Qantas wants $4.2b from government to 'level playing field' if Virgin gets bailout

 
Topic moved from News by bevans on 01 Apr 2020 15:24
  Carnot Minister for Railways

Word is that Virgin will go into administration in the next few days - I think the rumors of a Chinese takeover were just smoke and mirrors.

It's really not that catastrophic, Virgin was on shaky ground for at least a year before this happened. I feel sorry for the employees but the reality was that it wasn't making money before this happened anyway.
don_dunstan
I've also heard that the Fed Govt are making a bail out contingent on VA relocating their HQ to the new Western Sydney airport.

Qantas would virtually have a monopoly if VA disappeared Ansett-style....  $1000+ Perth Economy return airfares here we come.  Then again, it might make the Overland profitable if it runs with regularity after this Covid-19 thing blows over.

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  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Qantas/Jetstar are typically running 4 flights each way between Sydney and Melbourne each weekday atm.

Virgin airlines only 1 flight each way per day.

In 1947 ANA were running 8 flights per day each way between MEL and SYD. (With much smaller aircraft though).

Virgin have secured some concessions from Qld Govt to keep its HQ in Brisvegas, but I wouldn't be surprised that its big Chinese stakeholder (HNA) end up owning most of it.  That puts the Australian Government in an interesting place - i.e. Does it get the big baseball bat out and take equity in VA to prevent a Chinese takeover?  But will neo-liberal small government ideology get in the way?
"Carnot"


HNA own 20% as does another Chinese company, Etihad and Singapore airlines with Virgin Group owning just 10%. SIA and Etihad are not exactly shinning stars of economic success and Virgin airlines UK is struggling. Virgin Atlantic is seeking a bailout.  So yes I think the others may take any offer and run.

The 10% of shares on the ASX have decreased from $1.50 nominal to less than 10c with most of the damage done down to 15c prior to Corona. VA shares must be approaching the value of that it paid for Tiger.

I think whole Virgin Airline Group has been contracting for years, I think the business model worked, until it didn't. Other discount airlines have found even more popular yet inhumane ways to stuff people into planes for lower fares and the 70's red bikini blonde hair hostess surrounding the Branson as if like a harem is out of date today! I also think Branson is loosing interest in flogging the "Virgin" brand as the guy is nearly 70 and like most of these type people, they tend to focus on their personal interest as they get older and richer.  

Prediction,
- Tigerair is unlikely to return
- By 2030 it will be easier to find a 25 year virgin than anything Branded "Virgin" still in operation outside space related.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Word is that Virgin will go into administration in the next few days - I think the rumors of a Chinese takeover were just smoke and mirrors.

It's really not that catastrophic, Virgin was on shaky ground for at least a year before this happened. I feel sorry for the employees but the reality was that it wasn't making money before this happened anyway.
I've also heard that the Fed Govt are making a bail out contingent on VA relocating their HQ to the new Western Sydney airport.

Qantas would virtually have a monopoly if VA disappeared Ansett-style....  $1000+ Perth Economy return airfares here we come.  Then again, it might make the Overland profitable if it runs with regularity after this Covid-19 thing blows over.
Carnot
But then maybe those cheapie discount airfares were never viable to begin with? Virgin had been hemorrhaging money for ages.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Word is that Virgin will go into administration in the next few days - I think the rumors of a Chinese takeover were just smoke and mirrors.

It's really not that catastrophic, Virgin was on shaky ground for at least a year before this happened. I feel sorry for the employees but the reality was that it wasn't making money before this happened anyway.
don_dunstan
I've also heard that the Fed Govt are making a bail out contingent on VA relocating their HQ to the new Western Sydney airport.

Qantas would virtually have a monopoly if VA disappeared Ansett-style....  $1000+ Perth Economy return airfares here we come.  Then again, it might make the Overland profitable if it runs with regularity after this Covid-19 thing blows over.
"Carnot"


QF won't have a monopoly for long at those fares and they will be heavily scrutinized by the govt. QF knows someone else will move in to replace VA, but the higher their fares, the faster this will occur.

If that rumor is true this would be why the Qld govt offered $200M to stay in Brisbane. The Feds are using this issue to their advantage to help Western Sydney Airport be successful for passenger movement, why not!
  Carnot Minister for Railways

Word is that Virgin will go into administration in the next few days - I think the rumors of a Chinese takeover were just smoke and mirrors.

