Merged: Virgin Blue Share Price - how low can it go and for how long?
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framer
QF know that it is politically impossible to have a monopoly in the domestic market. International competition has always been there.
They know there will always be a domestic competitor so the comment you quote makes sense to me.
As far as Virgin Blue goes I have previously observed that QF have them in a vice. JQ have lower costs and can absorb more pain, whilst QF have a larger network, so more connectivity. Virgin have chosen to take on more cost to try to compete with QF and wound up in a cost bind IMHO.
QF know that it is politically impossible to have a monopoly in the domestic market. International competition has always been there.
They know there will always be a domestic competitor so the comment you quote makes sense to me.
As far as Virgin Blue goes I have previously observed that QF have them in a vice. JQ have lower costs and can absorb more pain, whilst QF have a larger network, so more connectivity. Virgin have chosen to take on more cost to try to compete with QF and wound up in a cost bind IMHO.
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VBA Annual report
VBA Annual report lodged today view at VBA Company Announcements to download PDF of annual report
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If the shares were 2.65 ish when they floated and the company had a value of 2.6 billionish does the shares at 0.31 cents make the whole show worth 310 million AUD ? Ball park numbers ?
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All,
A primary responsibility for the Board and Management of public companies is to increase shareholder value through the combination of capital gain in the stock value and/or profits distribution through dividend yield.
The Australian Airline Majors closing values today were VBA $0.315 cents down 17.11 percent and QAN $3.130 down 3.1 percent. Co-incidentally as the largest independent Regional REX closed at $1.02 down 4.67 percent.
Considering that DJ listed at around $2.40 per share, by any measure the Board and Management have failed spectacularly in their duty of care to shareholders and staff.
Until recent weeks DJ managerial ineptitude has been shielded latterly by the TOLL Holdings majority ownership and formerly the Patrick Corp majority ownership.
Now the 'Gloves are Off' and the market clearly does not like what it perceives as the Board and Managements Buccaneering and Cavalier approach to the business at such an unstable time.
A primary responsibility for the Board and Management of public companies is to increase shareholder value through the combination of capital gain in the stock value and/or profits distribution through dividend yield.
The Australian Airline Majors closing values today were VBA $0.315 cents down 17.11 percent and QAN $3.130 down 3.1 percent. Co-incidentally as the largest independent Regional REX closed at $1.02 down 4.67 percent.
Considering that DJ listed at around $2.40 per share, by any measure the Board and Management have failed spectacularly in their duty of care to shareholders and staff.
Until recent weeks DJ managerial ineptitude has been shielded latterly by the TOLL Holdings majority ownership and formerly the Patrick Corp majority ownership.
Now the 'Gloves are Off' and the market clearly does not like what it perceives as the Board and Managements Buccaneering and Cavalier approach to the business at such an unstable time.
Surprising to see the CASK (cost available seat kilometre) was 9.05c for the 737 whereas for the E-Jet it was "above" twenty cents. I would have thought the E-jet a cheaper aircraft to run..........the report did go on to say it expected the E-jets to drop by half within the next year, this however still makes it a more expensive aircraft to operate per seat Km.
Is the 737 strong enough to carry two expensive stablemates i.e the introduction of the E-jet and the introduction of 777 into North America?
I hope for the folk at VB the answer is yes.
Is the 737 strong enough to carry two expensive stablemates i.e the introduction of the E-jet and the introduction of 777 into North America?
I hope for the folk at VB the answer is yes.
A smaller aeroplane is always more expensive in a CASK basis, as the costs dont decrease in proportion to the reduction in seating capacity, the 78 seat 170 has less than half the seating capacity than a 737-800, yet costs did not decrease by half, fuel burn didnt, salaries didnt (despite what some think!), financing cost didnt.
Conversly the 777-300 is cheaper than the 737 to run on a CASK basis.
Where the cost savings come in is that per block sector the Ejets are cheaper to run than the 737 which in turn are cheaper to run than the 777.
So if the sector that the ejet is scheduled on has booking of less than or equal to the seating capacity of the ejet (170 or 190) then it is cheaper to run an E Jet.
