luxury or prestige of a legacy carrier).
I was once told; "theres no such thing as compromise, only sacrifice".
In my view VB now has none of the strengths of an LCC or a legacy giant. IMHO its lost direction and is easy meat, lacking the support of mega carriers like QF or SIA and facing mega oil prices and stiff (and likely increasing) competition.
In my view its pretty simple; VB's strengths in the market are percieved by the players as almost nil, (cute F/A's perhaps?
), its strategy is unclear and so guess what; Toll can't sell its stake for any decent return; (What serious player would want it?) and the market knows it. Result - shares plummet! Not rocket science.Mind you QF's board might not be laughing too hard. Their oil hedge is rumoured to run out soon and then their shares will be under pressure too...
Maybe if Tricky really can buy back in and give some pizazz and leadership its stands chance as a reborn "value" carrier a'la Easyjet UK. But even then their current op is way off that mark too... Remodelling required IMHO...
I for one hope they sort it out. Lotta good people's jobs and families depend on it!
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VB redundancy?
As Ansett administrators have just paid some more redundancy money ( now to a total of 92c in the dollar ) do VB have a similar EBA? Or perhaps there are really no assets to speak of anyway. So what's the point?
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Kremin - I agree with you entirely, it's just that our outlooks are different - I am a long term investor. I woudn't seek to short-term profit from further decline in DJ's share price, rather commence a gradual buy-in with a long term outlook for a $1.60 - $2.40 selling price in the future for a 100-200% profit. Might take time, and involves some risk, but here's my risk assessment.
VB's B737s consume as much fuel as QF's B737s, and about as much fuel as Tiger and JQ's A320s.
The increasing fuel price will only have one impact - each of the above 4 carriers will have to raise their prices (by the same amount) to sustain their businesses.
This means that no carrier will sustain a market advantage over any other carrier in the Aus domestic market (due to fuel prices). The only thing that will happen is that overall price rises will eventuate and the travelling public will fly less.
However the demographic of the travelling public that will fly less will probably be the leisure sector (the main bread and butter of the LCCs).
So DJ's decision to be less of a LCC and more of a business oriented carrier will probably end up proving a good decision in the developing climate.
The other difference is that Tiger has backers that won't LET it fail, and JQ has a parent company that won't let IT fail either.
DJ is a bit alone here - no cashed up parent Company that can cross subsidise. How much or long will Toll/Tricky etc support it until it can reform itself into a good profit making entity?
Toll have a lot of money tied up here, as does Tricky... It will be interesting to see if DJ respond by reinventing themselves as a LCC, or taking on the big QF and REALLY trying to get the good high yield business. I agree, they probably need to go one way or the other, not waffle around in the middle.
For example, I have a business traveller friend who tried DJ - he booked a 6 o'clock flight with them on the phone. Turned up at 5.15pm and was told his 0600 flight had departed 12 hours ago. He tried to explain that he had booked a 6 pm flight - they said oh must have been some confusion, but bad luck, not refundable, you'll have to buy another ticket (at last minute rates: some $350). He was dumbfounded, refused on principle, marched over to the QF terminal and bought a last minute ticket for about the same price. He explained the situation he had just experienced with DJ to the ticket agent at QF and they assured him that that would not happen with QF. He will never fly DJ again. That is the sort of thing they need to fix if they want to play with the big boys.
But, I digress. I think they will fix it, and I think they'll recover, and the current share price might prove a good investment for the long term investor.
And when I refer negatively to the comment that "the market is always right", the market may think it's right on the basis of the news stories currently on the headlines, but don't invest long term on this basis. Short term traders trade on news. Long term traders pre-empt the news. You need to speculate on next year's news headlines - eg "DJ upgrades profit forecasts due increasing yield - share price soars" - it'll be too late to buy shares after you read this news story, all the guys "in the know" will have already pumped up the share price. That's when I would SELL!
VB's B737s consume as much fuel as QF's B737s, and about as much fuel as Tiger and JQ's A320s.
The increasing fuel price will only have one impact - each of the above 4 carriers will have to raise their prices (by the same amount) to sustain their businesses.
This means that no carrier will sustain a market advantage over any other carrier in the Aus domestic market (due to fuel prices). The only thing that will happen is that overall price rises will eventuate and the travelling public will fly less.
However the demographic of the travelling public that will fly less will probably be the leisure sector (the main bread and butter of the LCCs).
So DJ's decision to be less of a LCC and more of a business oriented carrier will probably end up proving a good decision in the developing climate.
The other difference is that Tiger has backers that won't LET it fail, and JQ has a parent company that won't let IT fail either.
DJ is a bit alone here - no cashed up parent Company that can cross subsidise. How much or long will Toll/Tricky etc support it until it can reform itself into a good profit making entity?
Toll have a lot of money tied up here, as does Tricky... It will be interesting to see if DJ respond by reinventing themselves as a LCC, or taking on the big QF and REALLY trying to get the good high yield business. I agree, they probably need to go one way or the other, not waffle around in the middle.
For example, I have a business traveller friend who tried DJ - he booked a 6 o'clock flight with them on the phone. Turned up at 5.15pm and was told his 0600 flight had departed 12 hours ago. He tried to explain that he had booked a 6 pm flight - they said oh must have been some confusion, but bad luck, not refundable, you'll have to buy another ticket (at last minute rates: some $350). He was dumbfounded, refused on principle, marched over to the QF terminal and bought a last minute ticket for about the same price. He explained the situation he had just experienced with DJ to the ticket agent at QF and they assured him that that would not happen with QF. He will never fly DJ again. That is the sort of thing they need to fix if they want to play with the big boys.
