getluv
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sat Aug 12, 2017 10:00 pm

jbs2886 wrote:
Channex757 wrote:
qf789 wrote:
Of the aircraft owned are 4 x 77W's, 2 x 73G's and just over half of the 738's the rest of the fleet is leased

VARA fleet includes both A320's leased and 2 F100's leased the rest are owned

That's a fairly typical balance. I assume from that their debt levels are for instruments related to fleet purchasing and other capital spends.

Everyone is concentrating on the bottom line. To me it looks like a tax-efficient statement. Their 'profit' is going into paying down debt levels, which makes them more financially stable. If they have owners who can accept this policy then great. Tesla is the same; they have a decent margin but all their operating profits on Model S and Model X is going into capital spending. If they suddenly stopped this then they would be a profitable auto maker with over 20% margin per vehicle.

VA have declared a small operating profit. That to me points to tax-efficiency and not a failing operation. The money is just going elsewhere and the proof of it is a fleet with the ownership you indicate. If they were on their arse everything would be sold and leased back!


:checkmark: :checkmark: this is what everyone missed. There is operating positive cash flow. No, the airline isn't doing great, and has a lot of recovery still ahead...but its not doomsday as most posting above would have everyone believe reading this thread.


Let's be fair, VA issued an additional $931M in shares, nearly a $800M increase on the prior year. All the money they raised went straight to debt repayments. This is not sustainable.
...
 
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RyanairGuru
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sat Aug 12, 2017 10:11 pm

Precisely. Their regular rounds of capital raising are pretty much the only thing standing between paying down debt and insolvency.
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travelhound
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sat Aug 12, 2017 10:15 pm

I think quite a few people have missed quite a few things.

Out of the 94 aircraft Virgin Australia directly operate only two of them (737-700) are owned. The rest are either leased or financed through a Virgin Australia syndicate loan. The syndicate loans effectively transfer debt from Virgin Australia (accounts) to third parties.

In the last financial year Virgin Australia have re-financed 7 aircraft (A330 ,737) that are to be kept and 7 aircraft that are planned to be removed from the fleet (ATR, E190). As such, the debt reduction and cash generation could be, to a degree associated with a re-organisation of debt and transfer of assets to third parties (All of the 777 are financed through syndicate loans and leases).

If this is the case than cash generation from operations is probably not as transparent as one would be lead to believe.

If we consider a 737 in operations can typically pay for itself over a 5-7 year time period and Virgin Australia has 73 of them, Virgin Australia should have generated sufficient cash flows to now own 24 of these aircraft. If we further consider quite a few 737's were owned when they were transferred from the old Virgin Blue, it doesn't take too much of an imagination to realise Virgin Australia has some real cash generation issues.

I'd suggest the airline is not sustainable.

With Virgin Australia International Airlines again recording a loss (close to $200m over five years) and TigerAir back in a loss making position I have my doubts about these two airlines; and how they can contribute to VA in the future.

With the A330's being transferred to International flying on new untested routes we could potentially see Virgin International Airlines report even higher losses (I'd suggest transferring the losses from the domestic to international operations). It typically takes two years to make a new route profitable.

With Virgin Australia in the final stages of a fleet re-organisation (effectively removing themselves from regional flying) we are still to see the effect on revenues (probably negative) and profits (probably positive). In a broader context passengers who once flew Virgin for both regional and mainline travel will probably have no choice other than flying on QANTAS.

So, from digging a little deeper into the VA accounts I really can't see any good news. It will be quite a few years before this airline is out of the woods.
 
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Channex757
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sat Aug 12, 2017 10:29 pm

RyanairGuru wrote:
Precisely. Their regular rounds of capital raising are pretty much the only thing standing between paying down debt and insolvency.

Investors do not buy stock in failing companies.

It seems to me that people with a lot closer knowledge of VA are putting their money up in these capital raising ventures. Moving debt from borrowings to issued shares is also good business as borrowed cash attracts interest. I would suggest that the current movement of routes and assets around various new divisions is being done with close supervision, and the stockholders are so far happy with what they see.

The cash position is vital though. Airlines go under (dear God do I understand that) when the cash in hand runs dry. It looks to me like VA is getting its house in order and maintaining tax efficiency where possible, with lower bank borrowings (that covers many different loan forms) and some simplification. The world economy could at any time tip into massive recession, especially in Asia-Pacific, and if that happens VA does not want to be holding on to a lot of bank debt.

I'd still go with my statement about the fleet profile being healthy. Any other carrier with financial issues might have a fleet of *Q8 or *6N type Boeing customer codes. Leased-in aircraft from the big finance houses carrying premium rates because of all their flying assets being effectively rented. At least VA has a tangible asset base and even room to contract should it be necessary in a changing world.
 
babastud
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sat Aug 12, 2017 11:14 pm

I never understood VA. Take SFO for example. They could have started a few years back a syd-sfo capturing a market that Qantas has left and moved into the booming Bay-Area, which turns out is highly lucrative for Qantas. They never took advantage and Qantas started back and from what I hear is doing quite well. VA has no real long term strategy.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sat Aug 12, 2017 11:55 pm

qf789 wrote:
Ryanair01 wrote:
In terms of Asian expansion, I read a lot of comments about low yield in China. That maybe true, but not in the case of Hong Kong. Hong Kong has notoriously good yields and backed by connecting traffic via HNA this looks a sensible strategy for VA imho.


With VA selling return tickets to HKG for under $400 notoriously good yields wont happen. Qantas stated last October that SYD-HKG was the worst performer out of all their international routes for October 2016


That's a $400 headline introductory fare in economy class..... HKG remains one of the strongest premium cabin destinations in Asia because financial services are still heavily restricted in the mainland, so they base themselves in Hong Kong. Fares out of Hong Kong shows yields are higher than most other Asian hubs, because Cathay remains heavily protected by the local authorities - (whatever happened to those Jetstar Hong Kong Airbuses in end?). Cathay have been feeling pain for many reasons, basically their cost base is too high (higher than QF actually), plus growth in mainland carriers has seen HKG loose relevance as a connecting point in/out of China which has hit them and driven their overall yield down as CX tried to maintain mainland volumes (almost half of CX's business connects in/out of the mainland). That means other airlines like QF have also taken a hit as their connecting fares have also reduced.

However HKG traffic itself (as opposed to connecting traffic) remains high yield and that is what Hainan are after via their Hong Kong Airlines subsidiary. VA's expansion is so that Hong Kong Airlines can gain further access to Australia, using Australia's capacity under the air services agreement. These new basically joint venture flights, because they benefit from VA's Australian and HX's Hong Kong corporate contracts, should be less but not entirely unreliant on lower yield connecting traffic (in theory).
 
xiaotung
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 1:08 am

Ryanair01 wrote:
qf789 wrote:
Ryanair01 wrote:
In terms of Asian expansion, I read a lot of comments about low yield in China. That maybe true, but not in the case of Hong Kong. Hong Kong has notoriously good yields and backed by connecting traffic via HNA this looks a sensible strategy for VA imho.


With VA selling return tickets to HKG for under $400 notoriously good yields wont happen. Qantas stated last October that SYD-HKG was the worst performer out of all their international routes for October 2016


That's a $400 headline introductory fare in economy class..... HKG remains one of the strongest premium cabin destinations in Asia because financial services are still heavily restricted in the mainland, so they base themselves in Hong Kong. Fares out of Hong Kong shows yields are higher than most other Asian hubs, because Cathay remains heavily protected by the local authorities - (whatever happened to those Jetstar Hong Kong Airbuses in end?). Cathay have been feeling pain for many reasons, basically their cost base is too high (higher than QF actually), plus growth in mainland carriers has seen HKG loose relevance as a connecting point in/out of China which has hit them and driven their overall yield down as CX tried to maintain mainland volumes (almost half of CX's business connects in/out of the mainland). That means other airlines like QF have also taken a hit as their connecting fares have also reduced.

However HKG traffic itself (as opposed to connecting traffic) remains high yield and that is what Hainan are after via their Hong Kong Airlines subsidiary. VA's expansion is so that Hong Kong Airlines can gain further access to Australia, using Australia's capacity under the air services agreement. These new basically joint venture flights, because they benefit from VA's Australian and HX's Hong Kong corporate contracts, should be less but not entirely unreliant on lower yield connecting traffic (in theory).


For VA, the more logical partner would have been CX (and perhaps also CX's part owner CA in Mainland China) which too wanted to increase Australian flights but couldn't. More connecting opportunities, more corporate contracts and better yields than Hong Kong Airlines. But unfortunately VA choose partners based on who would be willing to invest in them (and to repay their debt). That's not a strategy but an excuse to never make a profit.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 5:34 am

travelhound wrote:
I'd suggest the airline is not sustainable.


Thanks for that analysis.

I'd go as far to say that Virgin will go broke whilst Borghetti is at the helm. He will continue with his Qantas Mark 2 strategy, continue to spend money and try new things until there is no more money to spend. He has pumped cost into the business and essentially there are no more profitable than they were back in 2009 before he took on the job.

They seriously need to stop the bleeding and the pretences of being a global new world airline for Australians that don't want to fly Qantas.
 
travelhound
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 6:42 am

I don't lay all of the blame at the feet of JB. At the start the transformation to Virgin Australia was really kicking some goals (7% market share gain in a couple of years).

The Virgin Australia business plan ultimately failed because it underestimated the resolve of Alan Joyce and QANTAS. Even though the grounding of the airline was messy, it always instantly stopped Virgin Australia in its tracks.

QANTAS ultimately won that battle and Virgin Australia didn't have the resources or resolve for a Plan B.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 9:30 am

travelhound wrote:
I don't lay all of the blame at the feet of JB. At the start the transformation to Virgin Australia was really kicking some goals (7% market share gain in a couple of years).

The Virgin Australia business plan ultimately failed because it underestimated the resolve of Alan Joyce and QANTAS. Even though the grounding of the airline was messy, it always instantly stopped Virgin Australia in its tracks.

QANTAS ultimately won that battle and Virgin Australia didn't have the resources or resolve for a Plan B.


You are probably on the mark here, but nonetheless not having a plan B shows a failure of strategy IMHO.

Qantas is not perfect, and in some regards cost cutting is quite evident, but the fact that they are posting record profits while VAH can't decide whether they're coming or going is a massive feather in Alan Joyce's cap.
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redroo
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 1:22 pm

A lot can be laid at JBs feet.

- Buying the A330, doubling capacity to perth, and buying Skywest ($49m on that purchase) ... just as the mining boom was finishing.

- Two business class products on the A330 in 5 years. Thats not innovative, thats a waste of money.

- ATRs on the east coast bought/leased and now going. Another waste of money.

- Taking Virgin premium and leaving the growing budget space to Jetstar, then having to buy Tiger to compete again at the budget end. Ceded market to your competitor then having to buy and fight way back in.

JB got given a huge pile of money and flew as fast as he could to turn Virgin into QF 2.0. What have they got from it? Jetstar has grown substantially and is stronger than ever. Qantas is in great shape and printing money. Virgin is making a loss, has increased its cost base to match Qantas. The balance sheet is a disaster waiting to happen. It has not been a good run for the last 5 years.

There is no reason why Virgin can't be successful and turn a good profit in a domestic market of (effectively) two airlines. The passengers are there. There is plenty of regular business traffic between the capital cities and there are plenty of leisure routes as well. They need to return to being the cheap and cheerful domestic competitor to Qantas and give up all the loss making international flying. Their problem is that jetstar is now well entrenched in the "cheap and cheerful" space domestically and the have a QF cost base!

I do wish them success, but I worry about their future.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 8:00 pm

travelhound wrote:
I don't lay all of the blame at the feet of JB. At the start the transformation to Virgin Australia was really kicking some goals (7% market share gain in a couple of years)..


I lay the blame at mostly JB - and at Branson - birds of a feather. It was a pale shadow of what Branson did with Virgin Atlantic - trying to create a premium airline but without first class. Instead they bought market share, not a tough thing to do at the time when they had wealthy airline investors and when AJ was radically changing Qantas.:

http://www.news.com.au/finance/business ... a09d4ee681

"He also believes The Business and a redesigned Premium Economy cabin will lure passengers away from rival carriers like Qantas on LA-routes.
Currently Virgin Australia flies twice daily between Sydney-LA and once a day Brisbane-LA and hopes to soon reinstate Melbourne-LA services, dropped in 2014.
But the upgrade has come at considerable expense to the airline which yesterday revealed it had more than doubled its 2015 loss to $224.7 million due to the cost of overhauling its business.

Virgin Australia’s struggle to return to profitability has been its major weakness in recent years.
Executive Chairman of the Centre for Asia Pacific Aviation Peter Harbison says the carrier is paying the price for “taking its eye off the financial side for a bit”.
“The balance went much too far in favour of product and competition,” says Harbison."


I think it was all just silly. Old Virgin Blue mostly made money - Virgin Australia seldom has.

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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Sun Aug 13, 2017 10:19 pm

I think what needs to happen is a massive simplification and retreat to the domestic market. Strip all the cost out of the business and position yourself as the cheaper qantas and more civilised Jetstar. Cheap fares that are unbundled but give you plus legroom, plus luggage, plus food (like NZ). Grt rid of the free food and drinks and return to being a LCC. Kill all the international flying. Return the fleet to 737 only. Focus on getting Australians from A to B in Australia. Join the star alliance to give frequent fliers a choice over qantas and one world (which will be much more consistent offering than the miss match they have now).

If they can make money flying a few J seats on the golden triangle and Perth then keep them. Otherwise drop the product and just offer a bit of legroom for a fee (not a return to premium economy).

Eventually get rid of the Virgin name and stop paying money to Branson for a tired and not very funny brand any more.

This will NEVER happen whilst JB is in charge because it would admit defeat.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 1:34 am

On the whole I agree with tour argument, but I think it is important to note the turn around plan introduced by Alan Joyce was ultimately the move that brought JB's and SRB's grandiose Virgin Australia airline plan to a financial end.

We have to remember that at the time AJ was not only fighting VA, but QF's unions, a falling share price and a poor perception of his management style.

AJ and subsequently QANTAS won the battle. This was probably against the idds
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 2:06 am

travelhound wrote:
AJ and subsequently QANTAS won the battle. This was probably against the idds


I think AJ was seriously underestimated by everyone except perhaps the Qantas BOD, or some of them. Most people preferred the Armani suits of Borghetti, more classy.

But Qantas needed tough and that's what AJ gave us - but not on his own. He won the battle the day he grounded the airline, but he couldn't have done it without the Chairman, Leigh Clifford, who has been AJ's greatest ally.

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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 2:07 am

https://www.bloomberg.com/news/articles ... -knock-out

CX are about to post another loss. Premium and corporate traffic is likely to stay with QF/CX. The back of the plane traffic CX has lost in which VA seems to be interested has extremely low yields. Connecting traffic? What connecting traffic? Mainland travellers are no longer using HKG as a transit hub given nearly every 2nd tier cities now have direct flights.
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 2:24 am

redroo wrote:
I think what needs to happen is a massive simplification and retreat to the domestic market. Strip all the cost out of the business and position yourself as the cheaper qantas and more civilised Jetstar. Cheap fares that are unbundled but give you plus legroom, plus luggage, plus food (like NZ). Grt rid of the free food and drinks and return to being a LCC. Kill all the international flying. Return the fleet to 737 only. Focus on getting Australians from A to B in Australia. Join the star alliance to give frequent fliers a choice over qantas and one world (which will be much more consistent offering than the miss match they have now).

If they can make money flying a few J seats on the golden triangle and Perth then keep them. Otherwise drop the product and just offer a bit of legroom for a fee (not a return to premium economy).

Eventually get rid of the Virgin name and stop paying money to Branson for a tired and not very funny brand any more.

This will NEVER happen whilst JB is in charge because it would admit defeat.


Agree 100%. Match equipment to stages: single type fleet flying domestically with better legroom and baggage policy than Jetstar ... become the WN of AU. Balance intl and domestic: 100% domestic.

And change the name to .... Ansett. If the heirs object, call it Anzac. Wave the Oz and Kiwi flags a bit. Two islands with a shared culture vs. boreal Asia.

And this will never happen with JB at the helm.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 3:12 am

redroo wrote:
I think what needs to happen is a massive simplification and retreat to the domestic market. Strip all the cost out of the business and position yourself as the cheaper qantas and more civilised Jetstar. Cheap fares that are unbundled but give you plus legroom, plus luggage, plus food (like NZ). Grt rid of the free food and drinks and return to being a LCC. Kill all the international flying. Return the fleet to 737 only. Focus on getting Australians from A to B in Australia. Join the star alliance to give frequent fliers a choice over qantas and one world (which will be much more consistent offering than the miss match they have now).

If they can make money flying a few J seats on the golden triangle and Perth then keep them. Otherwise drop the product and just offer a bit of legroom for a fee (not a return to premium economy).

Eventually get rid of the Virgin name and stop paying money to Branson for a tired and not very funny brand any more.

This will NEVER happen whilst JB is in charge because it would admit defeat.


Star Alliance doesn't admit LCCs on its own.
If VA was to dissolve their LCC TT and go back to being a LCC themselves, they'd have to join the Value Alliance with the likes of Cebu Pacific, Vanilla Air Japan and Scoot (formerly Tigerair Singapore)

Also, IIRC most VA flyers would prefer their current partners and Skyteam member Delta over United (well anyone but United) for American flying.

The old DJ were primarily a Domestic & Tran-Tasman carrier (under Pacific Blue Pty Ltd with their own Pacific Blue titles) along with a few leisure markets e.g Denpasar and Fiji (under the "Virgin Blue Asia-Pacific Pty ltd" arm with its planes under the "Airline of Virgin Blue titles") pre-VA and pre-NZ investment.

Perhaps VA could simplify itself back to their pre-VA model (being primarily a independent Domestic & Tran-Tasman carrier) and adopt NZ's seats to suit model for routes that doesn't justify Business Class. It would mean a subfleet of 737s equipped with J for East Coast triangle flying + Perth whilst at the same time perhaps meeting criteria for Skyteam membership if Delta were to stick around as VA's partners. I don't see VA going for Star Alliance anytime soon as they are drawing further away from NZ, SQ are being silent on their stake and VA aren't willing to touch UA with a 6-foot pole.
 
redroo
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 4:16 am

Take the point about skyteam. It needs to be all in with either skyteam or star and end the random "it's Tuesday, it's lax, it must be the Airline X lounge". People like simplicity.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 5:24 am

redroo wrote:


Eventually get rid of the Virgin name and stop paying money to Branson for a tired and not very funny brand any more.



If Virgin was rebranded without the Virgin brand they would likely to have to pay royalties for a long period of time to SRB for dropping it, similar to what AS will have to pay for eventually dropping the VX brand
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redroo
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 5:38 am

Probably. But the deal must come to and end at some point. At which point you would ask is it worth paying the money for the brand.
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 7:17 am

To me, US and CA are close to a single market without being an "EU" and having cabotage, and AU and NZ are a similar market. A relaxed definition of "domestic", but excluding cabotage.

If that market definition is objectionable, then international/domestic balance: 75% AU domestic. 25% AU/NZ. Trans-Tasman Sea would be the only international. A WN or FR model.
 
coolian2
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 8:43 am

WPvsMW wrote:
redroo wrote:
I think what needs to happen is a massive simplification and retreat to the domestic market. Strip all the cost out of the business and position yourself as the cheaper qantas and more civilised Jetstar. Cheap fares that are unbundled but give you plus legroom, plus luggage, plus food (like NZ). Grt rid of the free food and drinks and return to being a LCC. Kill all the international flying. Return the fleet to 737 only. Focus on getting Australians from A to B in Australia. Join the star alliance to give frequent fliers a choice over qantas and one world (which will be much more consistent offering than the miss match they have now).

If they can make money flying a few J seats on the golden triangle and Perth then keep them. Otherwise drop the product and just offer a bit of legroom for a fee (not a return to premium economy).

Eventually get rid of the Virgin name and stop paying money to Branson for a tired and not very funny brand any more.

This will NEVER happen whilst JB is in charge because it would admit defeat.


Agree 100%. Match equipment to stages: single type fleet flying domestically with better legroom and baggage policy than Jetstar ... become the WN of AU. Balance intl and domestic: 100% domestic.

And change the name to .... Ansett. If the heirs object, call it Anzac. Wave the Oz and Kiwi flags a bit. Two islands with a shared culture vs. boreal Asia.

And this will never happen with JB at the helm.


Since I seem to have some interesting technical issue which results in a surprisingly majority of my posts vanishing without any explanation, I guess I'll repost the question.

Why would they call it ANZAC if they go 100% domestic in Australia?
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soectre99
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 9:30 am

Are we sure it is not some form of creative accounting, avoiding tax in Australia and funneling cash home to the UK, SG, UAE and CN?

The consistent trend of losses through favorable market conditions seems very sinister.
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Mon Aug 14, 2017 9:34 am

coolian2 wrote:
Why would they call it ANZAC if they go 100% domestic in Australia?


As I posted above, and repeat here:

To me, US and CA are close to a single market without being an "EU" and having cabotage, and AU and NZ are a similar market. A relaxed definition of "domestic", but excluding cabotage.

If that market definition is objectionable, then international/domestic balance: 75% AU domestic. 25% AU/NZ. Trans-Tasman Sea would be the only international. A WN or FR model.
 
DeltaB717
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 12:07 am

WPvsMW wrote:
To me, US and CA are close to a single market without being an "EU" and having cabotage, and AU and NZ are a similar market. A relaxed definition of "domestic", but excluding cabotage.

If that market definition is objectionable, then international/domestic balance: 75% AU domestic. 25% AU/NZ. Trans-Tasman Sea would be the only international. A WN or FR model.


I'm not sure if maybe I misread what you wrote, but the way the bilateral works between Australia and NZ is, in fact, a single market much like the EU. An Australian carrier can operate cabotage within NZ, and vice versa (indeed, JQ does just that).
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 12:19 am

Thanks! I did not know that for sure. So VA renamed as ANZAC, full cabotage, no problem. "Domestic" only. Name a ship Gallipoli. Name another Tobruk. Do what foreign carriers can't do: "be" the culture.
 
coolian2
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 12:31 am

NZ to Australia and v.v is international. Virgin (as DJ - albeit with ZK registered planes) tried domestic within NZ and got slaughtered. Trying to go up against NZ and JQ would be asking to run out of money.

No to mention it's a terrible name and to slap it on a business is a tad disrespectful.
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 12:44 am

WPvsMW wrote:
Do what foreign carriers can't do.


Foreign carriers can't really have the word "Australia" in their name either though, can they?

In any case, other companies have tried to commercialise the whole "Anzac" thing in recent years and it has backfired on them spectacularly. Any attempt to take advantage of our national military history is going to be fraught with danger and it would be an absolute minefield from a branding perspective (ie you wouldn't be able to do anything remotely fun or cheeky or modern, it would have to be all serious and conservative, aka boring).

The name isn't the problem. Virgin Blue worked fine for a decade and really they just needed to revamp the branding (probably still including a switch to the Virgin Australia name) rather than playing with the whole market positioning.

My view is that they should take service back to basics (ie BOB, no free luggage etc) and instead invest their money into an overly generous frequent flyer scheme. The constant devaluation (sorry, "enhancement") of Qantas Frequent Flyer has a lot of people feeling very disenfranchised and there is an opportunity for VA to offer a tangible reason for those customers to come across.

Provide top-notch lounges (ie better than QF's J lounges rather than just matching the QF Clubs) to offset the basic onboard experience. Better to concentrate spending on the folks who actually bring in money rather than spread it out across everybody including those who are flying on potentially loss-making fares.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 1:43 am

WPvsMW wrote:
So VA renamed as ANZAC, full cabotage, no problem.


Except that it cannot be called ANZAC, which is proprietary and copyright to the Crown(s):

http://www.mch.govt.nz/anzac-day

"Anzac Day now promotes a sense of unity, perhaps more effectively than any other day on the national calendar. People whose politics, beliefs and aspirations are widely different can nevertheless share a genuine sorrow at the loss of so many lives in war, and a real respect for those who have endured warfare on behalf of the country we live in.

