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Virgin Blue - Could It Go Bankrupt?  
User currently offlineSparklehorse12 From Australia, joined Feb 2007, 908 posts, RR: 1
Posted (6 years 3 months 2 weeks 5 days 15 hours ago) and read 6394 times:

I have been saying for a while that DJ are looking shaky with high oil prices etc

http://business.smh.com.au/virgin-bl...e-could-go-bust-20080605-2m49.html


Airlines Flown : QF,NW,AA, CX, AC, MH, SQ, DJ, NZ, TG, PG,US, FJ, J8, AN, DD, JQ
50 replies: All unread, showing first 25:
 
User currently offlineVHECA From Australia, joined May 2007, 262 posts, RR: 0
Reply 1, posted (6 years 3 months 2 weeks 5 days 14 hours ago) and read 6377 times:

Could this be the reason behind the E-Jet purchase?

Smaller jets, easier to fill, niche markets = $ in bank?

Not sure but hope that they can remain. Loving the open skies over Australia at the moment!

Cheers

VHECA

[Edited 2008-06-04 20:25:39]


Types Flown on - 312,320,722,732,733,73H,73W,742,743,74C,752,762,AB4,D1C,D28,DHT,F27,L11
User currently offlineTullamarine From Australia, joined Aug 1999, 1569 posts, RR: 0
Reply 2, posted (6 years 3 months 2 weeks 5 days 14 hours ago) and read 6333 times:

I don't think they will go broke. A position in the Australian dupoly is very valuable but they may have to modify their plans going forward.


717,721/2,732/3/4/5/7/8/9,742/3/4,752/3,762/3,772,W,A310,320,321,332,333,388,DC9,DC10,F28,F100,142,143,E90,CR2,D82/3/4,S
User currently offlineAirbear From Australia, joined May 2001, 648 posts, RR: 1
Reply 3, posted (6 years 3 months 2 weeks 5 days 14 hours ago) and read 6288 times:

Perish the thought, but in the current situation with oil prices, and other economic woes, I don't believe that any airline - except for Emirates, Qatar, Etihad and the like (because I have always believed that their owners would NEVER let them go down, no matter how much it cost to keep them in the air) - is completely immune from closing down.

I hate to think what we would pay to fly if the market was left to QF/JQ (and if DJ were to go, I would imagine that TT would have ceased long before).


User currently offlineSYDAircargo From Australia, joined Jun 2008, 242 posts, RR: 0
Reply 4, posted (6 years 3 months 2 weeks 5 days 13 hours ago) and read 6118 times:

the Australian marked needs DJ and with V Australia comming i don't see them going.

User currently offlineKent350787 From Australia, joined May 2008, 965 posts, RR: 0
Reply 5, posted (6 years 3 months 2 weeks 5 days 12 hours ago) and read 6049 times:

If DJ were to go under, the Aust Government would be bending over backwards to allow other entrants to compete with Qantas - there is just too big an economic stake for the country to allow competition to be removed. Imagine the overall economic cost of a monopoly being able to dictate higher prices on the MEL-SYD-BNE trio alone!

Even a slightly closer reading of the article says that a 10% increase in fares (not huge) should secure their future, although may impact on loads.

Kent

[Edited 2008-06-04 22:54:04]

User currently offlineCupraIbiza From Australia, joined Feb 2007, 836 posts, RR: 6
Reply 6, posted (6 years 3 months 2 weeks 5 days 12 hours ago) and read 6027 times:



Quoting SYDAircargo (Reply 4):
i don't see them going.

