20 buyers now circling Virgin Australia
- Shuttering international, and
- Resolving the unsecured notes.
International had long been a drag on the business. It had basically not returned anything by way of profit and had a fairly large cost line associated with it (half of the aircraft lease costs incurred by the business were from international). Just taking international out of the frame should put about $50 million net back onto the bottomline.
The coupon payments on the unsecured notes were around $160 million a year (that was about one quarter of the business's total annual finance costs). Taking that cost line off the books is a huge benefit. Of course, the corollary is to note how damaging last year's notes issues were to not just the balance sheet but also the P&L.
The EBAs, while doubtlessly important, are not big financial levers when compared to the far more basic (and brutal) labour cost lever, headcount. Removing one third of the workforce (perhaps more, I am acutely aware of the repeated use of the caveat phrase 'when the market recovers' whenever headcount is mentioned) is the big kicker to the bottomline.
What Bain will be looking for in the EBAs is flexibility that supports productivity. I don't know enough about the Virgin EBAs to comment on how they stand up in that regard. What I did note, from memory, was that the Virgin EBAs tended to have lower annual wages escalators than Qantas - don't expect that to change.
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ex The SMH: Bain offers unions key advisory role in Virgin reboot........
SMH article at 17:25 AEST- link here: https://www.smh.com.au/business/comp...30-p55qp1.html
An extract here:
Virgin Australia's presumptive owner Bain Capital has extended an olive branch to the airline's unions in the form of a workers' advisory council that will consult on how the carrier is relaunched from administration.
The establishment of the body made up of three union representatives, Bain and Virgin chief executive Paul Scurrah follows a union revolt over the US private equity firm's choice of directors to oversee Virgin.
In a letter sent to unions on Sunday, Bain's local boss Mike Murphy said he agreed to the unions' request to establish a union advisory council, which will meet every fortnight until the end of the year.
"We see this confidential forum as an important opportunity to discuss key matters that go to the heart of Virgin’s recovery, including how we can secure long lasting employment for as many Virgin people as possible," he said.
Mr Murphy said creating such a body was a "unique step in corporate Australia" which underscored the importance it placed in having a constructive relationship with the unions.
Transport Workers Union national secretary Michael Kaine welcomed the news and said his union would try to use the council to have a say in who ends up on the board.
Mr Kaine said the unions did not want to see the type of "spiteful leadership" at Virgin on display at Qantas, "as it uses the pandemic as a cover to replace 2500 ground workers on lower conditions".
The TWU and other unions have objected to Bain's plan to make former Jetstar boss and Qantas executive Jayne Hrdlicka a director and possibly chairman of Virgin, saying they feared she would bring either a budget airline mindset or Qantas' style of industrial hardball to the smaller airline.
Virgin's second creditors' meeting will be held on Friday, with creditors owed $6.8 billion to vote on the transfer of ownership to Bain.
Now, 'it' May/May-Not be of interest, here????, however- the TWU are sanctified, on your 'collective' behalf by 'Middleton J'...... Link here: https://www.judgments.fedcourt.gov.a...20/2020fca1218
The Best/& be Well/Go Well this week
rgds all
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An extract here:
Bain offers unions key advisory role in Virgin reboot
Bain offers unions key advisory role in Virgin reboot
By Patrick Hatch
August 30, 2020 — 5.25pmVirgin Australia's presumptive owner Bain Capital has extended an olive branch to the airline's unions in the form of a workers' advisory council that will consult on how the carrier is relaunched from administration.
The establishment of the body made up of three union representatives, Bain and Virgin chief executive Paul Scurrah follows a union revolt over the US private equity firm's choice of directors to oversee Virgin.
In a letter sent to unions on Sunday, Bain's local boss Mike Murphy said he agreed to the unions' request to establish a union advisory council, which will meet every fortnight until the end of the year.
"We see this confidential forum as an important opportunity to discuss key matters that go to the heart of Virgin’s recovery, including how we can secure long lasting employment for as many Virgin people as possible," he said.
Mr Murphy said creating such a body was a "unique step in corporate Australia" which underscored the importance it placed in having a constructive relationship with the unions.
Transport Workers Union national secretary Michael Kaine welcomed the news and said his union would try to use the council to have a say in who ends up on the board.
Mr Kaine said the unions did not want to see the type of "spiteful leadership" at Virgin on display at Qantas, "as it uses the pandemic as a cover to replace 2500 ground workers on lower conditions".
The TWU and other unions have objected to Bain's plan to make former Jetstar boss and Qantas executive Jayne Hrdlicka a director and possibly chairman of Virgin, saying they feared she would bring either a budget airline mindset or Qantas' style of industrial hardball to the smaller airline.
Virgin's second creditors' meeting will be held on Friday, with creditors owed $6.8 billion to vote on the transfer of ownership to Bain.
The Best/& be Well/Go Well this week
rgds all
S28- BE
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Not sure I would regard that move as an “olive branch”.
More likely to be a “tactic”. Bain will be wanting unions to support EBA amendments which involve reductions in terms and conditions.
