Virgin Australia to be privatised ?
 

With the resignation of Christopher Luxon of Air New Zealand from the board of Virgin Australia I suspect Air New Zealand may be paving the way for Virgin Australia to be privatised and the Air New Zealand holding disposed of.

It has been known for some time that Air New Zealand has not been happy with the financial return of their investment in Virgin Australia.

The business is a rudderless ship at the moment, JB's been like a GenY with a credit card, and trying to pick up the pieces of an already nonviable business. Workforce costs have continued to increase and an poor taste TV campaign revolving around the crew instead of the customer... Hmmm. Why would you use them?

The risk would be the investor that replaces the NZ 26% has limited capital, then its hello AN

Most analysts estimate Air NZ has made a $100mil profit on its investment. A 28% return over 4 years. Not bad in the airline world.

Make no mistake, with no game change Jetstar would've confined Virgin blue to a minor company and probably driven them out of business to be replaced by Lion air Australia.

Virgin has made significant inroads against a dominant competitor, no small achievement. Their handicap is access to cheaper capital which will hopefully be remedied in due course. Meanwhile the dominant competitor has demanded hand outs from the federal government, wasted millions on a failed Asian strategy, treated its staff with utter contempt and now thanks to some fortuitous infighting amongst oil producers is enjoying the windfall of a lucky hedging policy.

All of those relishing in Virgins short term woes should perhaps consider the alternatives if in the highly unlikely event it should fold. Air Asia and lion air would only be too happy to import their business models into the highly lucrative Australian domestic market....

Which isn't going to work. You would have to fly to the same airports using the same infrastructure, paying the same fees as everybody else does. They won't be able to import labour that's for sure and will have to negotiate with CASA which will be an interesting experience for them.:}

Agree Virgin has made inroads, but needs to concentrate on the core business, domestic flying!
Running a fleet of 5 777s, for a minor International operation must be costing them big time!

I think it's the A330s that are costing them big time!

Meanwhile...... Elsewhere in the world, where traditionally buoyant domestics markets have tanked, those airlines are Judiciously growing revenue very successfully via international markets, both long and medium haul.

JB's strategy at VA has been a huge failure and ANZ know it and are trying to cash in their chips while there are still some fat whales with loose wallets hanging around.

JB has boxed VA into a corner and is set for a future of poor financial returns. ANZ is becoming collateral damage with a rejuvenated QF and AA starting to land punches on ANZ.

JB is the best CEO QF has ever had:) QF should still be paying JB for all the good work he continues to do for QF.

My how times have changed. A couple of years ago JB was the man and AJ was the leprechaun.

It's a funny business this.

Nero fiddles while Rome burns!

Not Surprising
 

Really this is no surprise. JB was not the wunderkind he was made out to be at QF... the book that was written about the work at VA included (regardless of anyone's opinion) a very off color reference to the QF1 incident at BKK, that shocked me, coming to the book with an open mind, of amateurism and unprofessionalism. You don't make accusations like that from that position, it just sounds bad if nothing else, like sour grapes.
The way it appears from what can be gleaned is that a very large amount of money has been spent on lounges which are the most clinical, white-hospital-waiting area unappealing environments to wait in... even if it's 40 degrees I feel freezing in those lounges.
Then we had the re-branding, personally after the designer's work at QF which threw out of balance a very striking logo I'm surprised he got any work again but in he goes and comes up with a few bits of paper cut out of Virgin America, Virgin Express and Virgin Atlantic liveries moved around on a piece of paper and presented as a new image... it's the most insipid design... at least DJ you could spot from 10 miles out, like QF but not now... tail looks pink from a distance.
Then we move on to the choice of SABRE, old technology when apparently the more modern Amadeus FM/CM was embedded already at V Australia... SABRE has been a continual issue from what I've heard, less functionality than their partner's systems (except EY)... SABRE is allegedly a very good sales platform but hopeless at airports and at the delivery end - it is not easily capable of the sort of kiosk driven products that QF offers via Amadeus and even it's prior system - who's used bag drop at VA, queue up, check in, then tag bag then go to a counter and queue up again to drop your bag after showing ID - everyone in the same queue as me was asking 'what's the point when at QF I can just swipe my card get a BP, then swipe it again and deposit my own bag??? - this is part of the problem, having someone whose entire experience is sales and marketing making operational decisions such as this - I do know from the old culture in QF that airports had to fight marketing/sales for years for investment because in most sales people's mind the airport stuff 'just happened'.
On top of this, no profit for 5 years.
A few comments here have stated that the transformation has been impressive... NO, it hasn't. Non-adjustable business class on narrow-bodies results in massive disruption in aircraft changes to people who you want to keep happiest with fixed perspex screens that look cheap and it hasn't made a profit.
If it was a world class product that had increased profits then it would be impressive but all it has done is drive the airline into a debt crisis with no end in sight. You can make the best product in the world if you don't need to make a profit.