I think we need to examine the majority owner - Toll. These guys have a proud history of building the company by making acquisitions. I theink they have mad a few hundred very successful acquisitions to build the business to what it is. I dont see them doing an Air NZ and pulling the plug (sorry couldnt resist)



Everyday is a gift…… but why does it have to be a pair of socks?
User currently offlineSparklehorse12 From Australia, joined Feb 2007, 908 posts, RR: 1
Reply 7, posted (6 years 3 months 2 weeks 5 days 12 hours ago) and read 5986 times:



Quoting CupraIbiza (Reply 6):
I think we need to examine the majority owner - Toll. These guys have a proud history of building the company by making acquisitions. I theink they have mad a few hundred very successful acquisitions to build the business to what it is. I dont see them doing an Air NZ and pulling the plug (sorry couldnt resist)

No-one thought Ansett would go down either......

Here is the gossip:

A prominent QF employee is beleived to have said there could be some spare terminal space coming up around the country..*wink wink*

QF are putting together a contingency plan to quickly acquire this space IF it becomes suddenly availible.......

read between the lines and I think the industry insiders know something we don't. If I was DJ I would be absolutely furious that this article has been published and I would be furious that brokers are creating these scenarios based on speculation and modelling on an oil price at 200 a barrel.....specualtion needs to be taken out of markets...it is negative in the extreme!



Airlines Flown : QF,NW,AA, CX, AC, MH, SQ, DJ, NZ, TG, PG,US, FJ, J8, AN, DD, JQ
User currently offlineANstar From United Kingdom, joined Nov 2003, 5244 posts, RR: 6
Reply 8, posted (6 years 3 months 2 weeks 5 days 10 hours ago) and read 5830 times:



Quoting Sparklehorse12 (Reply 7):
read between the lines and I think the industry insiders know something we don't. If I was DJ I would be absolutely furious that this article has been published and I would be furious that brokers are creating these scenarios based on speculation and modelling on an oil price at 200 a barrel.....specualtion needs to be taken out of markets...it is negative in the extreme

Actually I think the media has been rather unfair to Virgin in the past week or so... allt hese doom and glooms are based on around $200 oil.

As for increasing prices, the did this at the start of May, so I wonder if this is factored into their figures?? Interesting oil is down in the last week from its highs..


User currently offlineSparklehorse12 From Australia, joined Feb 2007, 908 posts, RR: 1
Reply 9, posted (6 years 3 months 2 weeks 5 days 9 hours ago) and read 5780 times:



Quoting ANstar (Reply 8):

Actually I think the media has been rather unfair to Virgin in the past week or so... allt hese doom and glooms are based on around $200 oil.

As for increasing prices, the did this at the start of May, so I wonder if this is factored into their figures?? Interesting oil is down in the last week from its highs..

ANstar - yes, they have been unfair and so have brokers modelling prices above where they are and creating a scenario for DJ rather than reporting what actually is.......

QF would be loving this!



Airlines Flown : QF,NW,AA, CX, AC, MH, SQ, DJ, NZ, TG, PG,US, FJ, J8, AN, DD, JQ
User currently offlineANstar From United Kingdom, joined Nov 2003, 5244 posts, RR: 6
Reply 10, posted (6 years 3 months 2 weeks 5 days 9 hours ago) and read 5748 times:

http://money.ninemsn.com.au/article.aspx?id=575329

Interesting article from Ross Greenwood

Quote:

At the last balance sheet Virgin Blue had around $704 million of cash reserves in its balance sheet; total assets of $2.3 billion and total debt of $1.5 billion. It last year made $217 million.



Quote:

So presume that the fuel cost for Virgin Blue this year doubled — to around $980 million. With all other things being equal it works out that the airline would roughly have lost $270 million for the full year. That still will not burn that cash reserve — but put a decent dent it in and bring it down to around $430 million. What JP Morgan and UBS are both saying is that Virgin Blue cannot stand that sort of cash drain forever. That's true enough.

But is it enough to send the airline broke? Not really in the immediate future because presumably the management will change a range of things — most likely air-fares — to address the cash drain caused by fuel prices. The second thing that will cause some stress is the constant need to upgrade aircraft (in order to keep the major servicing of the aircraft down to a mimimum) and the need to promote special fares to keep the load-factor high in the aircraft. The thing that might be cast aside is the V-Australia plan, unless the prices can be set at sensible levels. The worst scenario is that for any reason travellers stop flying or lose confidence.




