VBA + AIR or AIZ (Air New Zealand)
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VBA + AIR or AIZ (Air New Zealand)
There is specualtion in the finance community that VBA will be shortly completing a capital raising:
Also over the last few weeks we have had this from Macquarie Equities - Mr Robert Shaw, who are probably keen to help with the capital raising as they would take a % if they got the job.
Now rather than wait for AIR to take a stake in VBA and possibly they don't have the money to do it, perhaps VBA after a capital raise could look to purchase a stake in AIR to start to tie up schedules, code share, maintenance, ground handling, back of house facilities, etc.
The NZ govt would be concerned at the moment about the way the trans-tasman is being flooded with flights and may accept this as a way to get through the current downturn. With VA, QF, UA, DL on SYD-LAX they would also be concerned about losing market share to those who used to choose AIR to fly to LAX.
A tie up could see less competition on certain routes or at certain times of the day similar to the way QF and J* share the domestic ports in OZ.
This is all a little left of field and is the reverse of what has been talked about but I would be interested to hear what people have to say on this. I would imagine AIR also need to do something at the moment as PB and J* would be hurting them.
Virgin capital raising won't fly
June 27, 2009
INVESTORS are expected to take a lukewarm approach to any attempt by Virgin Blue to raise capital to help it steer its way through the downturn in aviation.
Despite repeatedly ruling out a capital raising, Virgin managers are understood to have been canvassing investor appetite for the issue of new shares during a series of broker roadshows.
But analysts believe it would be difficult for Virgin to successfully promote a capital raising because the airline would be using the cash to fund losses rather than new investments.
"Their problem is a lack of demand," an analyst said. "I certainly wouldn't see [a raising] as a fait accompli. Virgin's problem is that they are losing money. [Investors] would be more inclined to say, 'Why don't you cut loss-making routes?"'
Management would also have to win the support of Virgin's largest shareholder, Richard Branson, who has steadfastly ruled out a capital raising for the airline. He would be loathe to have to invest more money into Virgin to avoid a dilution of his 25 per cent stake.
Matt O'Sullivan
June 27, 2009
INVESTORS are expected to take a lukewarm approach to any attempt by Virgin Blue to raise capital to help it steer its way through the downturn in aviation.
Despite repeatedly ruling out a capital raising, Virgin managers are understood to have been canvassing investor appetite for the issue of new shares during a series of broker roadshows.
But analysts believe it would be difficult for Virgin to successfully promote a capital raising because the airline would be using the cash to fund losses rather than new investments.
"Their problem is a lack of demand," an analyst said. "I certainly wouldn't see [a raising] as a fait accompli. Virgin's problem is that they are losing money. [Investors] would be more inclined to say, 'Why don't you cut loss-making routes?"'
Management would also have to win the support of Virgin's largest shareholder, Richard Branson, who has steadfastly ruled out a capital raising for the airline. He would be loathe to have to invest more money into Virgin to avoid a dilution of his 25 per cent stake.
Matt O'Sullivan
AIR New Zealand should consider an alliance with Virgin Blue to cut costs and create a stronger competitor to Qantas, Macquarie analysts led by Russell Shaw said this week.
A tie-up, through a takeover or "significant" investment by Air New Zealand in Virgin Blue, would improve profitability on routes and save money by eliminating engineering and maintenance duplication, they said. "With both airlines struggling in the current environment, we believe a merged entity or even some level of corporate investment by Air New Zealand in Virgin Blue would give these carriers improved longer term prospects," Mr Shaw said. A combined company "would stand a far greater chance of remaining competitive against regional powerhouse Qantas longer term". Macquarie said selling new shares to fund the deal might also dilute the government's 75 per cent stake in Air New Zealand, making it more attractive to domestic and foreign investors
A tie-up, through a takeover or "significant" investment by Air New Zealand in Virgin Blue, would improve profitability on routes and save money by eliminating engineering and maintenance duplication, they said. "With both airlines struggling in the current environment, we believe a merged entity or even some level of corporate investment by Air New Zealand in Virgin Blue would give these carriers improved longer term prospects," Mr Shaw said. A combined company "would stand a far greater chance of remaining competitive against regional powerhouse Qantas longer term". Macquarie said selling new shares to fund the deal might also dilute the government's 75 per cent stake in Air New Zealand, making it more attractive to domestic and foreign investors
The NZ govt would be concerned at the moment about the way the trans-tasman is being flooded with flights and may accept this as a way to get through the current downturn. With VA, QF, UA, DL on SYD-LAX they would also be concerned about losing market share to those who used to choose AIR to fly to LAX.