The first meeting would probably go something like this:
BAIN: “So, do we all agree that we need to do everything possible to secure as many jobs as we can?”
UNIONS: “Yes.”
BAIN: “Okay, so the only way we can do that is reduce xxx by yyy...”
UNIONS: “Oh, OK”; or
UNIONS: “Piss off.”
Then, regardless of which response the unions choose, either job losses or reductions in pay will become the unions’ fault, not Bain’s.
A reduction in pay will be played off against further job losses in order to achieve Bain’s financial goals. Of course, they won’t refer to it as their financial goals, they will refer to it as “survival of the airline”. This is where the unions will need to play smart, because they can lose either way. The “olive branch” will be a tactic to soften up unions for “the inevitable”. It will only become inevitable if they let it happen.
Saying “yes” to everything would be a poor idea, but saying “no” to everything may not be the best strategy either. They will need to be very smart, because they will have a formidable opponent in an awkward and unpredictable situation. The unpredictable nature of the industry at present will play to Bain’s advantage. They will also need to keep their members onside, which may be difficult.
But at the end of the day, it will be important for everyone to remember that Bain’s purchase of the airline is not conditional on EBA sacrifices.
More likely to be a “tactic”. Bain will be wanting unions to support EBA amendments which involve reductions in terms and conditions.
The first meeting would probably go something like this:
BAIN: “So, do we all agree that we need to do everything possible to secure as many jobs as we can?”
UNIONS: “Yes.”
BAIN: “Okay, so the only way we can do that is reduce xxx by yyy...”
UNIONS: “Oh, OK”; or
UNIONS: “Piss off.”
Then, regardless of which response the unions choose, either job losses or reductions in pay will become the unions’ fault, not Bain’s.
A reduction in pay will be played off against further job losses in order to achieve Bain’s financial goals. Of course, they won’t refer to it as their financial goals, they will refer to it as “survival of the airline”. This is where the unions will need to play smart, because they can lose either way. The “olive branch” will be a tactic to soften up unions for “the inevitable”. It will only become inevitable if they let it happen.
Saying “yes” to everything would be a poor idea, but saying “no” to everything may not be the best strategy either. They will need to be very smart, because they will have a formidable opponent in an awkward and unpredictable situation. The unpredictable nature of the industry at present will play to Bain’s advantage. They will also need to keep their members onside, which may be difficult.
But at the end of the day, it will be important for everyone to remember that Bain’s purchase of the airline is not conditional on EBA sacrifices.
The normal trade off is to enforce designated union membership on all staff. In return the union rolls over on reduced terms and conditions. The usual term is “company unions”. The union officials don’t care, they join the company HR department eventually while they wait for a safe labor seat or a commissioners job at fair work.
So where does this leave the AFAP? They are not aligned with Labor Politics or the TWU. The last thing we need is the clowns at the TWU claiming they speak for all employees or coercing pilots into things that may not be in Pilot's best interest.
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The normal trade off is to enforce designated union membership on all staff. In return the union rolls over on reduced terms and conditions. The usual term is “company unions”. The union officials don’t care, they join the company HR department eventually while they wait for a safe labor seat or a commissioners job at fair work.
Sunfish, going back to your question about Bain’s exit strategy, apart from the obvious medium-term play of knocking the business into shape and floating or selling it, there is a possible shorter term play involving Velocity. Bain would have the option of either selling (part or all) or spinning off and floating Velocity.
A sale would obviously be the more straightforward of the two options. Last year's re-acquisition of 35 percent of Velocity for $700 million notionally valued the business as a whole at $2 billion. Clearly, it is not now nor was it then worth that (which only goes to underscore the questionable nature of that transaction) but to the right buyer it is possibly worth somewhere in the order of $850-ish million give or take 10-15 percent (that's a back-of-the-napkin estimate based on prior EBITDAR, YMMV).
Two of the many, many questions that would need to be considered are:
Nevertheless, there's a play there and I'd be surprised if Bain haven't already run down the numbers on it.
A sale would obviously be the more straightforward of the two options. Last year's re-acquisition of 35 percent of Velocity for $700 million notionally valued the business as a whole at $2 billion. Clearly, it is not now nor was it then worth that (which only goes to underscore the questionable nature of that transaction) but to the right buyer it is possibly worth somewhere in the order of $850-ish million give or take 10-15 percent (that's a back-of-the-napkin estimate based on prior EBITDAR, YMMV).
Two of the many, many questions that would need to be considered are:
- What impact has the industry downturn had on Velocity's earnings/value (and how long would any such impact persist)?
- Is Velocity of greater value over the medium term being retained by the business?
Nevertheless, there's a play there and I'd be surprised if Bain haven't already run down the numbers on it.
Last edited by MickG0105; 31st Aug 2020 at 00:14. Reason: Spelling
Both the organisations representing the majority of flight crew at VA have been doing an exceptional job,given the situation could reasonably be assessed as backs to the wall stuff.