User currently offlineHKGKaiTak From Australia, joined Jun 2005, 1050 posts, RR: 0
Reply 11, posted (6 years 3 months 2 weeks 5 days 8 hours ago) and read 5657 times:



Quoting Tullamarine (Reply 2):
I don't think they will go broke. A position in the Australian dupoly is very valuable but they may have to modify their plans going forward.

I don't think they'd go under either (or that they'd be allowed to, for that matter), but then I wonder if the Australian situation really is a duopoly with the QF Group's two brands.

It certainly isn't easy being the meat in the sandwich, fiercely protecting its business/luxury clientele whilst at the same time poaching the Kath and Kim flyers with JQ. Either way the future goes the QF Group holds the trump card ...



4 Engines 4 LongHaul
User currently offlineCupraIbiza From Australia, joined Feb 2007, 836 posts, RR: 6
Reply 12, posted (6 years 3 months 2 weeks 5 days 8 hours ago) and read 5578 times:



Quoting HKGKaiTak (Reply 11):
I don't think they'd go under either (or that they'd be allowed to, for that matter),

What has changed since Ansett?.... Speaking of Ansett there are those who believe Ansett buying RJs was the beginning of the end for them....

Quoting HKGKaiTak (Reply 11):
It certainly isn't easy being the meat in the sandwich, fiercely protecting its business/luxury clientele whilst at the same time poaching the Kath and Kim flyers with JQ.

A few of us (I cant remember who else) have been saying for a while that DJ is getting squeezed in a perfectly executed "Qantas Group" pincer movement.

Whats worse is now DJ doesnt stand for anything. They aren't for the businessman but they arent an LCC. Mr Godfrey has sailed through with lots of free kicks. But now its time to step up Bretty boy



Everyday is a gift…… but why does it have to be a pair of socks?
User currently offlineThegeek From Australia, joined Nov 2007, 2638 posts, RR: 0
Reply 13, posted (6 years 3 months 2 weeks 5 days 6 hours ago) and read 5448 times:



Quoting CupraIbiza (Reply 12):
Whats worse is now DJ doesnt stand for anything. They aren't for the businessman but they arent an LCC. Mr Godfrey has sailed through with lots of free kicks. But now its time to step up Bretty boy

That's about right. Until Patrick's interference they were running a pretty good race, but they don't have that excuse now.

I think they're planning to return some or all of their 73G's to the lessor at the end their leases, which might give them more near to the capacity they need, but they have been making baffling decisions to expand capacity in the face of rising fuel prices and sending 738s to do NZ domestic ops while flying 73G's SYD-MEL at times. But I don't think they'll go broke.

I'm less pessimistic than Sparklehorse12 on their USA venture. It shouldn't end in tears, and it's probably too late to turn back now. But they've been very quiet on partner airlines and additional routes which is not a good sign.


User currently offlineANstar From United Kingdom, joined Nov 2003, 5244 posts, RR: 6
Reply 14, posted (6 years 3 months 2 weeks 5 days 5 hours ago) and read 5354 times:



Quoting Thegeek (Reply 13):
It shouldn't end in tears, and it's probably too late to turn back now. But they've been very quiet on partner airlines and additional routes which is not a good sign

Come on join skyteam already..... they need some more international partners.... become more appealing!

Quoting Thegeek (Reply 13):
sending 738s to do NZ domestic ops while flying 73G's SYD-MEL at times. But I don't think they'll go broke.

Now to be honest I thinkg 738's on NZ domestic was foolish.... surely the EMB190's or 73G's would be more suitable????