This is not saying Qantas are the be all and end all, that was once a very good airline but has been white anted but at the end of the day... public companies are required to provide a return and QF does that and VA doesn't regardless of rhetoric.

For all intents and purposes it's been a disaster and could have been done better and cheaper.
My pick would be for Delta to buy Air NZ share, maybe even increase to near majority.
BTW, Analysts are not saying NZ has made $100m dollars, they have lost approximately $100m paying $480 and share now worth $381.
Any other benefits they've received could have been obtained via marketing agreements, etc.
While I'm not defending QF either, there are some inaccuracies on this thread... both airlines benefited to an extent from lower fuel prices but QF benefited slightly more because it hedged cleverly and VA didn't, VA did hedge but not so as to take best advantage. The CEO was at QF when they were leaders in hedging so there is no excuse for VA not getting this right it would seem.
QF have taken about 3-6% capacity out of the market since the end of the 'capacity war' and VA have added .1% (WTF???).

The sooner there is a clean out at VA instead of good people being let go (sometimes because of frustration of being isolated for fighting against stupidity I'm told) the better the future will be for the good people that are in the company, many of whom are in the process of leaving through sheer frustration. Once again, anecdotal, just what I'm told as I'm not connected with VA.

As for QF, they just need a people person at the top now all the restructuring has been done.

To summarize, there's been obscene expenditure, the wrong people employed in some key positions, bad decisions on equipment and IT, lounges that are in no way competitive - I mean they had Air NZ to look at, their lounges are fine - increased debt, no profit for 5 years. All in all, not very impressive.

Very true... on the subject of workforce costs, include an EBA for ground people that seems to have added millions of cost when it was supposed to remove millions... considering it took years to conclude it raises the question what is going on??? How long did the Cabin Crew EBA take??? It seems to be at the point now that QF's labor costs are now approaching, if not, less per pax than DJ/VA's were/are.

My bets on Singapore taking complete control with the next 24 months, appointing a new executive and running it to their protocol. SIA has been focusing recently on consolidating their businesses under the one group, plus SIAs apparent involvement around the while Virgin/Tiger thing indicates they already have more input than the other two. Scoot also interlines with Virgin, happend pretty much overnight.

Singapore Airlines
Virgin Australia
Scoot
Silkair
Tiger Airways

Ah bugger, just bring back Ansett

Yet another good investment!

Many forget that JB has saved VA. IT was a LCC that was floundering. It has taken lot of time, effort and cash to transform it into a full service airline.

Mistakes include some issues with fuel hedging and perhaps some poor fleet choices. Some of these issues he inherited.

SQ owned 49% of VS. Do you really think they have the required $1B to invest in VA? Both SQ and EY are busy with their own issues

Who is hiding in the bushes. DELTA. They already bought SQ's 49% of VS. VX is on the market (as of last week)

Watch out for the Delta controlled Virgin Airline Group. Cashed up and ready to pounce

If this is saving VA, I'd hate to see what it would be like if he was trying to destroy it!

Interestingly enough, that floundering airline made more money then with significantly less people and significantly less debt and investment from its owners.

None of the problems JB faces are inherited, all are of his own making

Exactly! And even when others tried to advise him against certain decisions, their concerns were brushed aside, so he really has nobody to blame but himself.

Funny how the press 2 months ago were singing JB's song


Virgin Australia is flying high as the nation's second biggest airline benefits from 12 year-low oil prices and higher domestic airfares.

Virgin swung to a net profit of $45.7 million for the six months to December 31, with a $33.8 million benefit in the fall in oil prices offsetting a $19.2 million impact from the Bali volcanic flight disruptions in November.

