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Government Loan to Virgin Australia

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Government Loan to Virgin Australia

Old 22nd May 2020, 22:49
  #1241 (permalink)  
 
Join Date: Nov 2005
Location: UK
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Sunfish - sad but true to say that bidders will not give a fig for staff. They are bottom line feeders that are only interested in the dollars around the deal.
Led Zeppelin is offline  
Old 23rd May 2020, 04:00
  #1242 (permalink)  
 
Join Date: May 2020
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The cull of 750 didn't make it anywhere near it. Official oracle report was 349.
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Old 23rd May 2020, 23:07
  #1243 (permalink)  
 
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Open your eyes, to the real reason why its being rushed. It'll fall into liquidation from 23 June.
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Old 23rd May 2020, 23:33
  #1244 (permalink)  
 
Join Date: May 2016
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Originally Posted by didrechambers77 View Post
The cull of 750 didn't make it anywhere near it. Official oracle report was 349.
And that tells you pretty much all you need to know about the abject lack of purpose demonstrated by Scurrah and Co in getting the business's cost base under control. Virgin was losing between a half to a million dollars a day - if that doesn't galvanise a sense of urgency I don't know what does - and they couldn't manage to achieve 50 percent of their 'rightsizing' target in six months of trying.

Despite Scurrah telling Elizabeth Knight of the SMH in November last year that, 'By Christmas, most of the 750 in headcount reductions, designed to shave $75 million from Virgin's cost base, will be complete.' the FY20-H1 interim report stated that only 'approximately 140 employees had left the business before 31 December'.
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Old 24th May 2020, 01:07
  #1245 (permalink)  
 
Join Date: May 2020
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Or the fact the boys club didn't have the balls to have tough convo's or take it seriously. Many GM's et al were overheard at drinks with "Oh they'll take a couple of sacrificial lamb's but I'll keep the rest", when the reality came and many of them were far off the target. Awkward looks across the room.
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Old 24th May 2020, 02:33
  #1246 (permalink)  
 
Join Date: May 2016
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Originally Posted by Paragraph377 View Post
Failed to meet his KPI and still pocketed a bonus! The world of aviation executives.
Well, I know that it's unusual to find anyone with a kind word for AJ in these forums but what few remember (or know, as there was no fuss made about it) was that back in 2012 when QF tumbled to a loss, because of the way the scorecards were structured AJ was still entitled to a $792,000 STIP bonus. He turned it down. He also declined the $65,000 increase to his base pay he was entitled to that year.
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Old 24th May 2020, 03:17
  #1247 (permalink)  
 
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Originally Posted by MickG0105 View Post
Well, I know that it's unusual to find anyone with a kind word for AJ in these forums but what few remember (or know, as there was no fuss made about it) was that back in 2012 when QF tumbled to a loss, because of the way the scorecards were structured AJ was still entitled to a $792,000 STIP bonus. He turned it down. He also declined the $65,000 increase to his base pay he was entitled to that year.
Wow, what a legend! How on earth did he survive with just a few million bucks?
Iím sure he really missed the $65,000 increase to his base pay!
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Old 24th May 2020, 04:18
  #1248 (permalink)  
 
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Originally Posted by didrechambers77 View Post
Open your eyes, to the real reason why its being rushed. It'll fall into liquidation from 23 June.

thatís some pretty specific information action you claim to have there.
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Old 24th May 2020, 08:10
  #1249 (permalink)  
 
Join Date: Nov 2005
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I can't see any way that Scurrah will be part of a new operation, whoever picks up the pieces. They will want their own people as unpleasant as that may be, particularly if Bain gets hold of it.
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Old 24th May 2020, 08:37
  #1250 (permalink)  
 
Join Date: May 2016
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Originally Posted by Led Zeppelin View Post
I can't see any way that Scurrah will be part of a new operation, whoever picks up the pieces. They will want their own people as unpleasant as that may be, particularly if Bain gets hold of it.
The BGH-AustralianSuper-Temasek crowd are likely the most open to retaining Scurrah and almost most likely to buy into the Virgin Mk.II Qantas Mini-Me business model of full service domestic plus international plus LCC (aka 'The Delusion'). I can't see how they'll get the numbers to work on that model though.

Someone mentioned the debtors earlier. Here it is instructive that the unions, acting as a block, will be able to vote down any proposed Deed of Company Arrangement by virtue of their representation of the employees. Even though the employee debt is a pittance in the grand scheme of things each of the 9,000-odd employees counts as a creditor for voting purposes and votes are carried or lost on value and number. We'll have to see what carries the day - pragmatism or principle.
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Old 25th May 2020, 06:32
  #1251 (permalink)  
 
Join Date: Jan 2008
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Hey Jethro, if it only were so,
The 75 million in savings required, was a spreadsheet exercise, aimed at drawing favor from the financial markets immediately prior to the bonds issue, that funded the Velocity buyback. When announced there were zero plans in place as to how to achieve it, and remarkably the contractors and consultants were the first group exempted, and then there was the call centre, and then anyone who was on an EBA, and then anyone on the front line, all exempted. Easy to see how buy into the program was so low.

