Aviator34ID wrote:

The Australian this morning said that Virgin had available cash of $1.1billion. doesn't sound like going bust.

And Virgin incurs about $6 billion in expenses annually, a good portion of which is fixed in nature. So the $1.1 billion isn't all that much in that context...

Aviator34ID wrote:

The Australian this morning said that Virgin had available cash of $1.1billion. doesn't sound like going bust.

Might sound like a lot but if you have a lot of debt due and no revenue coming in as no one is booking yet you still have your costs Im not sure how long it will last.

zkncj wrote:

Does anyone know what VA’s current terms are with MasterCard/Visa?

For example are they an airline that the credit card providers are willing to provide them the funds up front? Or are they on terms when passengers get post the passengers travel commencing?

Notice that VA has removed the term about flights involving New Zealand having the option to converting to an 12month credit value.

Virgin absolutely gets money upfront. They aren't a basket case of an airline and (under normal circumstances) are at no risk of folding. Very few major airlines get funds withheld - South African and Norweigan are the only two that spring to mind recently.

Was expecting a lot more cancellation with the mandatory 14 day quarantine for everyone. Would suck if you work FIFO & stay in South East Asia or a tourist spending 14 days indoors

anstar wrote:

Aviator34ID wrote:

The Australian this morning said that Virgin had available cash of $1.1billion. doesn't sound like going bust.

Might sound like a lot but if you have a lot of debt due and no revenue coming in as no one is booking yet you still have your costs Im not sure how long it will last.

Would expect a few redundancies to be rolled out or 6 months unpaid leave.

Report from a good mate who works for Tiger and has contact with management, says he would be shocked if company still exists by April.

log0008 wrote:

Report from a good mate who works for Tiger and has contact with management, says he would be shocked if company still exists by April.

VA you mean or just TT? Honestly VA is in a very tricky position but I can’t see them going bust if it’s only a short pause, but anything past a few months will be hard to handle.

They still have moves they can make to limit overheads , including leave without pay, so I don’t think your contact is on the money with that one. Paying out redundancies wouldn’t work that well though at this point though.

EVA has pulled out of BNE effective Tuesday night. Not sure when they're planning on coming back (per online reservation system).

SQ dropping down to just a daily service (was 4x daily before COVID-19). Will be the SQ245/246 flight.

Captdasbomb wrote:

Was expecting a lot more cancellation with the mandatory 14 day quarantine for everyone. Would suck if you work FIFO & stay in South East Asia or a tourist spending 14 days indoors

I think it was very unexpected- two NZ two days to can 85% QF/VA got 12hrs notice. I’d say we’ll hear more by the end of the week.

If VA went into voluntary administration, wouldn't the administrator be looking for a buyer? If hypothetically SQ was that buyer, why appoint an administrator? Was that to remove unsecured debts from the books? Why didn't AN go into administration but collapsed the next day? So many questions!

Early Reports about tomorrow’s cuts announcement.

QF all 747s and A380s grounded plus a significant number of A330s.

https://www.theaustralian.com.au/busine ... 4161f20aa8

xiaotung wrote:

If VA went into voluntary administration, wouldn't the administrator be looking for a buyer? If hypothetically SQ was that buyer, why appoint an administrator? Was that to remove unsecured debts from the books? Why didn't AN go into administration but collapsed the next day? So many questions!

Your "so-called saviour SQ" has enough troubles of their own to worry about VA for that matter.
Considering SQ has a mediocre record of investments in airlines over the years (Air New Zealand/Ansett Group, Virgin Atlantic, Tiger Airways Australia and now Virgin Australia), it's not a very good track record for a "so-called saviour".

Considering there has been reports of SQ 'considering' going to their own government for financial assistance on the back of the COVID-19 situation, it's more than likely SQ will be worrying about their own group including their Vistara investment.

QF is in a relatively strong position.

Going on 2018 data, only 14% of the fleet is leased and lease costs represent less than 2% of its overall costs.

Fuel represents 21% of its cost base with international flying being 50% of the fuel cost. So this is a variable cost that will reduce along with the amount of flying and the greater reduction in international flying will have a larger impact on reducing this cost.
Aircraft variable costs represent 23% of its cost base with almost half of that going towards route navigation and landing fees. Again these costs will reduced with less flying.
Depreciation represents around 10% of its costs and this is a non cash item (it is not funded by cash).
Selling/Commission costs are 5% - another largely variable cost that will change in line with the level of flying.
Just on the above, about 60% of its costs could flex with the volume of flying or are non cash costs.

