Merged: Virgin Blue Share Price - how low can it go and for how long?
 

VB shares must be taking a beating...they even got a mention on CNN in the States!!!:bored:

$0.89...down two cents (or nearly 2.2 percent) for the day. Down about 40 cents in the last three or four weeks? Personally I reckon that's underdone but I don't have enough spare cash to put my money where my mouth is! :(

Can someone tell me how it is even possible that the limited amount of shares on the market can make much of a difference to VB.
Toll own 62%
Virgin Group own 20%
Brett has say 5%

Leaving only 13% actually traded on the market. This would have to be one of the lowest actual amount of shares on any of the companies on the stock exchange. Even if Toll are selling off whilst talking about holding VB shares they would surely reach a point where they would have to tell the market that they are doing this.

Perhaps someone with more knowledge about the stock exchange than myself can explain?

Time to watch the wave people, peaks and troughs here they come.

Listings as of some time ago..

Toll 62%
Virgin Group 25%
BG 3%(ish)
Market 10%

At listing in 2003 VBA was worth an estimated $2.3 Billion, today it is likely about 1.1 (or less).

Tricky Dicky sold down to Patrick for a fortune, not bad for $10 million in seed money.

Now BG who has 3%(ish) has gone from a reported $85M down to $30M(ish) so whatever happens I will not be shedding a tear because it was only ever worth the paper the documents were signed on. Don’t forget that.

BG will stay, Toll will hold on, end of the day they are very well run and are proactive if anything, see the “cutting flights” thread.

As to Tricky the windbag coming back in, doubtful. Little has piddled on his shoes before and there is no love lost between the two and although VBA is “non-core”, belly cargo in V-Aus is definitely core. Meaning Tricky cant get his hands on more than 49% of an Australian Company operating internationally (Stands to be corrected on this bit), which would then kill V Aus, similar vein to why SQ cant/wont pitch the pacific.

Watch this space, money and debt are harder to come by right now at the right price so whomever is contemplating needs cash/equity and deep pockets.

The key will be the mums and dads who bought into windbags’ hype and paid double for what their shares are worth now. So whoever panics and and dumps there will be some interesting buyers (sharks) that will bounce in the future.

From scuttle but around our office some one was crunching the numbers to see if they could raise the $1bn plus just to get their hands on the outstanding VB 737 purchase rights that they have at a very very good price and turnover the airframes for the cash.

Watch this space there is word out

Hog,

I don't think there are many airframes that VB actually own. Its only about 10 aircraft. The rest are leased and the firm orders are for EMB's and some 777, they are not even here yet. If they are buyin the stock for firm order options, well thats different. VB owns nothing, no terminals, no assests, just the rights to Bransons name. About the purchase rights to the 737's, I don't know how many they have on order. Interesting times ahead myfriend.

Either way, I think this company is a slow sinking ship! I give it 12-18 months and it won't exsist in its current form. Two airline Aus, here we go again.

So we are talking about a company that makes $100 million every year with debt only associated with assets shutting down in 12 months. Sure that makes sense. :} Ansett only made one profit in two years of the last ten ( and those were only after Big Ed did some asset sales) and had 2 Billion in debt when it tanked. Can't see the comparison although if pax numbers dive it could be a different story.

Hi Deeds,

The company made $215 million last year and is expected to make $100 million this year which includes the capital outlay for a major expansion.

If i were in a company making $100 million i am not so sure that i would be calling it a sinking ship? The share price has tanked because the market, which is already a very nervous one, does not like to hear profit downgrades. Nevertheless, i would think that comments like yours would be more appropriately reserved for when there is $0 profit or an overall loss.

Regards

Ratter :ok:

Fuel-$113.91/Barrel ex Nine News
 

Fuel at $113.91/Barrel overnight- as quoted on Nine News this morning, a new high apparently.

If you've been following it closely, VB announced 1st half profit of $113m for FY07/08 back in Feb, and last week said full year profit would not exceed $140m. So the company turned from $113m in 1st 6months, to possibly nothing or even a loss in 2nd half. It may even run at a huge loss in 2nd half of 08 with more E-jets and startup of V Australia.

The Australian economy has only just started to slow down, and there's already a sharp profit dive. How could the share price not have slumped?

Beep WRONG! how about looking at the facts before you post mate

Morning all

Coaldemon and Ratter

Would have to agree. I would'nt mind owning a couple of companies each making a profit of 100M plus each year.

If DJ or any company for that matter makes 100M plus profit each year then their not going the gurgler any time soon.

Also i reckon i can think of several American legacy carries who would be happy to be in that position.