It's really not that catastrophic, Virgin was on shaky ground for at least a year before this happened. I feel sorry for the employees but the reality was that it wasn't making money before this happened anyway.
I've also heard that the Fed Govt are making a bail out contingent on VA relocating their HQ to the new Western Sydney airport.

Qantas would virtually have a monopoly if VA disappeared Ansett-style....  $1000+ Perth Economy return airfares here we come.  Then again, it might make the Overland profitable if it runs with regularity after this Covid-19 thing blows over.


QF won't have a monopoly for long at those fares and they will be heavily scrutinized by the govt. QF knows someone else will move in to replace VA, but the higher their fares, the faster this will occur.

If that rumor is true this would be why the Qld govt offered $200M to stay in Brisbane. The Feds are using this issue to their advantage to help Western Sydney Airport be successful for passenger movement, why not!
RTT_Rules
It's an ALP vs. Libs competition.

Meanwhile, Moody's have downgraded VA to Caa1 rating: https://www.asx.com.au/asxpdf/20200420/pdf/44h2msdqpb0fvd.pdf
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
It's an ALP vs. Libs competition.

Meanwhile, Moody's have downgraded VA to Caa1 rating: https://www.asx.com.au/asxpdf/20200420/pdf/44h2msdqpb0fvd.pdf
"Carnot"


Probably

VA long term price had a stable period around $1.50, peaks of >$2, they are now worth around 5% of the $1.50 price. I think it was first floated in 2003 for around $2.00, so that's what +98% loss in share holder value. So if you are cashed up and willing to have a go, you could pick up a really cheap airline.
  Carnot Minister for Railways

It's an ALP vs. Libs competition.

Meanwhile, Moody's have downgraded VA to Caa1 rating: https://www.asx.com.au/asxpdf/20200420/pdf/44h2msdqpb0fvd.pdf


Probably

VA long term price had a stable period around $1.50, peaks of >$2, they are now worth around 5% of the $1.50 price. I think it was first floated in 2003 for around $2.00, so that's what +98% loss in share holder value. So if you are cashed up and willing to have a go, you could pick up a really cheap airline.
RTT_Rules
Cheap as chips.  And Boeing and Airbus will have big headaches over lost orders with so many surplus planes hanging around now.

The current stoush over VA HQ has incited words such as "bring a bazooka to a fight" and "Back-off" among the pollies: https://www.abc.net.au/news/2020-04-20/coronavirus-six-billion-dollar-hit-to-queensland-tourism/12151078

I suppose it's something for them to do while Rugby League State of Origin ain't happening...
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
It's an ALP vs. Libs competition.

Meanwhile, Moody's have downgraded VA to Caa1 rating: https://www.asx.com.au/asxpdf/20200420/pdf/44h2msdqpb0fvd.pdf


Probably

VA long term price had a stable period around $1.50, peaks of >$2, they are now worth around 5% of the $1.50 price. I think it was first floated in 2003 for around $2.00, so that's what +98% loss in share holder value. So if you are cashed up and willing to have a go, you could pick up a really cheap airline.
RTT_Rules
Cheap as chips.  And Boeing and Airbus will have big headaches over lost orders with so many surplus planes hanging around now.

The current stoush over VA HQ has incited words such as "bring a bazooka to a fight" and "Back-off" among the pollies: https://www.abc.net.au/news/2020-04-20/coronavirus-six-billion-dollar-hit-to-queensland-tourism/12151078

I suppose it's something for them to do while Rugby League State of Origin ain't happening...
"Carnot"


If the govt throws money at QF (majority Aussie owned with limits on how much another airline can own) you know they will get it back one way shape or form without putting conditions in place and the purpose for throwing money at QF is overall achieved, ie we sustain a major domestic and international airline. No one wins of QF goes bust.

If the govt throws money at VA, well the outcome is uncertain. Could be like the initial rescue of Ansett, Compass Mk1/Mk2 etc. It doesn't have the local investment limits like QF. Its smaller than QF and could fold tomorrow and post Corona Virus QF could easily pick up most of the work of VA and if they moved during the shutdown, likely be more than ready as they would mobilise their people to start picking up a few planes and interviewing staff and be ready to pick up the VA work load for the foreseeable future by acquiring VA planes and crew. This assumes that there will be a significant reduction in travelers 10-30% for the rest of the year.