Staff costs represent 28% of its cost base. It remains to be seen what it can do to tackle staff costs.

IndianicWorld wrote:

log0008 wrote:

Report from a good mate who works for Tiger and has contact with management, says he would be shocked if company still exists by April.

VA you mean or just TT? Honestly VA is in a very tricky position but I can’t see them going bust if it’s only a short pause, but anything past a few months will be hard to handle.

They still have moves they can make to limit overheads , including leave without pay, so I don’t think your contact is on the money with that one. Paying out redundancies wouldn’t work that well though at this point though.

Just TT is what i'm referring too, TT will be the first thing to go in attempts to save VA.

Chris2302 wrote:

Early Reports about tomorrow’s cuts announcement.

QF all 747s and A380s grounded plus a significant number of A330s.

https://www.theaustralian.com.au/busine ... 4161f20aa8

Sounds like NZ style announcement is coming - cut international apart from key trade gate ways... SIN/HKG/AKL/LAX-SYD/MEL daily.

We could see all 5 remaining B744 retired early. It’s unlikely the demand will recover enough for them to be required before their planned retirement at end of this year.
With 3 more 789 to join this year, can’t see a need to keep the 744’s now.

Flyerqf wrote:

We could see all 5 remaining B744 retired early. It’s unlikely the demand will recover enough for them to be required before their planned retirement at end of this year.
With 3 more 789 to join this year, can’t see a need to keep the 744’s now.

I’d say the 3 B789 deliveries would be delayed with the pause button yet again on BNEORD.


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log0008 wrote:

IndianicWorld wrote:

log0008 wrote:

Report from a good mate who works for Tiger and has contact with management, says he would be shocked if company still exists by April.

VA you mean or just TT? Honestly VA is in a very tricky position but I can’t see them going bust if it’s only a short pause, but anything past a few months will be hard to handle.

They still have moves they can make to limit overheads , including leave without pay, so I don’t think your contact is on the money with that one. Paying out redundancies wouldn’t work that well though at this point though.

Just TT is what i'm referring too, TT will be the first thing to go in attempts to save VA.

Forgive me if I'm wrong, but I believe TT did make profit in the first half.

D7A330 wrote:

log0008 wrote:

IndianicWorld wrote:

VA you mean or just TT? Honestly VA is in a very tricky position but I can’t see them going bust if it’s only a short pause, but anything past a few months will be hard to handle.

They still have moves they can make to limit overheads , including leave without pay, so I don’t think your contact is on the money with that one. Paying out redundancies wouldn’t work that well though at this point though.

Just TT is what i'm referring too, TT will be the first thing to go in attempts to save VA.

Forgive me if I'm wrong, but I believe TT were one of the few parts of VA that made profit in the first half...

IIRC TT only made "sparodic" profits during certain "quarters" but has ended up as losses overall at the end of all financial years.

SCFlyer wrote:

D7A330 wrote:

log0008 wrote:

Just TT is what i'm referring too, TT will be the first thing to go in attempts to save VA.

Forgive me if I'm wrong, but I believe TT were one of the few parts of VA that made profit in the first half...

IIRC TT only made "sparodic" profits during certain "quarters" but has ended up as losses overall at the end of all financial years.

True. However, most of these were out of TT's hands. Industrial action, botched fleet transition, Bali fiasco, Max crisis. I get they'll maybe close TT first, but i guess I'm just getting at their problems run way deeper than TT.

Rumour has it at QF:

All 380s grounded
All 747s grounded, probably permanently
90% of A330s (meaning about 3 aircraft left, this is probably to keep the pilots current and trained on the aircraft type for it's re-entry into service when demand comes back)
Nothing about the 787, but I'd assume it will maintain a skeleton operation to Asia, the UK and London. Despite travel quarantines there will be some people who need to travel, but not a lot.

All JQ international flying stopped. So no JQ 787s

timtam wrote:

QF is in a relatively strong position.
Staff costs represent 28% of its cost base. It remains to be seen what it can do to tackle staff costs.

Almost certainly staff of affected aircraft will be forced into a leave of absence without pay. There are some provisions to do so, but will probably require union approval. It's likely a lot of senior pilots flying the 380 and the 747 especially will not come back and may have, without them knowing, flown their last commercial flight.

SYDSpotter wrote:

Aviator34ID wrote:

The Australian this morning said that Virgin had available cash of $1.1billion. doesn't sound like going bust.