Skystar320.

I was witn AN mks 1 and 2 to the end and i don't think coaldemon is too far from the mark.

I don't think any shareholder and/or employee likes to see their company downgrading profits, but these are trying times for a lot of companies and not just in aviation. 100M plus in the bank after all the bills have been paid is not a bad result.

And let's not forget that a number of factors affecting DJ are affecting other airlines.

Fly safe and play hard.

Regards to all.

Hoss 58

One of the truisms of the sharemarket is " The market is always right." It's a warning about buying against the trend.

The price is going down for a reason. Anyone thinking of buying VBA shares when the trend is down needs their head read because there are very good reasons for it. These reasons may only be short term, such is the nature of the sharemarket, but they are compelling for the analysts and institutions nevertheless.

And one of the falsehoods of the sharemarket is "The market is always right".

A lot of astute investors make a lot of money taking advantage of "opportunities" that arise when the believe the market has undervalued or overvalued a stock. The market always overreacts. The market sometimes panics. The market often gets greedy. The market is, actually, a bunch of fools...

So true Hoss58. Back in October 2007 when the market was riding high, QAN was trading at $6.00, REX was around $2.70 and VBA was $2.30.
Compare these to today's prices - QAN $3.56 - down about 40% since October, REX now $1.16 down 57% and VBA 90c down 61%.

So whilst VBA might have their problems at the moment they are not alone.

$100m Cost Cutting
 

Brett sent an email out to all staff saying that the company needs to cut $100m in costs and information to staff on the first cuts will be within weeks... any ideas on what they might cut ?

Tell you what HF3000, you buy some 1000 shares now and I will short 1000, and lets compare notes in a month or so.

I would take you up on that with the exception that I wouldn't expect to see a profit in a "month or so". But I reckon you'd see a significant opportunity to sell those shares for a good profit some time in the next few years. Aviation is cyclic - the risk is when an airline doesn't survive a downturn. I think DJ will survive this downturn, and so will Qantas. I would buy shares in both airlines at the current prices. DJ may be a bigger risk, but also might turn out to be a bigger reward.

I wouldn't be taking out a margin loan on those shares though, so I suppose that means I confess there's a good chance of more loss before there is gain.

I also wouldn't commit more than a small percentage of my portfolio to airline stocks!

VBA- 16 April 08
 

They bounced along at .89/.90c for most of the day and softened to .88c at the end, on a volume of 1,131,865.

Link to the chart for today ex the ASX website- below:

ASX Chart- VBA 16/04/08

The recent collapses and mergers in the airline industry imply survival is becoming increasingly difficult. Sadly history tells us only the strongest will stay.

With a population of only 22 million I can't see all OZ airlines cruise through the upcoming economic downturn, exacerbated by the subprime crisis. Banks are not as willing to lend money to keep you above water, and personally I think only QF/JQ will be around in a few years' time.

Hmm, I wonder what the Qantas share price will hit when they are the only airline left in the country?

BUY BUY !!

And I wonder what qantas's share price will hit if they announce a profit downgrade????

The increasing price of fuel will have a major impact on airline revenues over the next year or 2 .

OPEC has the world by the testicles and it seems every 10 years or so it gives them a good squeeze.

HF3000, you actually prove my point. The trend on VBA shares is down. In the short term world of the sharemarket they are more likely to be down than up in a months' times.

I speak as a trader, not an investor... two very different things. The trend is your friend.....(until it bends...)

Ratter,

$215m then $100m then what is next? Its like a QF physc test question!

This is what Shares in Virgin Blue Holdings fell 18.5 percent to a record low on Monday after Australia's second-biggest airline warned its profit would more than halve as it faces higher fuel costs and competition.

Virgin Blue, in which transport group Toll Holdings owns a 63 percent stake, said after the close of trading on Friday that its net profit would drop to around A$100 million (US$93 million) this year, from A$216 million a year earlier.

It could also incur an extra A$120 million in fuel costs next year and faced an increase in capacity as new carriers enter the market.

"It is sobering to note the guidance implies the business just breaking even in the second half," said a research note from analysts at UBS, who cut the stock to sell from neutral and lowered their forecast for next year's earnings by 36 percent.

Virgin Blue stock, which traded above A$2 in February, was down 18.5 percent at A$0.91 in the morning session. Shares in Toll were 12 percent lower at a 19-month low of A$8.31.

UK entrepreneur Richard Branson's Virgin Group owns about 25 percent in Virgin Blue.

The carrier, which competes with Qantas Airways, appointed Goldman Sachs JBWere in February to review its future amid reports it could sell a controlling stake to another airline. On Friday it said buyer interest did not reflect the airline's underlying value and it was reviewing alternatives.

