SYDSpotter
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Virgin Australia - $852m capital raising

Wed Jun 15, 2016 1:14 am

VA have announced a $852m fully underwritten capital raising:

http://www.asx.com.au/asxpdf/20160615/p ... nv8twt.pdf

Interestingly, EY have decided not to take up their entitlement whilst all other existing shareholders (including the 2 new Chinese Groups and NZ) have.
Last edited by SYDSpotter on Wed Jun 15, 2016 1:36 am, edited 1 time in total.
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sunrisevalley
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 1:28 am

Not sure what you were trying to say about NZ. The text of the announcement suggests that they are in.
 
SYDSpotter
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 1:36 am

sunrisevalley wrote:
Not sure what you were trying to say about NZ. The text of the announcement suggests that they are in.


Yes you're correct, they will be participating only to the extent that they remain a shareholder on the "record" date of the Offer and they will also subscribe for Nanshan Group's entitlement if Nanshan do not receive regulatory by the date (i.e. doing it on their behalf).
Edit: Have amended original post

http://www.asx.com.au/asxpdf/20160615/p ... xc0958.pdf
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bill142
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 1:58 am

Maybe NZ were right to try pushing Borghetti out the door.
 
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mariner
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 4:02 am

There's an interesting article in The Australian about all this, ending with a pointed summary:

http://www.theaustralian.com.au/busines ... d248dbcf78

"The strategic review, the capital raisings, the introduction of new shareholders and the new restructuring program Virgin has committed to will place enormous pressure on Virgin’s board and management to stop the cash leakage and start to improve weak financial metrics that are going to be further diluted, significantly, by the equity issues."

The BOD and its Chairperson have what they wanted. Let's see if they can deliver.

mariner
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Sydscott
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 4:27 am

So Borghetti has his billion. Qantas gives a billion back while Virgin takes a billion in. LOL

Interesting that the plan is to save an annualised $300 million by 2020 by taking $200 million in cash charges, and another $150 to $200 million in impairments along with repaying the loan they previously took out from EY/SQ/NZ in full. The repayment of that loan, and the cash charges, account for around two thirds of the cash raised so one wonders where to from here if they need to raise more. (Although the answer is obvious because the Chinese are obviously happy to write a cheque)
 
travelhound
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 8:52 am

From what I can work out VA will in effect be closing down its regional flying in the eastern states. In addition to this the E190 will be going.

The only thing left to do is change their name back to Virgin Blue!
 
chiraagnt
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 9:20 am

Sigh... Virgin seems to be bleeding money, especially for its original shareholders (SQ,EY and NZ).

Kind of disappointed in the direction that the investments in virgin are going, especially since I had high hopes SQ would buy out NZ, then launch an offer to buy over Virgin (and finally have a foothold and airline in the AUS market), completing their strategy of having airlines/investments in important markets and segments like Vistara/Tiger/Scoot.

It seems that all the shareholders seem to be doing is invest money without seeing any returns, although the passengers Virgin puts on the carriers is invaluable to them of course! With the new HNA deal, the benefits to SQ from investing in Virgin continue to dwindle(with regards to the Australia-China market).
 
jupiter2
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 9:34 am

So Virgin is raising money through a share issue, which it's current major share holders have to invest in if they want to maintain their present sized share holding ? Then Virgin is going to repay the same major share holders, the loan they gave Virgin, with the money they raise of this share issue ?

Is there any wonder the airline is going backwards.
 
LandSweetLand
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Re: Virgin Australia - $852m capital raising

Wed Jun 15, 2016 12:12 pm

travelhound wrote:
From what I can work out VA will in effect be closing down its regional flying in the eastern states. In addition to this the E190 will be going.

The only thing left to do is change their name back to Virgin Blue!


Just as long as we get the red aircraft back.
 
zkncj
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 5:52 am

travelhound wrote:
From what I can work out VA will in effect be closing down its regional flying in the eastern states. In addition to this the E190 will be going.

The only thing left to do is change their name back to Virgin Blue!


From what http://www.news.com.au/finance/business/breaking-news/virgin-aust-to-raise-852m-cut-fleet/news-story/df9fd5afdf11200a71dccbf3b71c659e seems to be reporting the ATR and E190 fleets are both gone, does this mean the smaller ports on the East Coast are now probably getting cut?

How can Virgin not make an profit with its ATR fleet? NZ seems to love theres and keeps buying more. NZ claims that there 72-600s have an lower operating cost than Jetstars Q300s
 
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qfvhoqa
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 6:36 am

zkncj wrote:
From what http://www.news.com.au/finance/business/breaking-news/virgin-aust-to-raise-852m-cut-fleet/news-story/df9fd5afdf11200a71dccbf3b71c659e seems to be reporting the ATR and E190 fleets are both gone, does this mean the smaller ports on the East Coast are now probably getting cut?

The language used by No News is misleading, but where they say "cut" ATR as opposed to "remove" Embraer they mean that the ATR fleet will reduce. From the ASX announcement:
This program, which includes a reduction in ATR aircraft and the removal of all E190 aircraft from the fleet over the next three years, will assist the Group in simplifying its business and becoming more scalable and productive.


It will probably mean routes like BNE-EMD/GLT/MOV/BDB/ISA/CNJ will reduce or go (even QFlink don't fly BNE-CNJ), along with SYD-PQQ/TMW/ABX/CFS.
 
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allrite
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 11:52 am

Interesting analysis from CAPA suggests that Virgin Australia is a winner out of this capital raising and the change of shareholding, with the holdings of the stingier partners in NZ and SQ now reduced. Qantas not to benefit so much out of the turmoil.
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IndianicWorld
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 12:21 pm

VA's fleet has to be streamlined.

Getting rid of the EMB-190's is a good start but it still leaves it with a fleet of:

777-300ER
A330-200
737-800
737-700
A320 (TT and VARA)
F100 (VARA)
ATR72 (VARA)

The fleet size overall doesn't gain any significant economies of scale other than in the 737 component.

As for its ownership, VA appears to be getting into even more of a power struggle that will create more headaches.

Removing NZ from the situation was a positive start but bringing on 2 new Chinese investors was an interesting move.

It had also damaged SQ's chances of strengthening its position and potentially creating a bit more stability. A SQ deal seemed the most logical but it wasn't to be.
 
bunumuring
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 1:51 pm

Hey guys,
Information in the mainstream press (eg. Sydney Morning Herald) claims that over a three year period all Embraers will go and that the ATR fleet will be 'cut' but presumably not eliminated altogether.
I believe that the number of ATRs kept will be determined by a route review. Statements that all regional flying in the east seem to be off the mark, but possible. Maybe the ATRs will be concentrated in the west and/or Qld...
No news however on a potential wide body expansion to cater for China... Unless the spare capacity currently in that fleet and the possible dropping of Abu Dhabi allow Chinese flights to open without extra planes?
And the effect this capital raising will have on Tigerair? HMmmmmm....
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SXI899
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 3:45 pm

IndianicWorld wrote:
VA's fleet has to be streamlined.

Getting rid of the EMB-190's is a good start but it still leaves it with a fleet of:

777-300ER
A330-200
737-800
737-700
A320 (TT and VARA)
F100 (VARA)
ATR72 (VARA)

The ATRs are VA operated now, no longer VARA.
I expect the B73G to go as well, leaving a total of 6 types between the three operators. And I assume that replacing the A320s with B738/8MAX is also an option thats on the table.

bunumuring wrote:
I believe that the number of ATRs kept will be determined by a route review.

It wouldn't surprise me if they standardise on the -600, which leaves 8 aircraft remaining of the existing 14.
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zkncj
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 7:13 pm

IndianicWorld wrote:
Removing NZ from the situation was a positive start but bringing on 2 new Chinese investors was an interesting move.


Look forward to see the Chinese investors introducing the Comac C919 in the VA Fleet. :lol:

If anything NZ was most likely pushing VA for am simplified fleet like its doing it self, and reducing pilot operating types.

By the end 0f 2017.
777-300ER
777-200ER
787-9

A320/321NEO
A320CEO

ATR 72-600/500 *500s replaced by 600s
Q300

There goal is to effectively have the 777/789 as the same pilot group in the long-term, and with the Q300s rumored to be next on the chopping block and additional 72-600s added. It would take the airline down to 3x crew groups.
 
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mariner
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 8:40 pm

allrite wrote:
Interesting analysis from CAPA suggests that Virgin Australia is a winner out of this capital raising and the change of shareholding, with the holdings of the stingier partners in NZ and SQ now reduced. Qantas not to benefit so much out of the turmoil.


The CAPA article is a bit odd. It refers to Etihad as "Virgin's (previously) largest shareholder" but its own charts show that Etihad was never that - Air NZ was.

Etihad's position in this is intriguing. It's been throwing money at other airlines faster than a French sailor getting drunk in a Marseiiles waterfront bar, but seems ambivalent about whether or not it will (eventually) participate in this and Borghetti seems equally ambivalent about Etihad:

"The elephant not in the room was Etihad, and Virgin Australia CEO John Borghetti explained that Etihad was “still going through its internal processes”, that it “did not need to be involved” and he was “not concerned if Etihad participated”.

A cynic might say he's got a couple of new Chinese sugar daddies to make goo-goo eyes at - LOL.

