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Government Loan to Virgin Australia

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Government Loan to Virgin Australia

Old 25th May 2020, 09:30
  #1261 (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, 09:40
  #1262 (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, 10:10
  #1263 (permalink)  
 
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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, 10:16
  #1264 (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, 10:41
  #1265 (permalink)  
 
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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, 11:21
  #1266 (permalink)  
 
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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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Old 25th May 2020, 11:54
  #1267 (permalink)  
 
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Mick

Thanks, clear info and stuff to think about, appreciated.

Q: probably pertains to "ownership" but when AN went down everyones FF points disappeared, no longer any value.

If there's no VA2 do all the velocity points disappear??
Suppose simply the Q is difference between AN Frequent Flyers and VA Velocity, why there'd be a difference.

Pass! on the VA2 question. Disappointing but a measured response.

Cheers

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Old 25th May 2020, 12:06
  #1268 (permalink)  
 
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To me it would make more sense to run this through receivership as this will mean asset pricing lower than any deal brokered by Deloittes under administration.

The other big attraction is that the debt will be quarantined to the current entity in this scenario.

The other point claimed is that the staff may be able to veto any deal made under administration. I don’t know whether that is factually correct. If it is, that may further complicate an already messy situation.

Whatever happens, there will be a new airline at the end of it.
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Old 25th May 2020, 12:37
  #1269 (permalink)  
 
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Receivership would mean the loss of the AOC which would render the whole exercise futile.
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Old 25th May 2020, 12:50
  #1270 (permalink)  
 
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Originally Posted by galdian View Post
Mick

Thanks, clear info and stuff to think about, appreciated.

Q: probably pertains to "ownership" but when AN went down everyones FF points disappeared, no longer any value.

If there's no VA2 do all the velocity points disappear??
Suppose simply the Q is difference between AN Frequent Flyers and VA Velocity, why there'd be a difference.

Pass! on the VA2 question. Disappointing but a measured response.

Cheers
Back in the AN days the whole frequent flyer/loyalty thing was nowhere near as sophisticated as it is today. As such I am pretty sure that there was no separate business entity back then for the FF business. The points were issued as a form of unearned revenue and held on the AN balance sheet. And if I recall correctly while you could earn points by other than flying (payments using Diners Card for instance) you could only redeem the points for flights back then.

Velocity is a business in its own right with multiple revenue streams (loyalty partners who buy points to award to their customers) and a range of opportunities to expend points (Velocity shop) that is not exclusively restricted to the airline. That said, Velocity's fate is likely closely intertwined with VA. I'm struggling to picture how it might survive as a stand alone business if VA went down the gurgler but I'd need to see what percentage of points earned and redeemed involved VA. I guess that it could ensconce itself with whatever emerges from the ashes as a turn key FF partner.

On the VA Mk.II question, I think that the only bidder that is interested in keeping the Virgin brand and retaining as much of the pre-administration business as possible is BGH and only because of the union tie up with AustralianSuper and the Temasek connection. I don't think that they'll be able to make the numbers work though. Neither Cyrus, Indigo or Bain would have even a passing interest in the Qantas Mini-Me model being hawked by Scurrah and Strawbridge although I'm sure that they're happy to feign same to stay engaged and get further and better information.

Realistically, without a deep pocketed partner, neither Cyrus nor Indigo could afford to buy into anything other than a very lean mean core route domestic machine and even that would stretch their balance sheets. Bain could write the requisite cheque for something grander but I suspect that they will have already frightened the unions (hence the 'let's make flying fun' soft sell - that's not for customers, that's an attempt at assuaging the unions).

And apart from those permutations and combinations of the bidders and their preferences, there's that rapidly unravelling thread attached to the sword that is the sales process - Deloitte are fast running out of money. It's not often that you see a sales process go belly-up because the auctioneer had to fold his tent. And that puts the parties who think that they'd rather pick over a liquidation in the box seat. It wouldn't be hard to simply run the clock down.

For all of those reasons I think that it's currently just too hard to say yea or nay.

Last edited by MickG0105; 25th May 2020 at 12:52. Reason: Tidy up
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Old 25th May 2020, 13:01
  #1271 (permalink)  
 
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Well there are some interesting dates to note at this point in time,

1. June 11th -Government subsidies ceases.
2. June 12th -Binding bids.
3. June 16th -Administrators become liable for Aircraft leases.
4. June 30th- Administrators close sale, liquidate or have received further funding to operate.
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Old 25th May 2020, 20:37
  #1272 (permalink)  
 
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Receivership would mean the loss of the AOC which would render the whole exercise futile.
If that's indeed correct (anyone who can accurately comment on this ???), then any new entity won't be up and running before 2021. This may not be a bad thing as the domestic market will be much closer to "normal" by then and a new entrant will have some traction.

The above dates would imply that the 16th June would be the real date the administrators will have to pull the pin if the bidding complexity delays the outcome. Why would they waste 2 weeks (to 30th June) of aircraft lease payments when creditors could get their hands on those funds based on a known outcome as at the 16th June.
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Old 26th May 2020, 00:17
  #1273 (permalink)  
 
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Originally Posted by Blackout View Post
Well there are some interesting dates to note at this point in time,

1. June 11th -Government subsidies ceases.
2. June 12th -Binding bids.
3. June 16th -Administrators become liable for Aircraft leases.
4. June 30th- Administrators close sale, liquidate or have received further funding to operate.
There is probably one more you can add to that:

3.5 June 23rd - Administrators run out of cash

Last edited by MickG0105; 26th May 2020 at 01:39. Reason: Grammar
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Old 26th May 2020, 01:33
  #1274 (permalink)  

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Originally Posted by MickG0105 View Post
There probably one more you can add to that:

3.5 June 23rd - Administrators run out of cash
And...

5. July 1st - PPRuNe hits peak VA Admin threads...

Last edited by Buster Hyman; 26th May 2020 at 02:39.
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Old 26th May 2020, 02:19
  #1275 (permalink)  
 
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July 2nd. Stewie and co are knocking on Rex’s door sprucking how they can set up 10 737’s and make a profit within the first year.
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Old 3rd Jun 2020, 03:19
  #1276 (permalink)  
 
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You have no idea what your saying! Of course it will change silly
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Old 3rd Jun 2020, 03:22
  #1277 (permalink)  
 
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Well said, now cut 50% of cabin crew and you’ll be on the money
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Old 4th Jun 2020, 00:24
  #1278 (permalink)  
 
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Originally Posted by MickG0105 View Post
There is probably one more you can add to that:

3.5 June 23rd - Administrators run out of cash
And you're surprised the Administrator delayed it for binding bids. quelle surprise.
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Old 5th Jun 2020, 03:11
  #1279 (permalink)  
 
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Regardless of the outcome there will be tears this month.
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Old 5th Jun 2020, 05:02
  #1280 (permalink)  
 
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Originally Posted by B772 View Post
Regardless of the outcome there will be tears this month.
Some articles are stating at least 2000 staff will go. I will probably be one of them. Yes there will be tears, we will lose our house.
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