Separately, Qantas said on Monday that Pacific Airlines, Vietnam's second largest carrier in which Qantas has an 18 percent stake, will be renamed Jetstar Pacific.

Jetstar Pacific planned to introduce up to 30 Airbus A320 aircraft by 2014, Qantas said. The first A320 is expected to start in August, initially growing services within Vietnam, before international expansion from late this year into markets likely to include Thailand, Singapore, Malaysia and Cambodia.

Qantas will increase its stake to 30 percent in 2010.

The numbers don't lie!

Hit the nail on the head...
 

"Shares in Virgin Blue Holdings fell 18.5 percent to a record low on Monday after Australia's second-biggest airline warned its profit would more than halve as it faces higher fuel costs and competition." :{

I thought that one day this might happen. IMHO a few basics;

1. VB based its initial model roughly on Virgin Express; THE loser in the Euro LCC wars and now quoted by experts as how NOT to set up an LCC.
2. VB is no "miracle" of OZ aviation. It looked very shakey until by pure luck Ansett fell over and created massive market space.
3. VB grew and succeeded for a while because the only competition was QF (High cost legacy carrier). That was tempered by Joke* (IMHO a subsidised LCC) and now will be squeezed by Tiger (A hard core Ryanair style LCC with mondo backing).
4. VB's response has been to break every rule in LCC cost control; multiple aircraft types, lounges, multiple products (inc a quasi biz class) etc, etc.
5. From what I've read here and the opinions of mates inside VB the past strength of its once great esprit d'corp and positive relationship with management has gone. That kills productivity. Well known fact - just ask South West (USA) and their legendary President / CEO Herb Kelleher.

To me its like BG is trying to make VB all things to all people (LCC & Legacy) and not surprisingly failing at both (not as cheap or simple as a real LCC nor offering the network, luxury or prestige of a legacy carrier).
I was once told; "theres no such thing as compromise, only sacrifice".

In my view VB now has none of the strengths of an LCC or a legacy giant. IMHO its lost direction and is easy meat, lacking the support of mega carriers like QF or SIA and facing mega oil prices and stiff (and likely increasing) competition.:sad:

In my view its pretty simple; VB's strengths in the market are percieved by the players as almost nil, (cute F/A's perhaps? :)), its strategy is unclear and so guess what; Toll can't sell its stake for any decent return; (What serious player would want it?) and the market knows it. Result - shares plummet! Not rocket science.

Mind you QF's board might not be laughing too hard. Their oil hedge is rumoured to run out soon and then their shares will be under pressure too...

Maybe if Tricky really can buy back in and give some pizazz and leadership its stands chance as a reborn "value" carrier a'la Easyjet UK. But even then their current op is way off that mark too... Remodelling required IMHO... ;)

I for one hope they sort it out. Lotta good people's jobs and families depend on it! :ok:

VB redundancy?
 

As Ansett administrators have just paid some more redundancy money ( now to a total of 92c in the dollar ) do VB have a similar EBA? Or perhaps there are really no assets to speak of anyway. So what's the point?

Kremin - I agree with you entirely, it's just that our outlooks are different - I am a long term investor. I woudn't seek to short-term profit from further decline in DJ's share price, rather commence a gradual buy-in with a long term outlook for a $1.60 - $2.40 selling price in the future for a 100-200% profit. Might take time, and involves some risk, but here's my risk assessment.

VB's B737s consume as much fuel as QF's B737s, and about as much fuel as Tiger and JQ's A320s.

The increasing fuel price will only have one impact - each of the above 4 carriers will have to raise their prices (by the same amount) to sustain their businesses.

This means that no carrier will sustain a market advantage over any other carrier in the Aus domestic market (due to fuel prices). The only thing that will happen is that overall price rises will eventuate and the travelling public will fly less.

However the demographic of the travelling public that will fly less will probably be the leisure sector (the main bread and butter of the LCCs).

So DJ's decision to be less of a LCC and more of a business oriented carrier will probably end up proving a good decision in the developing climate.

The other difference is that Tiger has backers that won't LET it fail, and JQ has a parent company that won't let IT fail either.

DJ is a bit alone here - no cashed up parent Company that can cross subsidise. How much or long will Toll/Tricky etc support it until it can reform itself into a good profit making entity?

Toll have a lot of money tied up here, as does Tricky... It will be interesting to see if DJ respond by reinventing themselves as a LCC, or taking on the big QF and REALLY trying to get the good high yield business. I agree, they probably need to go one way or the other, not waffle around in the middle.