No one wins, but no one really looses apart from many of the VA employees. The elephant in the room in all this is that even if VA is saved, neither QF and VA will require their full workforce back until likely Xmas or even 2021, at best. I would not expect QF to be gouging as they will be trying to get people with no leave, reduced bank accounts and cash starved businesses who got used to video conferencing to fly again.

2021, assuming VA closes, expect the likes of Air Kiwi to enter the domestic market with a open invitation from the Ozzie Govt. International flights from Australia via Air Kiwi will take some time, but not a priority, afterall Australia has EK, Etihad and Qatar to look after the bulk of the flights competing against QF.
  KRviator Moderator

Location: Up the front
AAAnnd that's the end of that for Virgin...

They're going into Administration tomorrow
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
AAAnnd that's the end of that for Virgin...

They're going into Administration tomorrow
KRviator
As expected.
2021, assuming VA closes, expect the likes of Air Kiwi to enter the domestic market with a open invitation from the Ozzie Govt.
RTT_Rules
What are you basing that bit of insane speculation on.
  KRviator Moderator

Location: Up the front
Australia does not currently have an "Open Skies" policy that permits foreign airlines to operate domestic flights. I'd be extremely surprised to see any foreign airline flying domestically in Australia anytime soon.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
AAAnnd that's the end of that for Virgin...

They're going into Administration tomorrow
KRviator
As expected.
2021, assuming VA closes, expect the likes of Air Kiwi to enter the domestic market with a open invitation from the Ozzie Govt.
RTT_Rules
What are you basing that bit of insane speculation on.
"don_dunstan"


I feel sorry for the people, but this was coming long before CV.

I said I expect the likes of....Air NZ was just one of many options. I do not believe there will be a Compass like start up again any time soon. I believe it will be another airline opening a subsidiary, but not the way Virgin was.

If we use Air NZ as a potential option that could quickly grab a few planes and be operating the east coast corridor B-S-C-M with the odd flight to Adel, Hobart and Perth with within a few weeks.

Why NZ, because of their proximity to the busy east coast corridor, similar time zone, they can still run most of it including plane maintenance from HQ NZ. No idea on how practical, but when has that stopped any of us here.
  ANR Deputy Commissioner

When virgin goes bust, it won't be missed. Nobody misses Ansett. We don't need Air NZ.
  arctic Deputy Commissioner

Location: Zurich
Does going into administration mean they will stop operations completely? - normally this is up to the administrators?
  Big J Deputy Commissioner

Location: In Paradise
Does going into administration mean they will stop operations completely? - normally this is up to the administrators?
arctic
Great point. No it doesn't. Normally the administrators like to continue to trade to retain cashflow, while they restructure debt. However, if they can't obtain capital then they will wind it up, like Ansett.

The problem is COVID19 is impacting their normal operations and therefore cashflow.

I think VA will emerge at the other end, but it will be VA lite (maybe a VirginBlue of the first 5 years). That is a LCC operating between the capitals. They will axe international (maybe not NZ) and sadly for us regionals, except maybe going back to some leisure sectors later. The with the later they will probably not be operating for a few years as that sector has been hit hard.

Even if we do operate in a Bubble with internal travel and domestic holidays are encouraged. I think people habits for flying may change after this and people may prefer to drive again for those holidays to avoid crowds.

Anyway that is my guess, as good as anyone else that think it wont continue or will continue as a full service airline.

I think the administrators will get some money out the current backers (SA, HNA, Etithad, Branson), but at different levels and I think the states will kick in dough. But it wont be the same airline that we knew at the beginning at the year. They were in trouble then.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
....

I think the administrators will get some money out the current backers (SA, HNA, Etithad, Branson), but at different levels and I think the states will kick in dough. But it wont be the same airline that we knew at the beginning at the year. They were in trouble then.
Big J
Branson has penned an open letter to the "Virgin family" pleading with the British and Australian governments to help bail out his failing commercial enterprise. He's even been so generous as to offer his British Virgin Islands paradise (Necker Island) as collateral to the UK government in exchange for a loan.

Not offering any of his actual cash though!
When virgin goes bust, it won't be missed. Nobody misses Ansett. We don't need Air NZ.
ANR
Remember how Ansett were such an integral part of the Aussie aviation scene? Shocking really that the whole thing disappeared without trace within a few months.



https://www.youtube.com/watch?v=HwE5SOAwjIc

Let's face it, an airline is just a brand - nothing more, nothing less. Ansett was indeed much beloved but it got sunk by the extremely poor management of News Limited and then later on Air New Zealand. Hard to believe that all that was nineteen years ago... Virgin was losing money before all this happened and it was unlikely that they were going to be able to continue in their existing format anyway.