It was a shame, I had thought the new boss, was evidence of the grown ups being in charge, but this an now the Delusion just go to show you, that the circus just goes on.
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Old 25th May 2020, 08:02
  #1252 (permalink)  
 
Join Date: May 2016
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Originally Posted by jethro_027 View Post
To play devils advocate for a moment, I believe it was 750 individual contract positions that were to be reduced to achieve a target of $75 mil. Not necessarily 750 people to be made redundant. If an identified role was vacant, became vacant or was merged with another role, then I would imagine this would be counted toward the target but not counted as a redundancy. Having said that, the process did drag too long and with some disappointing results, namely some of the talent departing the organisation as compared with what was being retained or worse brought back in. Unfortunately, by the time it got to the lower levels of the structure COVID 19 fun began.
You're taking an interesting semantical approach to what was in essence a hard dollar financial problem. From a cost control perspective two things were important - elimination of roles and elimination of costs associated with the role. Offering up a role that was vacant achieves the former without necessarily contributing towards the latter. In order to save money in this context you need to stop spending it. If you're already not spending it (eg the role is vacant) then offering up that up as part of the rightsizing doesn't contribute to a real saving.

In any event, Virgin's own reporting in ASX filings explicitly links 750 employees to the 750 roles being ostensibly eliminated. The FY20-H1 interim report states that of the 750 roles targeted, '140 employees' had left as of 31 December (18.7 percent achievement against target), with roles impacting a further '280 employees' having been identified to leave the business by 30 June 2020 (in aggregate, a 56 percent achievement). The report notes that further plans were under consideration for the remaining 330 roles.

By any ordinarily accepted business practices relating to cost reductions that effort was glacial and almost literally half-hearted in terms of execution against a plan. It is all the more of a capital F Fail in that Scurrah had told the SMH in November that 'most of the 750 in headcount reductions' would be complete by Christmas. Less than 20 percent had been achieved by Christmas.

The whole rightsizing exercise is just further evidence, to the extent that it is needed, of the absence of any sense of either urgency or purpose and the abject lack of accountability at the top of the business.
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Old 25th May 2020, 09:36
  #1253 (permalink)  
 
Join Date: Oct 2014
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Originally Posted by MickG0105 View Post
You're taking an interesting semantical approach to what was in essence a hard dollar financial problem. From a cost control perspective two things were important - elimination of roles and elimination of costs associated with the role. Offering up a role that was vacant achieves the former without necessarily contributing towards the latter. In order to save money in this context you need to stop spending it. If you're already not spending it (eg the role is vacant) then offering up that up as part of the rightsizing doesn't contribute to a real saving.

In any event, Virgin's own reporting in ASX filings explicitly links 750 employees to the 750 roles being ostensibly eliminated. The FY20-H1 interim report states that of the 750 roles targeted, '140 employees' had left as of 31 December (18.7 percent achievement against target), with roles impacting a further '280 employees' having been identified to leave the business by 30 June 2020 (in aggregate, a 56 percent achievement). The report notes that further plans were under consideration for the remaining 330 roles.

By any ordinarily accepted business practices relating to cost reductions that effort was glacial and almost literally half-hearted in terms of execution against a plan. It is all the more of a capital F Fail in that Scurrah had told the SMH in November that 'most of the 750 in headcount reductions' would be complete by Christmas. Less than 20 percent had been achieved by Christmas.

The whole rightsizing exercise is just further evidence, to the extent that it is needed, of the absence of any sense of either urgency or purpose and the abject lack of accountability at the top of the business.
And exactly why I'm so suspicious that Voluntary Administration was Virgins AND Deloittes plan all along.
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Old 25th May 2020, 10:22
  #1254 (permalink)  
 
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Yes, and they cunningly spent 10 years of losing money to achieve it....
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Old 25th May 2020, 10:30
  #1255 (permalink)  
 
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The VAH board had their head in the sand for years, but they will be gone when the company disappears and a new entity is started.
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Old 25th May 2020, 10:40
  #1256 (permalink)  
 
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Originally Posted by ozbiggles View Post
Yes, and they cunningly spent 10 years of losing money to achieve it....
I don't think that it was a ten year plan but it is notable that given current circumstances VA has managed to reacquire 100 percent of Velocity for significantly less than half of the earlier sale price.

They raised the $700 million purchase price plus the $11 million in transaction costs plus sufficient to cover KS's bonus payment in an unsecured bonds issue that they never had to make a coupon payment on. They'll end up settling with bondholders for what? 20 cents on the dollar. That means that they will have reacquired that 35 percent stake in Velocity that was sold back in 2014 for $355 million for around $150 million.

​​​​​​Funny how things have worked out, Velocity not being part of the Voluntary Administration and all.
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Old 25th May 2020, 11:10
  #1257 (permalink)  
 
Join Date: Aug 2004
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Sorry for the pun, but Virgin was stuffed from the start by an antiquated Board structure populated by dickheads. It still is - until it’s sold or wound up.