For example, I have a business traveller friend who tried DJ - he booked a 6 o'clock flight with them on the phone. Turned up at 5.15pm and was told his 0600 flight had departed 12 hours ago. He tried to explain that he had booked a 6 pm flight - they said oh must have been some confusion, but bad luck, not refundable, you'll have to buy another ticket (at last minute rates: some $350). He was dumbfounded, refused on principle, marched over to the QF terminal and bought a last minute ticket for about the same price. He explained the situation he had just experienced with DJ to the ticket agent at QF and they assured him that that would not happen with QF. He will never fly DJ again. That is the sort of thing they need to fix if they want to play with the big boys.

But, I digress. I think they will fix it, and I think they'll recover, and the current share price might prove a good investment for the long term investor.

And when I refer negatively to the comment that "the market is always right", the market may think it's right on the basis of the news stories currently on the headlines, but don't invest long term on this basis. Short term traders trade on news. Long term traders pre-empt the news. You need to speculate on next year's news headlines - eg "DJ upgrades profit forecasts due increasing yield - share price soars" - it'll be too late to buy shares after you read this news story, all the guys "in the know" will have already pumped up the share price. That's when I would SELL! :)

VBA- .89c ASX Close 17 Apr 2008
 

Last at .89c: - ranged .885-.895 most of the day.

On a volume of 506,907 or about half of yesterday's volume.

Chart (6 mth) ex the ASX website:
Moderators: Feel free to dump the chart if it causes you grief- it is a public site and have referenced it???- the sticky ten thingies has moved on???

Put your money where your mouth is, people.

I did,

5K into vba today.

Lets see if I blow my holiday money or double it over time....;)

Dunno if that's clever or silly! :cool:

I put my 5k on a 6-month term deposit with the NAB.. 8.2% p.a. interest, almost completely risk-free.

Let's see how we do in mid-Oct.

DJ is a bit alone here - no cashed up parent Company that can cross subsidise. How much or long will Toll/Tricky etc support it until it can reform itself into a good profit making entity?

It still is making a profit and has done for most of its life. There is no need for any cross subsidy:rolleyes:

If you read the ASX release they will still make over $100 million for the financial year. I would call that a profit. We will see about next year...

So Betsy,

Back of the napkin figures here basically says that your NAB punt is worth about $200 gross.:hmm:

To match or beat that, the shares have to climb above $0.92 (once again just over $200 gross):E

See you here in 6 months:ok:

Why would you buy Virgin Blue when you can buy into undervalued fertilizer companies like MAK and RWD, everyone has to eat, even pilots.
Agriculture is the hottest sector in the market right now.

Regarding airlines as a business venture/investment, there was certainly one comment by BG that was on the money: Airlines are not for the faint hearted.

I've devoted most of my adult life to committing acts of aviation, and I'm with Ratter on this one. However, if I was looking to invest any amount of money on something, aviation would be the last thing on my mind. Even if an airline were turning a record profit, there will always be better ways to make money. As the saying goes: If you want to make a small fortune from aviation...

In defense of VB
 

I travel on VB twice, sometimes thrice a month and I find the product suited to my needs like the proverbial T. Clean, modern aircraft at convenient times. The Mel-Per sector has more legroom than a Qantas flight I had used. Mostly I book the cheapest outgoing fare, and a fully flexible return fare, and the total is nearly half of what Qantas charges. That is unbeatable value not considering promotions, travel to Avalon etc.

A few people agree with me, as the flights I have been on, are nearly always full.

To an earlier post, the real early flights are often at a very low price, which cannot be achieved on an evening fare.

In my opinion it is not going to be easy for Vb, as anyone else, but they do have the right product to survive the great upheaval that is predicted.

Jatayu,

Ansetts flights were full up to the day they crashed, it means nothing. Its about cost structure and yield. Even though VB made 100m, it equates to an almost even turnover if you look at it in real economic returns. It has no assets, is trying to save money yet spends $60m on a new head office with WIFI and new office furniture etc etc.

"Rome is falling Cesar", "Well lets throw a party, wine for everyone"

"But the masses are hungrey your Majesty", "Well feed them some Cake"

I have a question. With the current, lets say "uncertainies" in the market. Where is the money (or support) coming from for the LA start?
With fuel running US$ 110 or so it's a lot different than running 5 or 6000kg on a 737 between SYD & MEL and 120,000 on LA.
:confused:

IHD, I think that you bought in a little early - I have a buy rating on vba stock when they hit 5c per share. :)

A buy at 5 cents! Charming GB...:hmm: