QF: The Virgin distraction
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QF: The Virgin distraction
A recent $1b raising from the Roo had a couple of curious analysts asking questions.
I get the Virgin rhetoric. They are very vocal. Yes, the numbers are untidy and the previous bloke blew a lot of cash.
But what about its own house?
The USA and OZ Domestic markets will recover faster compared to some other markets. The below businesses are of concern financially during grounding, but more importantly for the following year after the vaccine, will continue to be heavily loss making. They also don’t have much say in the dramas in Singapore and Vietnam, they are at the mercy of the other shareholders due to previous issues.
QF International
Jetstar NZ
Jetstar Singapore 50%
Jetstar Japan 30%
Jetstar Vietnam 30%
Both Airline groups in this country are facing the same predicament. Balance Sheets are going to be wiped to zero. One can fund future loans against it 787s, the other can’t.
A $2-3 Billion Dollar Loss isn’t out of the question. A $1b loss post Vaccine also is not unreasonable. The bottom three on that list above face a very diminished near future, and will need large cash injections.
Is Airbus still wanting its cash this month and for the next three years for its narrow body fleet replacement? Because that was budgeted to be one of the largest financial commitments in the companies history. Those Bills start this month.
I think too many stones are being thrown.
I get the Virgin rhetoric. They are very vocal. Yes, the numbers are untidy and the previous bloke blew a lot of cash.
But what about its own house?
The USA and OZ Domestic markets will recover faster compared to some other markets. The below businesses are of concern financially during grounding, but more importantly for the following year after the vaccine, will continue to be heavily loss making. They also don’t have much say in the dramas in Singapore and Vietnam, they are at the mercy of the other shareholders due to previous issues.
QF International
Jetstar NZ
Jetstar Singapore 50%
Jetstar Japan 30%
Jetstar Vietnam 30%
Both Airline groups in this country are facing the same predicament. Balance Sheets are going to be wiped to zero. One can fund future loans against it 787s, the other can’t.
A $2-3 Billion Dollar Loss isn’t out of the question. A $1b loss post Vaccine also is not unreasonable. The bottom three on that list above face a very diminished near future, and will need large cash injections.
Is Airbus still wanting its cash this month and for the next three years for its narrow body fleet replacement? Because that was budgeted to be one of the largest financial commitments in the companies history. Those Bills start this month.
I think too many stones are being thrown.
Last edited by wheels_down; 4th Apr 2020 at 10:39.
I forgot about all the Jetstar Asia stuff wheels, and was unaware of the bus payments commencing. Perhaps Q will need that 4.2b to send overseas to prop up the Jetstar franchise. How ironic.......
Whilst I see what you are saying I can’t agree with the Jetstar NZ on the list. It is likely that this operation will be the 1st Qantas group entity to start flying domestically again. It has been profitable for years and will more than likely keep its small share of the domestic market. Domestically in Australia will recover however it has to be seen if there is a big enough market for Virgin, Qantas and Jetstar. Which product will be ramped up first, Qantas or Jetstar? Jetstar Japan may recover relatively well with China on the face of it moving out of lockdown and Japan managing to flatten their curve. Jetstar Singapore is stuffed I think, as is Qantas International at its current size. Also where does Jetconnect fit now? They only do Tasman flying and when we maybe get to opening the Tasman we may see a reduction in overall services and will Qantas International want that work? Having said that here may be less seats in the Tasman due to the likes of Emirates not having access due to international restrictions and the possible disappearance of Virgin.
Of course this is all pure speculation, if there is a treatment soon things could warm up quicker than expected, when restrictions ease there is a lot of travel credit in the system that people will want to use, businesses will want to get back to work ASAP and of course a vaccine could change everything in 12 months time. Also in NZ kiwis spend 4bn per year on overseas travel, will a good proportion of that be directed to domestic travel or holidays? Depends on the unemployment rate I guess.
at the end of the day no one knows, we don’t know what Joyce and Co are thinking, hey could be sharpening the blade to cut loose excess staff, they could be planning on an assault on the market to try and increase market share during the loss making times, they could be planning on shutting the whole thing down and starting a new entity with radically reduced EBA’s. time will tell, there is going to be a lot of careers ended or curtailed though.
Of course this is all pure speculation, if there is a treatment soon things could warm up quicker than expected, when restrictions ease there is a lot of travel credit in the system that people will want to use, businesses will want to get back to work ASAP and of course a vaccine could change everything in 12 months time. Also in NZ kiwis spend 4bn per year on overseas travel, will a good proportion of that be directed to domestic travel or holidays? Depends on the unemployment rate I guess.
at the end of the day no one knows, we don’t know what Joyce and Co are thinking, hey could be sharpening the blade to cut loose excess staff, they could be planning on an assault on the market to try and increase market share during the loss making times, they could be planning on shutting the whole thing down and starting a new entity with radically reduced EBA’s. time will tell, there is going to be a lot of careers ended or curtailed though.