User currently offlineSparklehorse12 From Australia, joined Feb 2007, 908 posts, RR: 1
Reply 15, posted (6 years 3 months 2 weeks 5 days 5 hours ago) and read 5296 times:



Quoting CupraIbiza (Reply 12):
Whats worse is now DJ doesnt stand for anything. They aren't for the businessman but they arent an LCC. Mr Godfrey has sailed through with lots of free kicks. But now its time to step up Bretty boy

They have completely fallen through the cracks for all segments. From my perspective it all started to go wrong around the time they announced thier ambition to take on QF directly and that rediculous "get what you want" campaign..thier agency should have been marched for that!!! Awful aspiration Gen Y trash with no class at all trying to get higher yeild pax....big mistake

Captial Jet is another mistake....the only people who fly between SYD>CBR are government travellers, upper eschelons of management or wealthy retiree's. Middle management, sales reps and leisure segments drive as it is only 2:45 hours from Sydney. Government Travellers want food and points and upper management only fly QF.....DJ didn't do their homework...

Maybe V Aus will do well but with the A380 deployed with plenty of capacity and room to massage prices downward in response to V Aust they will have thier work cutout. QF will go absolutely overboard about the A380 on the route "fly with the latest" all of a sudden QF are the modern airline and DJ look second rate...a perfect angle for QF to protect market share....



Airlines Flown : QF,NW,AA, CX, AC, MH, SQ, DJ, NZ, TG, PG,US, FJ, J8, AN, DD, JQ
User currently offlineThegeek From Australia, joined Nov 2007, 2638 posts, RR: 0
Reply 16, posted (6 years 3 months 2 weeks 4 days 20 hours ago) and read 4992 times:



Quoting Sparklehorse12 (Reply 15):
Maybe V Aus will do well but with the A380 deployed with plenty of capacity and room to massage prices downward in response to V Aust they will have thier work cutout.

I think they need to find routes for which the A380 is not suitable. Routes to SFO and BNE-LAX would fit the bill. SYD-LAX will always be low margin for them with the need to undercut QF. Of course, if a code sharing deal with UA can't be stitched up, that makes SFO a significantly less attractive destination - how would you compete with UA's connections from SFO?


User currently offlineANstar From United Kingdom, joined Nov 2003, 5244 posts, RR: 6
Reply 17, posted (6 years 3 months 2 weeks 4 days 19 hours ago) and read 4911 times:

godfrey speaks....

http://www.news.com.au/business/story/0,23636,23819581-14334,00.html

Quote:

"We are considering a range of options which may include capacity reductions, redeployment of aircraft, fare reviews, and several other initiatives - not just the single demand-side lever of fare reviews as the JPMorgan Report suggested," Mr Godfrey said.



Quote:

"There's been no discussion in this document as to other options: not one discussion about what we could do with our frequent flyer program or all the planes that we own; not one to do with what we could do with the orders from Boeing or the slowing of deliveries or offering aeroplanes for sale," he said.

Interesting the meniton of the frequent flyer program.....


User currently offlineGarethW From New Zealand, joined Apr 2006, 308 posts, RR: 0
Reply 18, posted (6 years 3 months 2 weeks 4 days 19 hours ago) and read 4883 times:



Quoting ANstar (Reply 17):
Interesting the meniton of the frequent flyer program.....

What can they do with it? Is there a way to leverage some more capital from it.

I won't re-hash the above but I agree that they are vulnerable and I believe that on some of the thinner routes which they compete for against QF they will give way. Either voluntarily or QF will bully them out by right when it hurts.

I will never understand deploying 738s in New Zealand, making them the largest aircraft flying main trunk routes. Needed to be E-jets from the start or 73Gs at worst.

The problem as I see it for Dj is yes they can increse fares by 10%, but that will alienate a lot of travellers back to QF, which then goes back to what HKGKaitak wrote about trying to capture both ends of the market.

That right there is the fundamental problem with their business.



How good is it?
User currently offlineANstar From United Kingdom, joined Nov 2003, 5244 posts, RR: 6
Reply 19, posted (6 years 3 months 2 weeks 4 days 19 hours ago) and read 4872 times:



Quoting GarethW (Reply 18):
What can they do with it?