A tie up could see less competition on certain routes or at certain times of the day similar to the way QF and J* share the domestic ports in OZ.
This is all a little left of field and is the reverse of what has been talked about but I would be interested to hear what people have to say on this. I would imagine AIR also need to do something at the moment as PB and J* would be hurting them.
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Current Market Cap of:
VBA $323.05 M AUD - SRB owns 25%
AIR $972.65 M NZD - NZ Govt owns 75%
Estimated Current Cash Reserves:
VBA $550 M AUD
AIR $1400 M NZD
A complete merger would see the two airlines almost become as big as QF. Although I doubt that would ever happen as NZ public would be loath to let it fall into OZ hands. SRB loath for capital raising but has already commented on purchasing a part of BA so he may be keen. BG has always been keen on expansion of VBA.
VBA $323.05 M AUD - SRB owns 25%
AIR $972.65 M NZD - NZ Govt owns 75%
Estimated Current Cash Reserves:
VBA $550 M AUD
AIR $1400 M NZD
A complete merger would see the two airlines almost become as big as QF. Although I doubt that would ever happen as NZ public would be loath to let it fall into OZ hands. SRB loath for capital raising but has already commented on purchasing a part of BA so he may be keen. BG has always been keen on expansion of VBA.
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Good point Mr. Hat, they're finally getting back on their feet, somewhat, after the Ansett incident.
If they were to buy in, would that not also include PB? (Virgin Blue Holdings)
If they were to buy in, would that not also include PB? (Virgin Blue Holdings)
Mr Shaws analysis doesn't make any sense to me. I don't think AirNZ is struggling to the extent alluded to in his comments certainly they are doing no worse than any other airline and probably doing better than most airlines.
As for the comment on Qantas the "regional powerhouse", while AirNZ is much smaller I think it is in much better shape than Qantas, it seems to have much better staff "buy in", a management that is on the ball and respected by staff, and has a younger fleet that is better suited to the current climate.
The article by Matt O'Sullivan is probably closer to the truth. Why would AirNZ want to invest in VB if other investors are not keen. I don't see AirNZ wanting to invest in another Aussie bargain, once bitten twice shy.
I see AirNZ sticking to their knitting, keeping to themselves, and getting on with business. Airlines like VB/PB are most certainly a thorn in their side, however if the story is true that VB need cash just to keep going then the perceived need for AirNZ to do any deal might just disappear as VB/PB will probably make rationalisations to their operations.
As for the comment on Qantas the "regional powerhouse", while AirNZ is much smaller I think it is in much better shape than Qantas, it seems to have much better staff "buy in", a management that is on the ball and respected by staff, and has a younger fleet that is better suited to the current climate.
The article by Matt O'Sullivan is probably closer to the truth. Why would AirNZ want to invest in VB if other investors are not keen. I don't see AirNZ wanting to invest in another Aussie bargain, once bitten twice shy.
I see AirNZ sticking to their knitting, keeping to themselves, and getting on with business. Airlines like VB/PB are most certainly a thorn in their side, however if the story is true that VB need cash just to keep going then the perceived need for AirNZ to do any deal might just disappear as VB/PB will probably make rationalisations to their operations.
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Hang on wern't Macquarie and Co tied up in the very near fatal QF takeover.
Undoubtedly RF and cohorts would dearly love to get their fingers in the pie, asset strip both Airlines, ride off into the sunset never to be seen again leaving the village to burn.
Very reminiscent of Brierley and the 1990's.
