EyeSky From United States of America, joined Aug 2000, 316 posts, RR: 0 Posted (2 years 9 months 3 weeks 3 days 5 hours ago) and read 1198 times:
There has been a fair amount of discussion lately on A-net about the financial situation and long term viability of VX which got me wondering how DJ and VA are doing in comparison. Have their business models been more or less successful in their respective markets compared to VX?
RyanairGuru From Australia, joined Oct 2006, 6369 posts, RR: 6
Reply 1, posted (2 years 9 months 3 weeks 3 days 4 hours ago) and read 1201 times:
If you are referring to financial performance then Virgin Australia Holding (ASX: VAH) are profitable, making a before tax profit of $82.5 million in the 2011-2012 financial year. For comparison, the much larger Qantas Group made $95 million (although QF's figures were diluted by the effects of the industrial action/grounding)
Statutory Profit After Tax of $22.8 million, an improvement of $90.6 million on FY11
Underlying Profit Before Tax of $82.5 million, an improvement of $149.1 million on FY11
Total Revenue increased 19.8% to $3.9 billion
Yield growth in domestic of 12.2%, with 12.0% growth across the Group
Good liquidity, with $480.1 million of unrestricted cash, and $802.6 million total cash balance
International network EBIT of $35.4 million, a 58.0% improvement on FY11
Maintained tight control on costs, with underlying CASK1 growth (excl. fuel) of 4.5%, despite product enhancements
RyanairGuru From Australia, joined Oct 2006, 6369 posts, RR: 6
Reply 4, posted (2 years 9 months 3 weeks 3 days 2 hours ago) and read 1201 times:
Competition is only fierce because of DJ. There are, effectively, only 2 carriers (QF-JQ and DJ). Right now VA is intent on building its corporate travel profile, trying to snare traffic from a segment that has been almost totally loyal to QF since AN went away. There is therefore a lot of competition right now at the top end of the market, with VA trying to win over as many corporate contacts as possible. This seems to be working for them, per the above link 20% of their revenue last year was due to corporate and government sales, up from IIRC 8% two years ago.
This is probably a smart strategy for them: JQ has a lower cost base than DJ, but DJ is in turn lower than QF. It therefore makes sense for VA to take the fight to QF (mainline) as opposed to JQ.
Nonetheless, despite this fierce competition you only need to look at the bumper profits that all 3 airlines make on domestic flights to realise that this competition isn't really hurting anyone. There is definitely room for 2 in this market.
(Incidentally, those who suggest that QF is on the brink of collapse because they are simply incapable of flying international profitably completely ignore the gold mine that domestic flying is for them. QF isn't going anywhere!)
qf002 From Australia, joined Jul 2011, 3248 posts, RR: 2
Reply 5, posted (2 years 9 months 3 weeks 2 days 15 hours ago) and read 1201 times:
DJ was extremely lucky in the timing of their entry into the market, and was perfectly placed to fill the vacuum that AN left when they went bust about a year later.
The fight was pretty even between QF and DJ from 2001 -- QF faced severe capacity constraints (leading them to take over a pile of AA's 738 orders), and DJ expanded quickly enough to get their foot in the door.
VX has entered a market that is already pretty full. They've had to deal with competition from above and below while trying to push into the market, while DJ only had to deal with QF above.
The difference is that DJ filled a gap in the market, while VX has only really emulated what others a doing (in their own style, sure, but they're not doing anything fundamentally different).
Also don't forget that DJ is over a decade old. VX has only been around a couple of years. It takes time to build an airline, and it takes investors who don't chicken out after seeing bad figures in the first few reports. DJ isn't yet a solid financial success story, they made a loss in 2009 and 2011, with only a small profit in 2010 and a modest profit of $68m this year (compared to QF domestic which makes at least 3-4 times that).
EK413 From Australia, joined Nov 2003, 5319 posts, RR: 6
Reply 6, posted (2 years 9 months 3 weeks 2 days 12 hours ago) and read 1200 times:
Quoting RyanairGuru (Reply 4): (Incidentally, those who suggest that QF is on the brink of collapse because they are simply incapable of flying international profitably completely ignore the gold mine that domestic flying is for them. QF isn't going anywhere!)
I was under the impression QF domestic couldn't survive if it wasn't for the International operations...
Good evening, ladies and gentlemen. We are tonight’s entertainment!
travelhound From Australia, joined May 2008, 1268 posts, RR: 12
Reply 7, posted (2 years 9 months 3 weeks 2 days 11 hours ago) and read 1200 times:
I think there are some differences and similarities between DJ and VX.
Primarily DJ's initial growth or success was based around the failure of Ansett and as such they had one of the moments in time where opportunity presented itself. I can't see such an opportunity presenting itself in the US.
If we look at DJ after this time and specifically the investment made in the airline, than I'd suggest its performance is similar to that of VX. The major investors in the company Patrick’s (now owned by Toll) made a big fuss about exiting the airline share register and the Mum and Dad investors who purchased shares at the public float for $1.75/share have lost probably 80% of their money.
If you have a look at the current share register it is filled with the likes of ANZ, SIA & Ethiad. I'd suggest in all these instances the players are there more because of the strategic value than investment value of the stock.
To be candid, for these reasons I have never been a fan of DJ. I believe the listing of the company on the Australian Securities Exchange simply conned many Mums and Dads, who had never invested in shares before out of their money. I remember at the time of the float the head of Patrick’s (a cornerstone shareholder) openly disagreeing with the float with suggestions it was not appropriate and much of the investment community stating the stock at the suggested listing price did not meet the basic fundamentals for sound investment opportunity.
On the flip side I think it would be fair to assume DJ has been a very lucrative animal for a select few investors. We can probably find the basis of why VX exists in the history of DJ, but with the exception being VX hasn’t lived up to DJ’s very high expectations.
All in all, if VX fails I don’t believe it would be a bad thing. It might be an opportunity for people to properly analyze these airlines and realize the face of them (pretty girls, superior product? and supposed value for money) are simply mirages to disguise the ploys of big players making big money.