Join a global alliance and hope for more pax

Quoting GarethW (Reply 18):
I will never understand deploying 738s in New Zealand,

Currently NZ are blocking their entry into STAR.... perhaps they started NZ domestic as a bargainig chip for their entry - far fetched I know, but stranger things have happened.

Perhaps now DJ will say, let us join and we retrench from NZ domestic and Pac Blue flying...

Quoting GarethW (Reply 18):
The problem as I see it for Dj is yes they can increse fares by 10%, but that will alienate a lot of travellers back to QF

The article pretty much said he wasnt going to increase fares that much and they are looking at other options like deferring aircraft and selling owned aircraft


User currently offlineSparklehorse12 From Australia, joined Feb 2007, 908 posts, RR: 1
Reply 20, posted (6 years 3 months 2 weeks 4 days 15 hours ago) and read 4765 times:

Either way, they are vulnerable.......

Hypothetically if they join Star Alliance what upgrades would they need to undertake to comply with the standards or does it even work that way?



Airlines Flown : QF,NW,AA, CX, AC, MH, SQ, DJ, NZ, TG, PG,US, FJ, J8, AN, DD, JQ
User currently offlinePilotdude09 From Australia, joined May 2005, 1777 posts, RR: 4
Reply 21, posted (6 years 3 months 2 weeks 4 days 12 hours ago) and read 4637 times:

I think JQ and TT will go first, since they are low cost carriers and if they have to raise prices there goes their whole model.


Qantas, Still calling Australia Home.........
User currently offlineSparklehorse12 From Australia, joined Feb 2007, 908 posts, RR: 1
Reply 22, posted (6 years 3 months 2 weeks 4 days 11 hours ago) and read 4629 times:



Quoting Pilotdude09 (Reply 21):
I think JQ and TT will go first, since they are low cost carriers and if they have to raise prices there goes their whole model.

SQ have come out and said they will continue with thier plans regardless of the current climate so I doubt TT will go first.

JQ is the apple of the QF eye so if anything the QF brand will dissapear on routes before JQ colapsed....JQ will never get pulled while Dixion is there...it is his union busting silver bullet..

DJ is more vulnerable than either TT or JQ...DJ is a LCC posing as a "new world carrier" whatever the heck that means....has DJ created thier own class of carrier so they can claim they are the leaders in the "new world carrier" class?
 duck 



Airlines Flown : QF,NW,AA, CX, AC, MH, SQ, DJ, NZ, TG, PG,US, FJ, J8, AN, DD, JQ
User currently offlineZkpilot From New Zealand, joined Mar 2006, 4833 posts, RR: 9
Reply 23, posted (6 years 3 months 2 weeks 4 days 11 hours ago) and read 4605 times:



Quoting ANstar (Reply 19):
Currently NZ are blocking their entry into STAR.... perhaps they started NZ domestic as a bargainig chip for their entry - far fetched I know, but stranger things have happened.

Perhaps now DJ will say, let us join and we retrench from NZ domestic and Pac Blue flying...

Actually NZ is not blocking DJ... NZ is not however supporting them to join Star and has said it would prefer not to have DJ which is quite a different thing altogether!

It is SQ that is blocking DJ... or more specifically VS. As DJ is a part of the VS family it is by default blocked from Star by SQ.



56 types. 38 countries. 24 airlines.
User currently offlineCupraIbiza From Australia, joined Feb 2007, 836 posts, RR: 6
Reply 24, posted (6 years 3 months 2 weeks 4 days 11 hours ago) and read 4582 times:



Quoting Pilotdude09 (Reply 21):
I think JQ and TT will go first, since they are low cost carriers and if they have to raise prices there goes their whole model.

Except both JQ and TT have substatially lower cost bases than DJ. DJ will feel the pain earlier and harder than JQ & TT.