But, I digress. I think they will fix it, and I think they'll recover, and the current share price might prove a good investment for the long term investor.
And when I refer negatively to the comment that "the market is always right", the market may think it's right on the basis of the news stories currently on the headlines, but don't invest long term on this basis. Short term traders trade on news. Long term traders pre-empt the news. You need to speculate on next year's news headlines - eg "DJ upgrades profit forecasts due increasing yield - share price soars" - it'll be too late to buy shares after you read this news story, all the guys "in the know" will have already pumped up the share price. That's when I would SELL!
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VBA- .89c ASX Close 17 Apr 2008
Last at .89c: - ranged .885-.895 most of the day.
On a volume of 506,907 or about half of yesterday's volume.
Chart (6 mth) ex the ASX website:
ASX excludes all liability arising out of any inaccuracies in this Chart, except where liability is made non-excludable by legislation.
Chart values may be adjusted for changes in a company's capital structure or to link historical values that represent the company's primary equity security.
Moderators: Feel free to dump the chart if it causes you grief- it is a public site and have referenced it???- the sticky ten thingies has moved on???
On a volume of 506,907 or about half of yesterday's volume.
Chart (6 mth) ex the ASX website:
ASX excludes all liability arising out of any inaccuracies in this Chart, except where liability is made non-excludable by legislation.
Chart values may be adjusted for changes in a company's capital structure or to link historical values that represent the company's primary equity security.
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Put your money where your mouth is, people.
I did,
5K into vba today.
Lets see if I blow my holiday money or double it over time....
I did,
5K into vba today.
Lets see if I blow my holiday money or double it over time....
Let's see how we do in mid-Oct.
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DJ is a bit alone here - no cashed up parent Company that can cross subsidise. How much or long will Toll/Tricky etc support it until it can reform itself into a good profit making entity?
It still is making a profit and has done for most of its life. There is no need for any cross subsidy
It still is making a profit and has done for most of its life. There is no need for any cross subsidy
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So Betsy,
Back of the napkin figures here basically says that your NAB punt is worth about $200 gross.
To match or beat that, the shares have to climb above $0.92 (once again just over $200 gross)
See you here in 6 months
Back of the napkin figures here basically says that your NAB punt is worth about $200 gross.
To match or beat that, the shares have to climb above $0.92 (once again just over $200 gross)
See you here in 6 months
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Why would you buy Virgin Blue when you can buy into undervalued fertilizer companies like MAK and RWD, everyone has to eat, even pilots.
Agriculture is the hottest sector in the market right now.
Agriculture is the hottest sector in the market right now.
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Regarding airlines as a business venture/investment, there was certainly one comment by BG that was on the money: Airlines are not for the faint hearted.
I've devoted most of my adult life to committing acts of aviation, and I'm with Ratter on this one. However, if I was looking to invest any amount of money on something, aviation would be the last thing on my mind. Even if an airline were turning a record profit, there will always be better ways to make money. As the saying goes: If you want to make a small fortune from aviation...
I've devoted most of my adult life to committing acts of aviation, and I'm with Ratter on this one. However, if I was looking to invest any amount of money on something, aviation would be the last thing on my mind. Even if an airline were turning a record profit, there will always be better ways to make money. As the saying goes: If you want to make a small fortune from aviation...
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In defense of VB
I travel on VB twice, sometimes thrice a month and I find the product suited to my needs like the proverbial T. Clean, modern aircraft at convenient times. The Mel-Per sector has more legroom than a Qantas flight I had used. Mostly I book the cheapest outgoing fare, and a fully flexible return fare, and the total is nearly half of what Qantas charges. That is unbeatable value not considering promotions, travel to Avalon etc.
A few people agree with me, as the flights I have been on, are nearly always full.
To an earlier post, the real early flights are often at a very low price, which cannot be achieved on an evening fare.
In my opinion it is not going to be easy for Vb, as anyone else, but they do have the right product to survive the great upheaval that is predicted.
A few people agree with me, as the flights I have been on, are nearly always full.
To an earlier post, the real early flights are often at a very low price, which cannot be achieved on an evening fare.
In my opinion it is not going to be easy for Vb, as anyone else, but they do have the right product to survive the great upheaval that is predicted.
Last edited by jatayu; 17th Apr 2008 at 21:35. Reason: fast reading skills not what it used to be
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Jatayu,
Ansetts flights were full up to the day they crashed, it means nothing. Its about cost structure and yield. Even though VB made 100m, it equates to an almost even turnover if you look at it in real economic returns. It has no assets, is trying to save money yet spends $60m on a new head office with WIFI and new office furniture etc etc.
"Rome is falling Cesar", "Well lets throw a party, wine for everyone"
"But the masses are hungrey your Majesty", "Well feed them some Cake"
Ansetts flights were full up to the day they crashed, it means nothing. Its about cost structure and yield. Even though VB made 100m, it equates to an almost even turnover if you look at it in real economic returns. It has no assets, is trying to save money yet spends $60m on a new head office with WIFI and new office furniture etc etc.
"Rome is falling Cesar", "Well lets throw a party, wine for everyone"
"But the masses are hungrey your Majesty", "Well feed them some Cake"
Last edited by dirty deeds; 18th Apr 2008 at 01:13.
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I have a question. With the current, lets say "uncertainies" in the market. Where is the money (or support) coming from for the LA start?
With fuel running US$ 110 or so it's a lot different than running 5 or 6000kg on a 737 between SYD & MEL and 120,000 on LA.
With fuel running US$ 110 or so it's a lot different than running 5 or 6000kg on a 737 between SYD & MEL and 120,000 on LA.
Put your money where your mouth is, people.