Equally if the Ejet allows you to operate on a citypair that you wouldnt otherwise be able to run on (Albury - Sydney for example) then the Ejet is infinately less expensive to run than the 737 (assuming your fares actually turn you a profit)
The Ejet appears to have been extremely popular with the punters and crew, and I reckon it will do the business for VB.
It is a good option as compared to the 146, the F100 and the 717.
Conversly the 777-300 is cheaper than the 737 to run on a CASK basis.
Where the cost savings come in is that per block sector the Ejets are cheaper to run than the 737 which in turn are cheaper to run than the 777.
So if the sector that the ejet is scheduled on has booking of less than or equal to the seating capacity of the ejet (170 or 190) then it is cheaper to run an E Jet.
Equally if the Ejet allows you to operate on a citypair that you wouldnt otherwise be able to run on (Albury - Sydney for example) then the Ejet is infinately less expensive to run than the 737 (assuming your fares actually turn you a profit)
The Ejet appears to have been extremely popular with the punters and crew, and I reckon it will do the business for VB.
It is a good option as compared to the 146, the F100 and the 717.
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D,
Notwithstanding your excellent summary of comparative unit cost economics, yield is always the critical factor in determining contributions to the bottom line.
Australia currently has more competition in the domestic market than ever before. A great bulk of the passengers have been conditioned to 'self serve' via the internet to save cost and the by-product seems to have been the erosion of any 'brand loyalty' in favour of the cheapest fare on the day.
DJ to an extent have been an architect of this process and the introduction of 'Velocity', in part seems to have been an attempt to recapture the leakage of itinerant passengers. The success of 'Velocity' in this regard is questionable, however, as many VFR passenger will travel 'to and from' with different carriers if they offer an apparently cheaper fare.
The comparatively high unit costs (against the Dash 8 and Saab) in markets such as Port Macquarie and Albury have resulted in DJ's competitors consistently denying them any yield from the E-Jet passengers thus far carried. Qantaslink's decision to operate the Q400 into Albury may further exacerbate DJ's losses on that sector if the schedule runs in parallel with the E-Jet.
Finally, by going to an expensive and smaller airframe for operations on trunk routes services, even for off-peak, DJ will deny itself any opportunity to make a profit form the extra 50 odd seats on the 737 that are no longer available. Their competitors, however, will be able to offer these seats (to those itinerant customers only faithful to price) as they are continuing to operate 150 seat+ aircraft.
This entire discussion may become irrelevant if the DJ share price continues to lose value at the current astonishing rate, which by next week could result in the company being worth...........?
Notwithstanding your excellent summary of comparative unit cost economics, yield is always the critical factor in determining contributions to the bottom line.
Australia currently has more competition in the domestic market than ever before. A great bulk of the passengers have been conditioned to 'self serve' via the internet to save cost and the by-product seems to have been the erosion of any 'brand loyalty' in favour of the cheapest fare on the day.
DJ to an extent have been an architect of this process and the introduction of 'Velocity', in part seems to have been an attempt to recapture the leakage of itinerant passengers. The success of 'Velocity' in this regard is questionable, however, as many VFR passenger will travel 'to and from' with different carriers if they offer an apparently cheaper fare.
The comparatively high unit costs (against the Dash 8 and Saab) in markets such as Port Macquarie and Albury have resulted in DJ's competitors consistently denying them any yield from the E-Jet passengers thus far carried. Qantaslink's decision to operate the Q400 into Albury may further exacerbate DJ's losses on that sector if the schedule runs in parallel with the E-Jet.
Finally, by going to an expensive and smaller airframe for operations on trunk routes services, even for off-peak, DJ will deny itself any opportunity to make a profit form the extra 50 odd seats on the 737 that are no longer available. Their competitors, however, will be able to offer these seats (to those itinerant customers only faithful to price) as they are continuing to operate 150 seat+ aircraft.
This entire discussion may become irrelevant if the DJ share price continues to lose value at the current astonishing rate, which by next week could result in the company being worth...........?
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Yield with the E-jet is no where near enough to cross the finish line with cash in the bank.
This is the crux of Virgin's trouble. Effectively the cash reserves are feeding the yield gap that:
1. Has been generated by the jungle jets.
2. Will be generated by the 777.
With these 2 factors alone, it will take some very creative accounting to try and stay afloat. Also remember that lines of credit will have dried up to the point that any available funds for this type of high risk venture will attract extremely high interest rates.