I think we're headed for a regulated monopoly with domestic airlines. A smaller cut-price competitor might emerge from the ashes of Virgin but it won't be for a while. And domestic air travel will probably take a few years to fully recover from COVID19 (if it ever does).

Driving holidays are suddenly competitive again - I heard that petrol was being sold yesterday in Adelaide for 65 cents, that's just gob-smacking. I didn't think it was going to get any cheaper but it has...
  sydneyshortnorth Train Controller

Location: On the 1 in 40.
Economics (Transport) 101: How to make yourself a small fortune in the airline industry.

Start out with a very large one.

Steve
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
I think Australia is only suited to
- 1 x major airlines that pretty much goes everywhere operating full service and low cost options
- 1 x 2ndry airline that offers a reduced full service focusing on core hubs, they may also serve busier regional hubs and some mining contracts

The first one will be Qantas

The 2nd one will be either the skeleton of VA or a new operator.

If VA doesn't survive this is why I feel Air NZ may be invited to move in in a new arrangement between the two countries, more open sky's on major routes. Thus eliminating some of the issues faced for over seas operators.

With all the hype of deregulation in the US back in the 80's/90's what ever, they are pretty much down to 4 or 5 major carriers and I doubt finished with mergers.  International traffic headed from anywhere in the US to the east to anywhere other than EU, is all pretty much done by Middle East carriers and now with longer flights, western based pacific operators are now  direct flights with the need for a domestic flight mostly eliminated if travelling to anywhere other than major centre. The days of Hawaii, LA and SF hubs are dead.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
[quote="don_dunstan"][quote=Big J]....

I think the administrators will get some money out the current backers (SA, HNA, Etithad, Branson), but at different levels and I think

Driving holidays are suddenly competitive again - I heard that petrol was being sold yesterday in Adelaide for [b]65 cents, [/b]that's just gob-smacking. I didn't think it was going to get any cheaper but it has...[/quote]



Cost of petrol/oil wouldn't impact on driving vs flying holidays, less than the cost of lunch for 1000km drive. But Oil price and $A does impact on whether people holiday in country of out of country and encourages others to come here.


The low oil price will certainly help industry recover faster from this mess. Airlines should be able to offer unprecedented but still profitable fares.
  aussie48 Junior Train Controller

Location: Melbourne
Why would any Government in it's right mind in this C-19 climate bail out an Airline that is 39.95% owned by 2 Chinese Companies.  The other problem Virgin has, it owes $5 Billion for starters, hasn't turned a profit for years and has NEVER paid any Australian Tax.  As for Branson he doesn't own any Airlines anymore he gets paid by Companies a tidy sum that use the Virgin Name.
The Queensland Labour Federal Minister with the Noddy Dog Premier was on the news this morning waffling on about Qld bailing Virgin out etc etc.   Shortly after the Biggest political Cretins Albanese and Shorten are waffling about the Australian people demanding Morrison bail out Virgin, jobs lost etc etc.  What a load of Political Horse smeg, no one asked me if I wanted to loan/give Virgin money from my hard earned taxes.
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
Cost of petrol/oil wouldn't impact on driving vs flying holidays, less than the cost of lunch for 1000km drive. But Oil price and $A does impact on whether people holiday in country of out of country and encourages others to come here.

The low oil price will certainly help industry recover faster from this mess. Airlines should be able to offer unprecedented but still profitable fares.
RTT_Rules

Yeah but we still have no idea whether we'll ever have free-and-easy international travel like we used to.

And it'll kill that stupid dinosaur the electric car once and for all (hooray). Suddenly Tesla drivers aren't looking so smart...
  arctic Deputy Commissioner

Location: Zurich
Why would any Government in it's right mind in this C-19 climate bail out an Airline that is 39.95% owned by 2 Chinese Companies.  The other problem Virgin has, it owes $5 Billion for starters, hasn't turned a profit for years and has NEVER paid any Australian Tax.  As for Branson he doesn't own any Airlines anymore he gets paid by Companies a tidy sum that use the Virgin Name.
The Queensland Labour Federal Minister with the Noddy Dog Premier was on the news this morning waffling on about Qld bailing Virgin out etc etc.   Shortly after the Biggest political Cretins Albanese and Shorten are waffling about the Australian people demanding Morrison bail out Virgin, jobs lost etc etc.  What a load of Political Horse smeg, no one asked me if I wanted to loan/give Virgin money from my hard earned taxes.
aussie48
They didn`t, no one bailed anyone out. The overseas owners and the debtors will lose most of their shirt. As it should be, it was their risk.