They’ve been working together and doing all they can(and then some) to keep members informed of what is actually going on,and providing educated guidance on where things might or might not go whenever they can.Seeing as they are actually sitting across the desk from the people who are now acting for the new owners in waiting,it’d be hard to see anyone else’s point of view being more relevant.
As for the new agreement,once again,almost any opinion is speculation,and almost anything’s possible,given the obvious lack of leverage flight crews apparently have at this point in time.This doesn’t mean a negotiation means the unions should or will just rollover,it’ll probably be just tougher than almost any process had in better times;remember there’s almost no comparable precedent here.
A significant base rate reduction is probably on the cards,no different from almost any airline agreement reached worldwide in the last few months(didn’t Ryanair crew vote for a sizeable reduction?),but there’ll be opportunities too to make the best of a pretty awful position.
I don’t envy the guys in the chairs doing this stuff,most are line pilots themselves,with plenty of heat coming from many directions,like everyone else..
I reckon they need to be thanked and respected for whatever outcome they can manage.
They’ve been working together and doing all they can(and then some) to keep members informed of what is actually going on,and providing educated guidance on where things might or might not go whenever they can.Seeing as they are actually sitting across the desk from the people who are now acting for the new owners in waiting,it’d be hard to see anyone else’s point of view being more relevant.
As for the new agreement,once again,almost any opinion is speculation,and almost anything’s possible,given the obvious lack of leverage flight crews apparently have at this point in time.This doesn’t mean a negotiation means the unions should or will just rollover,it’ll probably be just tougher than almost any process had in better times;remember there’s almost no comparable precedent here.
A significant base rate reduction is probably on the cards,no different from almost any airline agreement reached worldwide in the last few months(didn’t Ryanair crew vote for a sizeable reduction?),but there’ll be opportunities too to make the best of a pretty awful position.
I don’t envy the guys in the chairs doing this stuff,most are line pilots themselves,with plenty of heat coming from many directions,like everyone else..
I reckon they need to be thanked and respected for whatever outcome they can manage.
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ex the ASX: RESIGNATION AND APPOINTMENT OF COMPANY SECRETARY.......
ASX link: https://www.asx.com.au/asxpdf/202008...g49wdm57bv.pdf
Extract:
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Extract:
VIRGIN AUSTRALIA HOLDINGS LIMITED (ADMINISTRATORS APPOINTED)(ASX:VAH):
RESIGNATION AND APPOINTMENT OF COMPANY SECRETARY
31August 2020
Virgin Australia Holdings Limited (the Virgin Australia Group) wishes to advise of the resignation of Ms Sharyn Pageas Company Secretary, effective 31August 2020. Ms Dayna Field and Ms Susan Schneider will be appointed as joint Company Secretaries with effect from 31 August 2020.
As the Company is in Voluntary Administration, the Administrator continues to be the Virgin Australia Group’s representative under ASX Listing Rule 12.6 for communication with the ASX in relation to Listing Rule matters. Ms Field is the Virgin Group Chief Legal & Risk Officer and Ms Schneider is the General Manager, Legal & Compliance at Virgin Group.
RESIGNATION AND APPOINTMENT OF COMPANY SECRETARY
31August 2020
Virgin Australia Holdings Limited (the Virgin Australia Group) wishes to advise of the resignation of Ms Sharyn Pageas Company Secretary, effective 31August 2020. Ms Dayna Field and Ms Susan Schneider will be appointed as joint Company Secretaries with effect from 31 August 2020.
As the Company is in Voluntary Administration, the Administrator continues to be the Virgin Australia Group’s representative under ASX Listing Rule 12.6 for communication with the ASX in relation to Listing Rule matters. Ms Field is the Virgin Group Chief Legal & Risk Officer and Ms Schneider is the General Manager, Legal & Compliance at Virgin Group.
ENDS
This announcement was approved for release by Vaughan Strawbridge, Administrator Deloitte.
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Last edited by Section28- BE; 31st Aug 2020 at 05:06. Reason: Double-Up: missed Mr 'Blackout's post shall leave this on, as it has an extract......
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I see this as an 'optics' play from Bain. The TWU are also in trouble as their 'numbers' continue to fall and the influence they can have at the airlines. The EA's at VA will need sharpening aka 'improved productivity'. This will be interesting to watch from the side on how this goes. VA needs to reduce their fuel-excluded cASK dramatically for V2.0 to be a success.
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This would apply broadly to all EA's. Not just pilots. And I would also suspect that there is a big drive on automation e.g. RPA and other technology-driven solutions to both reduce labour needs and improve productivity/capability etc. They've already signalled a significant investment in 'technology'.
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If the work rules are difficult to program there isn't any technology on the market that will make the rosters miraculously work. I suspect Bain will be going for the old exemption type Agreement. Most flexibility for the least cost.
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Looks like JH maybe a contentious issue regarding the Union according to The Australian newspaper.
But trust me - she's a changed person, a mere shadow of her former combatitive self - ready to work with all and sundry. Just ask her.
At least - that's the story she'll try and tell. But a leopard never changes it's spots.
Good luck in keeping her out.