In other words if the cash flow isn't there, yield management becomes irrelevant.
Something has to give here if the core brand is to be saved.
This is the crux of Virgin's trouble. Effectively the cash reserves are feeding the yield gap that:
1. Has been generated by the jungle jets.
2. Will be generated by the 777.
With these 2 factors alone, it will take some very creative accounting to try and stay afloat. Also remember that lines of credit will have dried up to the point that any available funds for this type of high risk venture will attract extremely high interest rates.
In other words if the cash flow isn't there, yield management becomes irrelevant.
Something has to give here if the core brand is to be saved.
The greater CASK of the e-jet V 737 means the e-jet is a lot more critical on selling a full aeroplane(or achieving high yield) in order to keep a lid on the greater than 737 costs. Perhaps it isn't fair to compare the two but the balance sheet certainly will. If one doesn't generate greater profit yet costs more to run what is the purpose? Only the accountants know the answer........I hope the e-jet is as good as some report.
How fickle this industry is..
DJ profit $97,000,000
Number of passsengers 16,000,000
Profit per passenger = $6
Now if each passenger paid an additional $10 for each flight then the profit would have been $256,000,000
And if each passenger had have paid $10 less per flight then the profit would have become a loss of $64,000,000
DJ profit $97,000,000
Number of passsengers 16,000,000
Profit per passenger = $6
Now if each passenger paid an additional $10 for each flight then the profit would have been $256,000,000
And if each passenger had have paid $10 less per flight then the profit would have become a loss of $64,000,000
Last edited by 1a sound asleep; 1st Oct 2008 at 05:02. Reason: spelling
I think the annual report is a lot better than some doomsayers were expecting. Ok it's not brilliant, but compared to the likes of some similarly positioned foreign carriers its damn good. Now the share price is seriously undervalued if you look at the balance sheet
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DJ profit $97,000,000
Number of passsengers 16,000,000
Profit per passenger = $6
Number of passsengers 16,000,000
Profit per passenger = $6
So lets see: 20 million pax equates to a $170 million. Can VB achieve this target within the next financial year? At the moment they are looking at 17.5 million pax YTD AUG 08 = $148.75 million. QF are handing them customers in certain markets, the Federal Govt has to travel with them for 25% of there bookings (currently at 12%).
Interest rates are coming down, oil prices have come down, the economy in Australia is still hanging in there and the US Govt is probably going to bail-out the US economy.
So once again I am coming to the conclusion that things aren't as bad as the minority in here believe.
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Ha..
I think you'll find that its the opposite regarding V Australia!
V OZ been giving flights away to QF at the moment.
V OZ is far from starting up when they said they would. They sold so many cheap tic's to unsuspecting customers, $500 LA return!
Now unsuspecting customers get to travel QF A380...Lucky bastards lol!!
Thats a massive blow that cant be recovered in any ones books
I think you'll find that its the opposite regarding V Australia!
V OZ been giving flights away to QF at the moment.
V OZ is far from starting up when they said they would. They sold so many cheap tic's to unsuspecting customers, $500 LA return!
Now unsuspecting customers get to travel QF A380...Lucky bastards lol!!
Thats a massive blow that cant be recovered in any ones books
Last edited by S.N.A.P; 2nd Oct 2008 at 02:15.
Virgin looks into the Abyss
Virgin looks into Abyss
Debt to Equity is really crappy but at least most of the debt is long term
V Australia is about to operate up to six or 7 very large gas guzzlers to a country that is at the moment in a pilotless uncontrolled spin and has to find a pilot to even find the rudder pedal, let alone push it.
The Aussie dollar is not that sick but no where near as strong as it has been. This has a detrimental effect on US denominated debt and US outbound tourism. It may help US inbound tourism except that many have just lost their house and are not taking an overseas holiday this year.
Domestic yields, as always are under pressure and the BIG Q is about to operate its brand new A380 in direct opposition to V Australia, yield management for V Aust will be a huge challenge!
There is no parent anymore, with deep pockets other than Richard and I think his hands wont be able to reach the bottom of his.
Bottom line is, something or someone will fall by the wayside. It wont be the BIG Q, AirNZ are government backed, Tiger is SQ and SQ Gov owned. This leaves VB, V Aust. and United. One or all of this three is going to hit the wall......Any Bets?