Section 17 of the Flags, Emblems, and Names Protection Act 1981 (the Act) prohibits the use of the word ‘Anzac’ in trade or business. The Ministry has compiled some guidelines as to what uses of Anzac or ANZAC will generally not be in breach of the prohibition in section 17.

We recommend using the term 'ANZAC' – with all capitals – only when referring to the specific Corps. For all other uses 'Anzac' is preferred. For example, 'On the Western Front there were two Anzac corps, with New Zealand Division serving in II ANZAC Corps until 1918. New Zealanders who died in war are remembered on Anzac Day.'"


mariner
aeternum nauta
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 2:37 am

OK, understood about ANZAC. No disrespect intended... I couldn't find it in trademark registries in which I checked, but statutory reservation actually bars trademark registration in the nation of that statute. I assume AU has the same statutory reservation.

Next step, buy an assignment of the ANSETT AUSTRALIA trademark. A set of four marks is still registered.
https://search.ipaustralia.gov.au/trade ... +AUSTRALIA
Plus AU 545769, 545771, 545772

In any event, we've got the network and name sorted out, AU and Trans-Tasman Sea, and ANSETT AUSTRALIA. No cabotage in NZ. Now all that's needed is a revised fleet, new marketing strategy, new financing, and new management. :smile:
 
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mariner
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 3:04 am

WPvsMW wrote:
Next step, buy an assignment of the ANSETT AUSTRALIA trademark. :


I've never understood the A.net affection for taking the names of dead airlines and trying to revive them.

Ansett's reputation in Australia was largely based on its excellent service - in its final years, Ben Sandilands at Crikey called it the "royal barge" off airlines. That doesn't come cheap, or, if its does, the airline goes bust.

So you seem to want what Borghetti wanted - maybe still wants - a premium airline selling itself as a low cost carrier, or a low cost carrier pretending to be a premium airline. Either way, I don't see how it would work.

Ansett died with the airline, the circumstances for its revival do not exist. If Virgin Australia has shown nothing else, it has shown that.

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WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 3:18 am

My sole interest in reviving ANSETT AUSTRALIA is brand recognition. It takes multimillion AUD or USD or CHF or EUR to build a brand, and the opportunity to revive a good brand, like NORTON in motorcycles, or OTTER in aircraft, MOTOBECANE in bicycles, etc., saves a huge startup expense.

My business model would be middle of the market, WN or FR, not NK or DY.
 
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mariner
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 3:27 am

WPvsMW wrote:
My sole interest in reviving ANSETT AUSTRALIA is brand recognition. It takes multimillion AUD or USD or CHF or EUR to build a brand, and the opportunity to revive a good brand, like NORTON in motorcycles, or OTTER in aircraft, MOTOBECANE in bicycles, etc., saves a huge startup expense.

My business model would be middle of the market, WN or FR, not NK or DY.


But the things you would want to present with Ansett - that remarkable service, loved by the businessmen of the Big Cities - wouldn't exist in your middle of the market model, and you'd leave a bad taste in the mouths of those expecting something like the brand that Ansett was.

Virgin Blue worked for me because it wasn't Ansett, and wasn't pretending to be.

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zkncj
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 5:46 am

coolian2 wrote:
NZ to Australia and v.v is international. Virgin (as DJ - albeit with ZK registered planes) tried domestic within NZ and got slaughtered. Trying to go up against NZ and JQ would be asking to run out of money.


Agreed - and the New Zealand Domestic market is even more than an blood bath than it was last time DJ tired to fly within New Zealand.

If VA think they had it bad in Australia, they should maybe open there eyes up to what NZ is doing to JQ. They are constantly selling domestic fares between $19-39 for 1-2hour services, and often you can purchase them just an week out at that price.

If VA was to re-enter the New Zealand market without NZ's support, they would be gone within an matter of months.
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 8:09 am

Ergo, no cabotage within NZ.

As for the premium service of the former AN, RIP. It's not coming back. Younger fliers (who never flew the old AN), middle managers of unlisted companies, families traveling together ... the bread and butter of WN and FR, that's the target demographic. Y and Y+.
 
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mariner
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 8:54 am

WPvsMW wrote:
As for the premium service of the former AN, RIP. It's not coming back. Younger fliers (who never flew the old AN), middle managers of unlisted companies, families traveling together ... the bread and butter of WN and FR, that's the target demographic. Y and Y+.


Which is what Virgin Blue was - until Branson/Borghetti decided they wanted a new Ansett to take on Qantas. It was never going to work but they sure burnt through some shareholders money.

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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 9:57 am

mariner wrote:
WPvsMW wrote:
As for the premium service of the former AN, RIP. It's not coming back. Younger fliers (who never flew the old AN), middle managers of unlisted companies, families traveling together ... the bread and butter of WN and FR, that's the target demographic. Y and Y+.