Undoubtedly RF and cohorts would dearly love to get their fingers in the pie, asset strip both Airlines, ride off into the sunset never to be seen again leaving the village to burn.
Very reminiscent of Brierley and the 1990's.
ANZ need a LCC or they are lost for growth and defence. With Freedom the idea was right but the execution and branding poor.
The LCC model has worked well for QF and they are now attacking ANZ turf. With PB ANZ could have a great tool for fighting JQ. Use PB to match JQ and atack whilst keeping ANZ for business and higher yield pax. At the moment they are trying to do it all with one brand.
V Aus not so good for ANZ. Can it and take the 777's?
The LCC model has worked well for QF and they are now attacking ANZ turf. With PB ANZ could have a great tool for fighting JQ. Use PB to match JQ and atack whilst keeping ANZ for business and higher yield pax. At the moment they are trying to do it all with one brand.
V Aus not so good for ANZ. Can it and take the 777's?
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I agree On Guard
The Ansett issue stemmed from the little fish buying the big fish, and then letting politics get in the way!
There is an urgent need for NZ to establish a LCC brand, and maybe this time the planets are in alignment and the trans Tasman marriage may well bear children...
The Ansett issue stemmed from the little fish buying the big fish, and then letting politics get in the way!
There is an urgent need for NZ to establish a LCC brand, and maybe this time the planets are in alignment and the trans Tasman marriage may well bear children...
There is an urgent need for NZ to establish a LCC brand, and maybe this time the planets are in alignment and the trans Tasman marriage may well bear children...
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ANZ has no interest in VB
they are tipping PB will pull out of domestic NZ in 6 months.
Theres always this one though
SaverJet.com
they are tipping PB will pull out of domestic NZ in 6 months.
Theres always this one though
SaverJet.com
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Yeh, well that little experiment (link above) fell flat, for ANZ... staff were disgusted at how low their company stoops for attention.
The "tipping they'll be out in 6 months", is on a losing bet too...
I see the Macquarie and Co "stunt" as nothing more than that. Putting some "ideas" into the media, to destabilize stocks, create uncertainty and hence gain from the fluctuations. "They" were obviously bored and thought this up over their Cubans and aged Scotch at the Gentleman club.
I think they might have been tied up in the very near fatal QF takeover... and who got locked up over that???
The "tipping they'll be out in 6 months", is on a losing bet too...
I see the Macquarie and Co "stunt" as nothing more than that. Putting some "ideas" into the media, to destabilize stocks, create uncertainty and hence gain from the fluctuations. "They" were obviously bored and thought this up over their Cubans and aged Scotch at the Gentleman club.
I think they might have been tied up in the very near fatal QF takeover... and who got locked up over that???
AMC- I said why in my post, growth and defence. PB/JQ have a lower cost base so at the same fare are making more/losing less than ANZ having to match those fares. They are being attacked domestically, trans tasman and more international to come I predict. Also regional NZ to come from PB.
PB out of NZ- maybe but why would they bring they EMB here and open up new ports. The EMB would be ideal to link those ports and offer more freq on the main truck and VB has excess of them. Had VB not got into trouble I may agree with you but the airframes are possibly better served in the NZ domestic markets than losing more in AU.
PB out of NZ- maybe but why would they bring they EMB here and open up new ports. The EMB would be ideal to link those ports and offer more freq on the main truck and VB has excess of them. Had VB not got into trouble I may agree with you but the airframes are possibly better served in the NZ domestic markets than losing more in AU.
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I can see where you all coming from, but cant quite agree on the Air NZ needing a LCC thing. PB are reducing the frequency of NZ domestic services. They have an $11M loss and are now trying to make money out of Dunedin and Hamilton on the Tasman. A typically big, ballsy move, and good on them.
But...
Could Air NZ already have a invisible LCC? Inside the 73 you have 2 types of seats, up front for the regulars and big fare payers more leg room etc and down back less leg room for the cheepies You have pricing on Grabaseat and fares outside peak business times are sure to be similar to the LCC competition. But you also have nearly all the business travel of NZ and the fares that come with that.