Debt to Equity is really crappy but at least most of the debt is long term
V Australia is about to operate up to six or 7 very large gas guzzlers to a country that is at the moment in a pilotless uncontrolled spin and has to find a pilot to even find the rudder pedal, let alone push it.
The Aussie dollar is not that sick but no where near as strong as it has been. This has a detrimental effect on US denominated debt and US outbound tourism. It may help US inbound tourism except that many have just lost their house and are not taking an overseas holiday this year.
Domestic yields, as always are under pressure and the BIG Q is about to operate its brand new A380 in direct opposition to V Australia, yield management for V Aust will be a huge challenge!
There is no parent anymore, with deep pockets other than Richard and I think his hands wont be able to reach the bottom of his.
Bottom line is, something or someone will fall by the wayside. It wont be the BIG Q, AirNZ are government backed, Tiger is SQ and SQ Gov owned. This leaves VB, V Aust. and United. One or all of this three is going to hit the wall......Any Bets?
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Just looking around here, speculation aside, I do think VB does have a shot for survival now...
They are in a bit of a dire situation at the moment, but I am starting to think they may be able to recover....
wirgin might be on the money with most of what he said.
I think V Australia will go within the first few months...
VB - Hopefully, and Might be able to stay
United- Quite solid arent they?
Which leaves V Australia as the odd one out, unless people take a huge liking there, theres no way it will survive, its profit margins would be razor thin, especially if the "gas guzzlers" suddenly had an increase in fuel costs (larger than the last hike)
They are in a bit of a dire situation at the moment, but I am starting to think they may be able to recover....
wirgin might be on the money with most of what he said.
I think V Australia will go within the first few months...
VB - Hopefully, and Might be able to stay
United- Quite solid arent they?
Which leaves V Australia as the odd one out, unless people take a huge liking there, theres no way it will survive, its profit margins would be razor thin, especially if the "gas guzzlers" suddenly had an increase in fuel costs (larger than the last hike)
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UAL
United Airlines' parent raising cash
UAL Corp. wants to strengthen its cash balance by $275M by the end of the year by selling assets and agreeing to a new aircraft financing agreement.
CHICAGO (AP) -- UAL Corp., the parent of United Airlines, said Wednesday it is further shoring up its cash position amid a major downturn in the economy and persistently high fuel prices.
The Chicago-based company said financing transactions will boost its cash balance by roughly $275 million by the end of the year.
UAL has completed a $125 million aircraft financing agreement, receiving about $60 million on Tuesday, and will receive the rest of the money by mid-October.
United also has completed or reached deals to sell certain assets for roughly $140 million. The carrier did not specify the assets in a statement Wednesday.
Lastly, United plans to substitute certain cash collateral with a letter of credit, generating $10 million in net incremental cash in the fourth quarter.
The company said it still has more than $3 billion of unencumbered assets to further improve its cash position if needed.
CNN
UAL Corp. wants to strengthen its cash balance by $275M by the end of the year by selling assets and agreeing to a new aircraft financing agreement.
CHICAGO (AP) -- UAL Corp., the parent of United Airlines, said Wednesday it is further shoring up its cash position amid a major downturn in the economy and persistently high fuel prices.
The Chicago-based company said financing transactions will boost its cash balance by roughly $275 million by the end of the year.
UAL has completed a $125 million aircraft financing agreement, receiving about $60 million on Tuesday, and will receive the rest of the money by mid-October.
United also has completed or reached deals to sell certain assets for roughly $140 million. The carrier did not specify the assets in a statement Wednesday.
Lastly, United plans to substitute certain cash collateral with a letter of credit, generating $10 million in net incremental cash in the fourth quarter.
The company said it still has more than $3 billion of unencumbered assets to further improve its cash position if needed.
CNN
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One or all of this three is going to hit the wall......Any Bets?
Maybe the original economic model was profitable, but that model is no longer valid in the current climate. Additionally, QF running the A380 as direct competition won't help.
So, if it all goes south, my money would be on VA folding to try and save the parent.
Without a benefactor, Virgin needs to retain all the cash it can and that can only happen if the status quo (ie the existing VB/PB operation) remains.