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The public will be eager to get away on a holiday I am leaning towards early June by way of the government lifting travel bans if not people will just do it anyway, they won’t put up living like this for the next 6 months and will need to start moving around. I would think QF domestic, JQ domestic will be back quickly along with JQ NZ even quicker now that VANZ are no longer. International travel will take a very long time to return, how long is any ones guess.
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This is a 1:50 year event and it is here, right now! The hurt is only just beginning.
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Exactly. Some of the younger generation, the ones under 35 have got no idea what a true recession, depression or economic crisis actually is. They have never seen one, studied one, or probably even understand what one is.
This is a 1:50 year event and it is here, right now! The hurt is only just beginning.
This is a 1:50 year event and it is here, right now! The hurt is only just beginning.
The public will be eager to get away on a holiday I am leaning towards early June by way of the government lifting travel bans if not people will just do it anyway, they won’t put up living like this for the next 6 months and will need to start moving around. I would think QF domestic, JQ domestic will be back quickly along with JQ NZ even quicker now that VANZ are no longer. International travel will take a very long time to return, how long is any ones guess.
Most states are the same.
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The public will be eager to get away on a holiday I am leaning towards early June by way of the government lifting travel bans if not people will just do it anyway, they won’t put up living like this for the next 6 months and will need to start moving around. I would think QF domestic, JQ domestic will be back quickly along with JQ NZ even quicker now that VANZ are no longer. International travel will take a very long time to return, how long is any ones guess.
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I'm not looking to start a fight, but isn't it a little presumptuous of you old timers to sit on your high horses looking down to us millennials about recessions etc? If you all knew what a true recession/depression was, then why are most old timers not prepared financially? Typical boomers.
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I’m not looking down on the millennials in the least. In my day pilots backed pilots, a brotherhood. I still see it that way today, hence some of my comments are aimed to help others, not belittle them. Often with age comes experience and wisdom. Sometimes not! Many ‘old’ people aren’t prepared financially because they too can’t read the economy. I ditched ‘paper’ 25 years ago - shares, bonds, cash and certificates and bought some property, metals and stones. All tucked away somewhere other than a bank vault which can be locked down by a grubby bank.
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how many families will be in a financial position to afford one once the lockdown is over?
.That's one of the root causes of financial systems collapsing. Nothing to support the house.
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I am of the opinion that on the leisure front - you'll see a very slow return. Consumer confidence will be low. Many have been financially decimated by the current environment. Many will be leveraging debt to get by currently. Holidays won't be on the table for many, likely for a year or two, as they try to recover their financial position. Further to this - airlines will likely be a little different too. They're smaller I think, in response to demand. This will push up cASK. With higher cASK - yield is eroded. To counter - airlines will increase fares. With leisure mostly price elastic demand - we'll see fewer travellers. Not sure on a flood of 'bargain basement, loss-leading offers'. I could be wrong. I hope so.
Attitudes are different now. Mine is. Life will be different. Maybe that will fade over time, as the younger get older. Who knows. The world will be different. So will behaviour.
Attitudes are different now. Mine is. Life will be different. Maybe that will fade over time, as the younger get older. Who knows. The world will be different. So will behaviour.
Qld residents aren’t required to self isolate on a normal basis. Read what I wrote. If you come to Qld, you must self isolate. What family is going to come for a holiday if they have to spend 2 weeks sitting in their accommodation before they can go out. And police are checking randomly people who are supposed to be self isolating.
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I am of the opinion that on the leisure front - you'll see a very slow return. Consumer confidence will be low. Many have been financially decimated by the current environment. Many will be leveraging debt to get by currently. Holidays won't be on the table for many, likely for a year or two, as they try to recover their financial position. Further to this - airlines will likely be a little different too. They're smaller I think, in response to demand. This will push up cASK. With higher cASK - yield is eroded. To counter - airlines will increase fares. With leisure mostly price elastic demand - we'll see fewer travellers. Not sure on a flood of 'bargain basement, loss-leading offers'. I could be wrong. I hope so.
Attitudes are different now. Mine is. Life will be different. Maybe that will fade over time, as the younger get older. Who knows. The world will be different. So will behaviour.
Attitudes are different now. Mine is. Life will be different. Maybe that will fade over time, as the younger get older. Who knows. The world will be different. So will behaviour.
In regards to some leisure only routes that carry very little self, small or large corporate traffic, like Cairns, Darwin, Gold Coast, these markets will be going backwards for a while if left to Aussie traffic only. The success in those markets will be left with the Chinese and how/if they start the mass travel migration soon after this ends. Cairns peak season isn’t far off, Jetstar normally Triples capacity and has half a dozen flights daily out of Melbourne and Sydney from April to September.
Leisure to Bali will bounce back almost instantly. I would even expect extra flights put on to Bali this Christmas. I reckon you could fill a Orange Liner out of Wagga full of Bogans for weeks once it’s over.
USA is going to be up the $hitter big time for the next 24 months.