Which is what Virgin Blue was


As crazy as it sounds, agreed. I appreciate that the friend-of-my-neighbours-cat analogy is completely meaningless, but I do know someone who is self-employed and used to fly DJ when they traveled for work. They now fly QF. I know another person who works for an SME (two partner accounting firm) who used to fly DJ, and now flies QF.

This is the corporate market that VA has lost. These people used to flock to DJ because they offered hourly service on the East Coast triangle at much lower costs than stodgy, old, conservative Qantas who didn't care for anyone that didn't make the BRW Rich List. In the last decade Qantas has gone through a culture realignment to make them more relevant to the average man on the street, and VA has done away with any reason to choose them over QF.
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redroo
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 10:34 am

RyanairGuru - spot on! QF isn't old and boring anymore and Virgin isn't young, hip and cheap anymore.

When you look for flights between any of the capital cities and the price comes out the same people are picking QF because Virgin isn't commanding the fare premium that they want/need.

You have got to be better or cheaper. They aren't clearly better than QF and they are certainly not cheaper than QF. Virgin has a big problem.
 
smi0006
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 10:43 am

redroo wrote:
RyanairGuru - spot on! QF isn't old and boring anymore and Virgin isn't young, hip and cheap anymore.

When you look for flights between any of the capital cities and the price comes out the same people are picking QF because Virgin isn't commanding the fare premium that they want/need.

You have got to be better or cheaper. They aren't clearly better than QF and they are certainly not cheaper than QF. Virgin has a big problem.


I would also say VA has potentially misjudged the gen Y- Virgin kinda award (think V8 ) has not got the same status as flying QF. QF is now seen as sauave and stylish to flash the cash on instagram.
 
Obzerva
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 11:04 am

smi0006 wrote:
redroo wrote:
RyanairGuru - spot on! QF isn't old and boring anymore and Virgin isn't young, hip and cheap anymore.

When you look for flights between any of the capital cities and the price comes out the same people are picking QF because Virgin isn't commanding the fare premium that they want/need.

You have got to be better or cheaper. They aren't clearly better than QF and they are certainly not cheaper than QF. Virgin has a big problem.


I would also say VA has potentially misjudged the gen Y- Virgin kinda award (think V8 ) has not got the same status as flying QF. QF is now seen as sauave and stylish to flash the cash on instagram.


To me the V8 sponsorship isn't just an uncomfortable fit between brands, it's just truly bizarre!

Not meaning to stereotype too much, but it would have a much better brand fit with JQ.

VA sponsors Melb Fashion Week from memory, that would have been a far more interesting safety demo vid, with the potential and fun/ridiculousness of the clothes on a catwalk (with floor level lighting along it...)

Football works because corporates take their clients to a game and there's corporate boxes, they don't take them up to Mount Panorama with slabs of VB
 
sq256
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 3:43 pm

https://www.ausbt.com.au/air-berlin-fil ... ws-support

Expect Alitalia and Virgin Australia to be next on the chopping block for EY divesting from their investments (and away from the "Hogan" legacy). Though both Alitalia and Air Berlin were both known to be bigger basketcases than VA.

Wonder what the future would hold for VA's shareholder makeup. If EY does divest of their VA stake, will SQ follow EY out the door? and will the Chinese shareholders (HNA Group & Nanshan Group) increase their stakes (by taking over EY and potentially SQ stakes) to make VA primarily Chinese owned?
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 4:57 pm

sq256 wrote:
https://www.ausbt.com.au/air-berlin-files-for-insolvency-after-etihad-withdraws-support

Expect Alitalia and Virgin Australia to be next on the chopping block for EY divesting from their investments (and away from the "Hogan" legacy). Though both Alitalia and Air Berlin were both known to be bigger basketcases than VA.

Wonder what the future would hold for VA's shareholder makeup. If EY does divest of their VA stake, will SQ follow EY out the door? and will the Chinese shareholders (HNA Group & Nanshan Group) increase their stakes (by taking over EY and potentially SQ stakes) to make VA primarily Chinese owned?

You can count HNA Group out, the Group is now under China government scrutiny to chalking up too many assets (along with debts) over the past few years. Not sure if the government will allow them to take on more debt, unless HNA is willing to cough out more cash.

http://fortune.com/2017/07/24/fortune-g ... oup-china/
https://www.bloomberg.com/news/articles ... s-j57r4vzy
 
WPvsMW
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 5:58 pm

Or an Air Berlin scenario: VA files for insolvency, and NZ buys out EY and SQ stakes. Under the single market agreement, maybe 100% control. Rebrand as NEW BLUE.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 6:20 pm

An Australian domestic carrier can be 100% owned by foreign interests. As for international carriers, these cannot be majority international owners, even by New Zealand. The open skies agreement is irrelvant to ownership.

NZ will not be buying out SQ and EY under any scenario. The biggest risk to NZ, and the reason they pulled the pin when they realised where this was heading, is that VA is a larger carrier than NZ. This had the potential to be Ansett 2.0, and could have pulled down NZ if VA really hit the rocks. At this stage VA isn't be attractive to anyone other than the Chinese, and if they tighten their belts then they could walk away as well.