Quoting Zkpilot (Reply 23):
As DJ is a part of the VS family

Not really. They both share the same first name, but different owners. Its like saying Ricky Ponting and Ricky Martin are part of the same family



Everyday is a gift…… but why does it have to be a pair of socks?
25 Aussie747 : DJ will be announcing some major restructure of routes next week. I suspect it will pull out of marginal routes and will either defer jet orders or le
26 Post contains links ANstar : I'd expect them to send back some 738's and replace them with the new E190's that are coming - especially on routes into Tasmania and thinner routes..
27 Bill142 : Toll will off load DJ as soon as it gets a whiff of it becoming a drain on it's own balance sheet. Based on it's current share price DJ is only worth
28 ANstar : They wouldnt be able to take all of Toll's stake as they would have to leave Virgin as a majority Australian company. Anyways - they have Tiger in th
29 CupraIbiza : Anyone have any idea what Patrick paid for the 68% holding in DJ? As for SQ purchasing Toll's stake what would happen with V Aus??
30 Bill142 : in 2002 they paid $260 million for 50% That would depend on the timing. One would assume it would all get absorbed in SQ and their 77Ws would become
31 Sparklehorse12 : I can't imagine SQ buying Tolls stake...gosh Toll must be frustrated by it....
32 Baroque : I have to confess that I did not spend much time reading about that modelling, but it occurred to me that it would be valid if a couple of boundary c
33 OzTech : Look out for the EMB170 down there very soon.. 2 more 190's to come on board then the 170's will be gone
34 ANstar : I cant see SQ buying Virgin Blue.... they already have Tiger in this Market and I think have well and truely learnt a lesson with the Virgin Brand! A
35 Thegeek : Wouldn't the E190 be more likely? Wouldn't the E170 only make sense for new routes, like AKL/WLG/CHC-ZQN? The E190 could open up some new routes like
36 Arcrftlvr : I certainly hope not! I just applied for my dream job with V Aus....
37 JoFMO : DJ could be a good investment for SQ. I even think that V Aus would not a problem this time. It would be the easiest think for SQ to to take their 773
38 Bill142 : I don't think the float diluted the Patrick share since it was the Virgin Group who were reducing their stake.
39 JGPH1A : DJ wants to join Star ? How ? Their current business model wouldn't support it. It would require a very radical shift in how they run things. I'm not
40 TruemanQLD : I could see DJ going. Failing under there own success. They have had average results, profit wise, and are no longer the cheap airline. There niche ma
41 Post contains links Thegeek : I found this on the internet: http://www.shares.com.au/forum/archive/index.php?t-294.html That's why they had about 45% of the stock and had to launc
42 JGPH1A : I'd agree about V Australia, they are set up for it - although quite what UA would have to say about that is anyone's guess
43 Zkpilot : Not so far as SQ is concerned and DJ does identify itself as part of the Virgin family of airlines... similar to how say Cocacola Amatil owns Cocacol
44 DJ748 : I totally agree with this statement. People are jumping the gun with starting the doom saying too early, particularly with the possibility of announc
45 Sparklehorse12 : Yes, all this speculation is causing some bother - just look at what happened today with the oil price - some dumb idiot makes a back handed comment
46 REALDEAL : hardly !!! It's the perfect environment for Tiger to expand. oh what about the business types who've been told to spend less on air travel. They can
47 Nzrich : I dont see DJ going under but it has a problem being the middle carrier in the Australian market .. Trying to compete in the business end and also the
48 Thegeek : Well, if they do that they might not. But do you really believe that VA's product is going to be superior to QF's when the A380 is put on that route?
49 JGPH1A : We've seen the pics of QF's product. Nothing to write home about. VA will have seen them too, and have till November to react.
50 FlyingClrs727 : I think Virgin America would be more likely to have problems than Virgin Blue given the fact that they are a new start up in the US where there is alr
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