Specifically, JB and Scurrah are/were “Managing Directors” which is a disaster waiting to happen. There is a huge conflict of interest between the role of “manager” and Director. The Directors job is to safeguard the assets and the interests of the shareholders. The managers role is to use the assets to make money.

The key here is risk. The Director MUST ensure that risk is managed to protect the assets. The manager has to accept risk to make money. The whole business plan/strategy thing is about balancing risk and return. If the Board and the manager cannot come to agreement or the manager screws up, then the manager is fired by the board.

Now if you have an MD, the poor board can’t even have a private conversation about the performance of the manager, let alone sack the MD. The roles are hopelessly conflicted. That’s why JB was there until he felt like leaving. If he was a CEO and not a Board member, the Board could have given him three years or else.


As for the staff cuts, that simply demonstrates weak and inexperienced management. You cut FIRST, then you tell the remaining people to get busy and restructure to cope with the work. To do otherwise gives the drones more time to burrow in, make more work for themselves and prove how essential they are. They are then almost impossible to remove.


To put that another way, why do you think that a football coach is always an employee of the club and not a member of the board of directors?
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Old 25th May 2020, 11:16
  #1258 (permalink)  
 
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Originally Posted by MickG0105 View Post
I don't think that it was a ten year plan but it is notable that given current circumstances VA has managed to reacquire 100 percent of Velocity for significantly less than half of the earlier sale price.

They raised the $700 million purchase price plus the $11 million in transaction costs plus sufficient to cover KS's bonus payment in an unsecured bonds issue that they never had to make a coupon payment on. They'll end up settling with bondholders for what? 20 cents on the dollar. That means that they will have reacquired that 35 percent stake in Velocity that was sold back in 2014 for $355 million for around $150 million.

​​​​​​Funny how things have worked out, Velocity not being part of the Voluntary Administration and all.
OK I'll be the financial bunny:
- who "owns" velocity and why (if bought back by VA) is it not part of the VA adiministration?
- who, if anyone, primarily benefits from velocity being outside the VA administration ( as you assert).

Finally simple yes/no: will there be a VA2?

I personally believe the administrator will keep finding financial blackholes and will end up in receivership/liquidation.... whatever.
More so wonder if the creditors will accept anything like 20cents in the $ and let others walk away with the entity/assets to be stripped, force receivership and get a better result (maybe?) and let the asset strippers eat shit.

From memory in the AN days one of the lead characters, upon departing these shores after failure to acquire/strip, was rather blunt and rude to the QF staff assisting his departure because of their "opportunity lost".

Cheers
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Old 25th May 2020, 11:41
  #1259 (permalink)  
 
Join Date: Apr 2010
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Would it be public knowledge if another operator lodged early plans for a AOC?

There was reports in March about Indigo considering submitting for a AOC, as well as looking at Virgin.

They could have lodged a 30 odd A320/1 AOC, and could be operational by Octobe/November. Tiger in 2007 lodged in March, went live late November.
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Old 25th May 2020, 12:21
  #1260 (permalink)  
 
Join Date: May 2016
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Originally Posted by galdian View Post
OK I'll be the financial bunny:
- who "owns" velocity and why (if bought back by VA) is it not part of the VA adiministration?
- who, if anyone, primarily benefits from velocity being outside the VA administration ( as you assert).
Okey doke, so Velocity Frequent Flyer Group Pty Ltd is a business entity in its own right that is wholly owned by Virgin Australia Holdings. It has two directors - Paul Scurrah and Keith Neate. Interestingly up until early March it had a third director, Ken Dean. He is also a VAH director. Dean ceased being a director of Velocity on 29 February and he was not replaced. The Velocity FFG is in turn comprised of seven different business entities.

Why isn't it part of the administration? There are 38 VAH business entities covered by the administration and Velocity FFG isn't one of them. I can only imagine that Velocity FFG is deemed to be sufficiently solvent and liquid that it doesn't require the protection of voluntary administration.

Que bono? I'm not 100 percent sure that anyone does but it just strikes me as odd that the business entity that creditors' money helped buy back isn't currently subject to the administration. The timing of the change to the composition of the Velocity board strikes me as curious though.

Originally Posted by galdian View Post
Finally simple yes/no: will there be a VA2?
Pass. I just think that there are currently too many variables and unknowns to make a straight up and down yes/no call on that.

Something will most assuredly rise from the ashes but it's hard to say at this stage what you'll be able to call that. A lot of it comes down to what Deloitte can do with the debt. Apparently the bidders teleconferenced with the unions today so they will now have a feel for how difficult any substantial restructuring will be. I'm thinking more and more that the emerging complexities are going to swamp Deloitte's sales process. I suspect that any of the bidders apart from maybe BGH would be just as happy picking through a liquidation rather than this process and it's only FOMO that's keeping the process ticking over.
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