Is it possible to use the same branding, same aircraft, same staff to achieve the impossible of being all things to everything at once?
And as for cost base, surely running 50 aircraft domestically has its advantages of scale to operating 6 or so?
I really cant see anyone ever successfully taking on the regionals in NZ without a seriously large bucket of $$ and a large loose screw.
But...
Could Air NZ already have a invisible LCC? Inside the 73 you have 2 types of seats, up front for the regulars and big fare payers more leg room etc and down back less leg room for the cheepies You have pricing on Grabaseat and fares outside peak business times are sure to be similar to the LCC competition. But you also have nearly all the business travel of NZ and the fares that come with that.
Is it possible to use the same branding, same aircraft, same staff to achieve the impossible of being all things to everything at once?
And as for cost base, surely running 50 aircraft domestically has its advantages of scale to operating 6 or so?
I really cant see anyone ever successfully taking on the regionals in NZ without a seriously large bucket of $$ and a large loose screw.
Yeh, well that little experiment (link above) fell flat, for ANZ... staff were disgusted at how low their company stoops for attention.
Have to wonder why VB/PB are going to places like DN and HN for trans Tasman. There might be a flurry of interest, especially with the tourism promotion that is being talked about by the burghers of NZHN, but I don't think the loadings will be sustainable.
The same external reasons that it didn't work for AirNZ at HN still exists for PB. AA is very close with plenty of choices (airlines) much better regularity and times of the day, and cheap prices.
Some of the cost structures may be lower but Air NZ has economy of scale. e.g. AirNZ has staff at these places doing checkin and despatch for other flights and extra Trans-tasman a day isn't that much more effort. If the business did pick up AirNZ would be back.
I think goodspeed has made soome very insightul comments.
The EMB may very well work but I think that was just a publicity stunt. Apparently MC looked at a jet option some time back. I don't think it stacked up.
Godspeed, good points and I agree with them.
However Air NZ still has operating costs 30-40% above PB/JQ so even matching fares in the back they must be losing more than PB/JQ in comparison. Higher yeild in the front does offset this however. Economies of scale is in their favour along with a good feeder network.
If they had their own LCC they can match the cost base with totally sep. staff and wages and bottom feed using this vehicle. They could also gain by using their own check in and ground handlers, eng. etc, on a contract basis so sig. advantages their with the infrastructure already in place.
All I am thinking is how well JQ has worked for QF. Without it they would have given a LOT more away to VB.
EMB - HN and others would be ideally suited to the EMB both domestically and trans tas. But this does have training and engineering issues for PB which go against the LCC model.
However Air NZ still has operating costs 30-40% above PB/JQ so even matching fares in the back they must be losing more than PB/JQ in comparison. Higher yeild in the front does offset this however. Economies of scale is in their favour along with a good feeder network.
If they had their own LCC they can match the cost base with totally sep. staff and wages and bottom feed using this vehicle. They could also gain by using their own check in and ground handlers, eng. etc, on a contract basis so sig. advantages their with the infrastructure already in place.
All I am thinking is how well JQ has worked for QF. Without it they would have given a LOT more away to VB.
EMB - HN and others would be ideally suited to the EMB both domestically and trans tas. But this does have training and engineering issues for PB which go against the LCC model.
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air nz
The government should have let air nz go to the wall in 2001 the tax payer over there should not have to have bailed them out again.Who do they think they are to be able to compete with the big guys when they only have a population of 4 million odd and i mean odd kiwis.Lets hope that somone wipes them off the face off the map.I say go get them and governments should stay out of the airline industry so the real players can do the best by the travelling public .
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karma
I would never wish that Virgin or any other airline goes out of business, but if a capital injection from Air New Zealand is what is needed to keep Virgin from going under, then I'm sure there will be many Air New Zealand (and Ansett) people who have not forgotten Richard Branson laughing and ripping up a cheque 7 years ago.
Last edited by yellow rocket; 30th Jun 2009 at 09:10. Reason: typo