The result was a major turnaround from $53.1 million net loss suffered a year earlier.

Virgin expects to book a similar gain from further oil price falls in the second half of fiscal 2016, chief executive John Borghetti said.

Virgin also remains on track to exceed its target of $1.2 billion in cumulative cost savings by the end of the fiscal 2017.

Those savings will include the sale of five Embraer 190s and six of its Embraer 170s, which are currently sub-leased to Delta Air Lines. As a result, Virgin will boast a fleet of 154 aircraft.

Virgin's underlying interim profit before tax jumped sharply to $81.5 million from $10.2 million a year ago, driven by strong revenue from its domestic operations and ongoing improvements at Tigerair.



Virgin Australia profit flying high

Maybe JB is being a scape goat and the Air NZ sell down a product of thier own doing?
The direction Virgin has taken under JB strikes me as that of a house renovation (which was needed) but along the way the inevitable cost over-runs occur and its hand it hat to the bank again and again (NZ,EY,SQ).
The house will most likley get finished but one of the bankers with the smallest pockets (NZ) has to bail out as they are in the process of getting hit hard on thier once gold mine regional routes. To make matters worse for NZ, they are about to loose thier North American grip and competition seems to be coming into the south pacific routes.

Maybe its Air NZ running scared rather than JB having failed?
If so would the irony be thats its the QF group (with AA) doing the damage? Could the Irishman be a genius afterall? Do I need to reassess what im smoking? Who knows.

1a sound asleep

I am not confident JB has saved Virgin Australia. He certainly has dug a bigger hole for them to climb out of.

You mentioned a figure of $1B. It appears to me that Virgin Australia is only worth about half its book value if all debts and liabilities are carried forward.
With total assets of $1,586,000,000 and liabilities of $2,300,800,000 the balance sheet is a mess.

With long term debt being 68% of the companies capital and a debt/equity ratio of 256.6% some serious surgery needs to be performed before a serious suitor would be interested.

Whilst it is true Delta purchased the SQ 49% holding in Virgin Atlantic after SQ lost a total of approx. $1B on their foray. Virgin Atlantic is now a shell of its former self having dropped services to Sydney, Tokyo, Vancouver, Mumbai and Cape Town. In addition its UK 'Little Red' domestic airline has closed down.

And yes you are correct; Virgin America is on the chopping block. After a huge airfare sale recently to raise some cash it appears the major partners in the airline (similar to Virgin Australia ) have offered the airline for sale after less than 18 months as a public company. So far Alaska Airlines and Jet Blue have made offers for the airline with an announcement expected as early as next week.

A number of years ago anything to do with Richard Branson was regarded as a 'sideshow'; nothing appears to have changed.

That is absolute rubbish. Speak to any staff member and they will tell you he has destroyed it. Some of the people he has brought in (with a few exceptions) are incompetent or do not inspire any confidence. The mark of success and progress at VA is the number of times 'going forward', 'reaching out', etc. can be worked into the conversation... 'let's talk about x y or z and 'what that looks like' or 'we need to discuss the xyz 'space'... maybe it's throughout business but some people I have spoken to say most meetings are dominated by this garbage and very little is achieved. Anyone with any talent is driven out. This appears to be replicated in some of the companies that have been taken over with good people leaving as a result. The depth of expertise present even in QF and NZ and other airlines is not present, hence solutions to airline 101 problems are complicated, onerous and laughable. From what I've heard from friends in New Zealand, there is also significant frustration from NZ regarding VA's belligerence in refusing to accept industry norms for the exchange of passengers in disruptions, apparently often NZ just gives its passengers to QF in disruptions rather than have them go back and forward between VA and NZ while they argue over standard paperwork. It's a complete and utter mess by all accounts, budgets do not get met or are unrealistic, technology that could help is purchased then abandoned short-shortsightedly at the first financial blip, managers don't get reports on their budget and P/L which is unheard of in other airlines. Godfrey was a respected person and leader, he navigated to profitability and many wish he would return. What JB has done, billy the blind man's dog knows was obvious, just not with the obscene cost.

I appreciate your perspective. Originally as VB VA was nothing more than a LCC. It has taken a lot to get it to where it is. Where to from here?