What is odd to me is that the things that are happening should have happened yonks ago, such as going into China - which I think it is a case of the Hainan tail wagging the Virgin dog. It is silly that an airline of Virgin's size has so many types in the fleet - the E190's, while a lovely ride, have seldom made money for anyone in a stand-alone situation. The cost cutting, about which Borghetti is slightly coy, is essential.

So I don't entirely believe that all these decisions were made by Borghetti and In one sense, Luxon is a sideways winner ("time for Virgin to get profitable"). It seems there is general agreement on that, if nothing else, the Fin Review thinks that even Etihad may be playing - or may have played - hardball.

We'll see.

mariner
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sunrisevalley
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 10:54 pm

Quote Mariner..
There goal is to effectively have the 777/789 as the same pilot group in the long-term,

Is the regulator holding this back?
 
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sunrisevalley
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 11:01 pm

mariner[/quote].....
A cynic might say he's got a couple of new Chinese sugar daddies to make goo-goo eyes at - LOL.

Why not one of the Chinese ending up with Tiger?
 
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allrite
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 11:16 pm

mariner wrote:
A cynic might say he's got a couple of new Chinese sugar daddies to make goo-goo eyes at - LOL.


I believe that the Chinese are the biggest consumers of luxury brands at the moment and may share his passion. And given him a real Rolex. :)

mariner wrote:
What is odd to me is that the things that are happening should have happened yonks ago, such as going into China - which I think it is a case of the Hainan tail wagging the Virgin dog.


Perhaps the other airlines wouldn't let Virgin. Especially Singapore, who were trying to funnel all Asian flying through them.

But I really wonder if China will be a panacea for Virgin's woes considering that there's a new Chinese airline flying to Australia every second week.
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mariner
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Re: Virgin Australia - $852m capital raising

Thu Jun 16, 2016 11:38 pm

sunrisevalley wrote:
mariner
.....
A cynic might say he's got a couple of new Chinese sugar daddies to make goo-goo eyes at - LOL.

Why not one of the Chinese ending up with Tiger?[/quote]

I'm not sure that Tiger - on its own - would be of greater value to the Chinese than the whole airline. Even if the Hainan/Virgin routes start at the low end (cheap packages) I'd expect them to grow to a greater percentage of higher yield (FIT) passengers, at which point low-end Tiger becomes of lesser value and (mainline) Virgin becomes more.

I fully expect the Chinese holdings to grow because they've already said so. Hainan, at 13%, has said it wants to get to 20% and with Nanshan at 20% that would give the Chinese block 40% - within coo-ee of majority ownership. If either - or both - uses the FIRB "creep" rules (3% every six months) it would take 'em long to get (jointly) to majority ownership.

It depends on what the eventual goals of Hainan and Nanshan are and whether they're in bed together or not, or plan to be. At the moment, Nanshan's Qingdao Airlines is an intra-Chinese regional player, but this purchase suggests they have eyes on a larger prize.

We might get a clue when the Nanshan/Air NZ deal is approved by the regulators and if Air NZ then sells its remaining shares to Nanshan.
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DeltaB717
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Re: Virgin Australia - $852m capital raising

Fri Jun 17, 2016 12:08 am

Correct in that ATR fleet will be reduced (although it doesn't say how many will go and how many will remain), and the E190s will be completely withdrawn.

qfvhoqa wrote:
It will probably mean routes like BNE-EMD/GLT/MOV/BDB/ISA/CNJ will reduce or go (even QFlink don't fly BNE-CNJ), along with SYD-PQQ/TMW/ABX/CFS.


I tend to agree, essentially. VA already has Alliance operating a F70 for them on EMD, I imagine there would be scope for Alliance to take on some of the other Qld flying for VA considering (a) the election campaign ending in a couple of weeks will release two F70s back to Alliance and (b) downturn in charter work will also release some capacity for Alliance. I wonder, as well, whether any of VA's own F100s might make their way over from WA and, between that and Alliance, we see Fokkers taking on a lot of the EMD, GLT, ROK, ISA, CNJ. My guess is they keep just enough ATRs to maintain MOV (which is reducing in frequency), BDB, PQQ, TMW and ABX, and pull CFS down to 10 or 11 weekly. MQL will be another one to watch.
 
DeltaB717
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Re: Virgin Australia - $852m capital raising

Fri Jun 17, 2016 12:14 am

IndianicWorld wrote:
still leaves it with a fleet of:

777-300ER
A330-200
737-800
737-700
A320 (TT and VARA)
F100 (VARA)
ATR72 (VARA)


In fairness to VA, for most (if not all) intents and purposes B737-800 and B737-700 are really just 'B737'.

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