Whatever remains "the new Virgin" owned by whover buys the remaining value may continue but most likely without the previous owners. Though a Government might provide this new airline with some incentives for HQ location etc etc.

cheers
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE
Why would any Government in it's right mind in this C-19 climate bail out an Airline that is 39.95% owned by 2 Chinese Companies.  The other problem Virgin has, it owes $5 Billion for starters, hasn't turned a profit for years and has NEVER paid any Australian Tax.  As for Branson he doesn't own any Airlines anymore he gets paid by Companies a tidy sum that use the Virgin Name.
The Queensland Labour Federal Minister with the Noddy Dog Premier was on the news this morning waffling on about Qld bailing Virgin out etc etc.   Shortly after the Biggest political Cretins Albanese and Shorten are waffling about the Australian people demanding Morrison bail out Virgin, jobs lost etc etc.  What a load of Political Horse smeg, no one asked me if I wanted to loan/give Virgin money from my hard earned taxes.
aussie48
They didn`t, no one bailed anyone out. The overseas owners and the debtors will lose most of their shirt. As it should be, it was their risk.

Whatever remains "the new Virgin" owned by whover buys the remaining value may continue but most likely without the previous owners. Though a Government might provide this new airline with some incentives for HQ location etc etc.

cheers
"arctic"


Agree, the existing owners have done their doe, including the Australian ASX mums and dad's.

IF and I say IF VA is to be bailed out I feel it should be a 50:50 arrangement of govt and private money. We don't want or need another govt owned airline. The existing share holders would be diluted to what ever is relevant and thats likely around 5% combined, if that much.

The private investors would be the operators of the airline. The govt would sell down its shares over time or if the airline to fail again be the principle creditor after employees. ie they get paid first from the fire sale after employees are paid out.

Such a deal would enable Virgin Aust to continue to trade under the VA name for 5 years paying no fees to the Virgin group for naming rights or until the company turns a profit.

For such a deal to take place, the existing creditors will no doubt have to write off some of their debt, around 50c in the $ to help make the airline viable.
  RTT_Rules Oliver Bullied, CME

Location: Dubai UAE

Yeah but we still have no idea whether we'll ever have free-and-easy international travel like we used to.

And it'll kill that stupid dinosaur the electric car once and for all (hooray). Suddenly Tesla drivers aren't looking so smart...
"don_dunstan"


Why not, the only thing that will change is a mandatory test prior to flying. Emirates is currently testing passengers on check in with results before boarding and boarding denied if positive and Abu Dhabi Airport has Australian based check in technology scanning passengers on trial and to be rolled out in May for all passengers. Amazing how fast some industries work when their survival is on the line.

Power prices are dropping as well, just not as quick, but whole sale prices are nearly half last years in some states, more if you exclude the usual peaking Jan prices.

Average car driver in Australia is 350 km/wk, medium sized car is around 8 L / 100km, so 30 L / week. Assuming 50c lower petrol price, thats $ 15 / wk or $ 2 / day and thats if you are still driving much, many are not which is why petrol prices are so low in the first place. Now when the govt gives tax cuts of $2/d, we never hear the end of how pointless it is and its basically nothing. So enjoy your nothing savings, I'm sure most SMART EV owners are not loosing sleep knowing these prices won't last long, OPEC will be targeting +$50/barrel Q3/Q4 to return their respective budgets back into the black and hence most SMART hydrocarbon fueled car owners know this.

Also who buys a car based on last few weeks fuel prices?
  Big J Deputy Commissioner

Location: In Paradise
Another thing I haven't really considered is the knock on effect on creditors. Today reports are out about Swissport that provide ground handling etc for VA.

The one I am concerned about is Alliance Airways, where they have done a lot of work for VA in the regions and FIFO on their behalf. They also do work for QF as well.

It might be an opportunity for them where they can fly in their own right, but it depends on how much money is owed to them to see what the total outcome is. I hope that they are not severely impacted.

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