Is the Virgin brand worth paying the large royalty fees for the name. Maybe it needs a new name and ditch the Virgin brand?
Is part of the problem the fact that have failed to join *Alliance ?
Way too different planes and the fleet?
Lack of investment from the likes of NZ to really be able to grow to become a true QF competitor?


The way I see it with no alliances or services to most international destinations its better to be a QF customer for loyalty and network of destinations. I think it is under capitalised as well as mismanaged to a degree

Funny ... I guess code share with Etihad to most ports in Europe, Singapore airlines to most ports in Asia, and Delta to most ports in USA aren't the same as QF code shares with Emirates :zzz:

Does anybody else wonder how much they might save if they didn't buy all their pilot's RM Williams boots?

The leather jackets, no ties, and red jets were rock n roll..white jets and black suit and tie are elevator music...yawn

Southwest Airlines have stood the test of time with an all-737 operation likewise Ryan Air and Easyjet [A320] etc...

Virgin should have blackened the skies with 737's and not worried about trying to match QF..

And then be crushed by Jetstar as QF threw unlimited cash into the Jetstar black hole? Which is basically what has been going on since 2000.

So either way not a good deal then??

The recreation of Ansett is what has occurred without tight cost controls and top airline guys running it...

Reminds me of Robert Amman saying after he won the then Coastwatch contract from Skywest that "I know I'll be successful because I know nothing about this industry!"

JB's refusal to look for a chinese partner isn't going to help VA ....

Yes China's economy may be on a fall, but yet it's still got heaps of dirty cash coming out of its people, while QF is enjoying those 'dirty money', VA is just falling behind....

I think the point was that QF has membership of a major alliance (oneworld) and thus has codeshares everywhere whereas VA is relying on selected carriers and ownership partners. So what about EY, the flight is often late (not EY's fault apparently, it's to do with an ATC congestion out of AUH... but when the flight arrives late, apparently SABRE is dysfunctional in terms of transferring passengers or there are problems with who 'owns' the booking, etc.).
These problems DO NOT exist in other alliances. Jesus, QF had this sorted with BA, AA, etc. in the 90's, it's not rocket science, just requires the correct systems and processes and a realisation it's a whole industry not just the other airlines having to play by VA's rules. There are other issues as well, I've heard from some passengers that they check in then get to the gate and they're not on the flight so have to sit somewhere else, a seat they didn't want.
I really think what VA need is someone like NZ or DL to take full ownership who will shake the crap out of it and implement the right processes and systems and have the will to say get lost to those who don't agree.
There appears to be reading between the lines, a lot of 'pre-conceptions' amongst VA management and many of these are wrong and stops the airline clicking into place with partners... this is anecdotal of course, just based on talking to people in the industry. I gather part of it seems to be a) insufficient capability in systems to deal with disruption and b) the tools not at the coalface in comparison with, say, QF where most disruption management is automated and/or available to the coalface and requires 2-3 clicks and all passengers are re-accommodated on first available flights. I haven't used their systems so I don't know for sure but that certainly seems to be the centre of a lot of problems. Anyway, it would certainly be interesting to be on the inside and know what is true and what is rumour. It does say a lot for the media though, they have been fawning all over the CEO for years and totally ignored the realties because of jazzy TV commercials, etc.

Hello,

Bullwinkle, Cant understand your logic, the A330s are utilised approx 16 hrs per day, 777s with the long layover LAX approx 10hrs per day.
777s fly with at least 3 cockpit crew or maybe 4? to LAX and AUH, 330s 2 cockpit crew.

Borghetti knew full well from his days at Qantas how much revenue Qantas derived from 330 operations to/from Perth.

I think your numbers need to be reversed. 4 crew on B777 Ops as well

The Townsville refueller's assistant says that a Chinese carrier is to buy the Air NZ (not the bank ANZ) share package and will take a very active role in the direction that Virgin Australia goes in the future.

http://crudeoilpeak.info/wp-content/..._2003_2013.jpg

Remember the heady days when the shares were issued at $2.00?

Not if EY gets in first..........

And when was Virgin nationalised?? I must have missed that one.
Tootle pip!!

Government.

NGO.

QUANGO.

Public company.

Private company.

keep up LeadSled

http://www.companydirectors.com.au/d...on-definitions