While the presence of four large shareholders makes a hostile takeover harder as you can't chip away at small holdings, it is telling IMHO that a private equity group hasn't made a play for the company. The shares are trading at 20 cents, the company is worthless, and yet nobody appears interested in making a play to gain control, take them private, and execute a turnaround plan. The only investors who have stumped up any cash over the past 5 years are other airlines with strategic needs for an Australian partner or Chinese interests. The market gave up on VA years ago.
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redroo
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 11:00 pm

Thank goodness the Kiwis got out when they did.

As ryanairguru says the market sees no value in VAH. In ten years they've gone from $2 to $0.20. It has halved from $0.40 to $0.20 fully on JBs watch. I wouldn't be surprised if the Jetstar franchise was floated that I would be worth multiples of VAH.

Something isn't working.
 
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 11:33 pm

redroo wrote:
Thank goodness the Kiwis got out when they did.

As ryanairguru says the market sees no value in VAH. In ten years they've gone from $2 to $0.20. It has halved from $0.40 to $0.20 fully on JBs watch.


As further evidence of diminished value, note that while DL has been buying stakes left and right between VS, AM, MU and now AF/KL - they haven't touched, or even hinted at touching VA.
 
commavia
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 11:39 pm

winginit wrote:
As further evidence of diminished value, note that while DL has been buying stakes left and right between VS, AM, MU and now AF/KL - they haven't touched, or even hinted at touching VA.


Virgin Australia is notably absent from Delta's cavalcade of global airline investees. I'd speculate that perhaps part of the reason why is that given that Virgin Australia's other primary owners are also airlines, Delta would not be able to exercise the level of control and influence that it would want (as manifested in, say, the Aeromexico, GOL and Virgin Atlantic relationships).
 
Boof
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Tue Aug 15, 2017 11:46 pm

RyanairGuru wrote:
An Australian domestic carrier can be 100% owned by foreign interests. As for international carriers, these cannot be majority international owners, even by New Zealand. The open skies agreement is irrelvant to ownership.

NZ will not be buying out SQ and EY under any scenario. The biggest risk to NZ, and the reason they pulled the pin when they realised where this was heading, is that VA is a larger carrier than NZ. This had the potential to be Ansett 2.0, and could have pulled down NZ if VA really hit the rocks. At this stage VA isn't be attractive to anyone other than the Chinese, and if they tighten their belts then they could walk away as well.

While the presence of four large shareholders makes a hostile takeover harder as you can't chip away at small holdings, it is telling IMHO that a private equity group hasn't made a play for the company. The shares are trading at 20 cents, the company is worthless, and yet nobody appears interested in making a play to gain control, take them private, and execute a turnaround plan. The only investors who have stumped up any cash over the past 5 years are other airlines with strategic needs for an Australian partner or Chinese interests. The market gave up on VA years ago.


While I agree with your sentiment here Ryanairguru, and the views of many others in this thread about VA's performance, I don't think your opening statement is 100% correct. An NZ owned operation can operate international services ex Australia under the open skies agreement and vice-versa. Examples are NZ's current SYD-RAR, and in the 90's the NZ SYD-LAX direct services.

What is a challenge for VA is the nonsense arrangement where VAI is majority Australian owned through the holding company that was created and based off the remaining floated shares not owned by the four airline groups. It is this company that allows access to the international traffic rights, yet there is no scrutiny of this and the IASC never look into it despite QF regularly questioning it's legality.
If only B6 flew in Australia...
 
sq256
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Re: Virgin Australia announces a net loss of $185 million for FY16/17

Wed Aug 16, 2017 1:57 am

RyanairGuru wrote:
NZ will not be buying out SQ and EY under any scenario. The biggest risk to NZ, and the reason they pulled the pin when they realised where this was heading, is that VA is a larger carrier than NZ. This had the potential to be Ansett 2.0, and could have pulled down NZ if VA really hit the rocks. At this stage VA isn't be attractive to anyone other than the Chinese, and if they tighten their belts then they could walk away as well.


And knowing NZ's involvement in AN back in the late 90s and early 2000s by the then-owners/management (all of those figures who are no longer with NZ), I can see why the current NZ management didn't want to be involved again in another situation where they may have Ansett 2.0 all over again (only this time with VA).

The Ansett case was a complex one back then, News Corp didn't consider AN a core business as they bought them to get access to a TV station in the 1980s, and TNT via Peter Abeles was buying different fleets, left, right and centre which was bad for AN from a fleet commonality point of view.

News was handing a lemon to NZ (which the management knew), but egos by the then NZ owners, BIL (then-Chairman Selwyn Cushing could be compared to current VA CEO Borghetti in some ways) used his first refusal rights to stop SQ (who was stronger financially at the time) from acquiring News' stake in AN, even though he knew that NZ didn't have the financial capacity to fix a ailing AN at the time.

Once bitten, twice-shy in NZ's case with the current management.

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