And Virgin incurs about $6 billion in expenses annually, a good portion of which is fixed in nature. So the $1.1 billion isn't all that much in that context...

VA's financial position is less than ideal (to put it politely)... To sum it up:
- 107% of VA's cash at end CY2019 is tied up as unearned revenue! Red flag here if they are forced to provide significant refunds/ credit?
- Accounts receivable is outweighed by accounts payable by a factor of nearly 2.5.
- Working capital (net current assets) is approximately -1.3B.

Not sure what debt facilities they have up their sleeve?

IMO, their only savior will be successful negotiations with relevant financial institutions (Citi, Merrill, HSBC, Chesters, JP) and AC lessors. Highly likely given the global crisis happening at the moment!

https://www.virginaustralia.com/cs/grou ... report.pdf

From another forum.
Anyone know what QF and VAs hedging exposure is? Presumably they will need to settle contracts for fuel they aren't using.

QF HY said 100% hedged for remainder of FY (till June) with 45% downside protection with a footnote about $10/bbl.

moa999 wrote:

From another forum.
Anyone know what QF and VAs hedging exposure is? Presumably they will need to settle contracts for fuel they aren't using.

QF HY said 100% hedged for remainder of FY (till June) with 45% downside protection with a footnote about $10/bbl.

QF make extensive use of options. So a simplified guess would be that they have paid ~$10/bbl in option fees/premium covering 45% of their fuel requirement with the rest hedged through swaps. The option fee/premium is what they stand to lose if the options are out of the money. They have 3.5 months remaining in the financial year.

In the following year they have 80% downside participation with 90% of their fuel requirement being hedged. So it can be guessed that they might have used options/caps for 80% of their fuel requirement so they are only losing the premium.

QF have always been very good with their hedging - something CX has had to learn the hard way.

The footnote was the unclear bit.
Could be read as either 45% coverage to $10/bbl down on the ~$55/bbl, or at $10/bbl down it was 45%

The question is what's the protection at $25/bbl down (given oil is at about $30)?

sierrakilo44 wrote:

It's likely a lot of senior pilots flying the 380 and the 747 especially will not come back and may have, without them knowing, flown their last commercial flight.

I’d suggest the same is true of VA’s widebody pilots as well (at VA at least). They can’t afford to keep the international business going - I think we will see it grounded and shut down entirely over the coming months (ie mass redundancies, walking away from contracts/leases etc) to allow every cent VA has to be directed into domestic. Same story for TT.

I feel incredibly sorry for Paul Scurrah - inherited a mess (and the management team that took them there), minimal aviation experience and this storm hits. And he is going to take the flack for making these tough decisions despite it not being his fault at all.

D7A330 wrote:

log0008 wrote:

Forgive me if I'm wrong, but I believe TT did make profit in the first half.

Only because of the PIA at Jetstar,.

I doubt TT would have the cash to close down and make redundnacy payments.

anstar wrote:

D7A330 wrote:

log0008 wrote:

Forgive me if I'm wrong, but I believe TT did make profit in the first half.

Only because of the PIA at Jetstar,.

I doubt TT would have the cash to close down and make redundnacy payments.

Hopefully doesn’t happen but if it does VA would have to fork out the cost of the redundancies.


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EK413 wrote:

anstar wrote:

D7A330 wrote:

Only because of the PIA at Jetstar,.

I doubt TT would have the cash to close down and make redundnacy payments.

Hopefully doesn’t happen but if it does VA would have to fork out the cost of the redundancies.


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Isn’t VA Intl partly owned by VA? So wouldn’t there blow from closing VA International totally fall on there balance sheet? eg wouldn’t the loss be against all the investors of VAI

zkncj wrote:

EK413 wrote:

anstar wrote:

Only because of the PIA at Jetstar,.

I doubt TT would have the cash to close down and make redundnacy payments.

Hopefully doesn’t happen but if it does VA would have to fork out the cost of the redundancies.


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Isn’t VA Intl partly owned by VA? So wouldn’t there blow from closing VA International totally fall on there balance sheet? eg wouldn’t the loss be against all the investors of VAI

Nah, VAI is wholly owned by VA, which is in turn owned by SQ and the rest. That's how VAI can be an Australian owned international airline, even though VA itself is majority foreign owned.

Qantas COVID-19 Group Update

https://www.qantasnewsroom.com.au/media ... esponse-2/

To be phased in from the end of March 2020 onwards:

Total Group International capacity will be cut by around 90 per cent until at least the end of May 2020. This is up from a 23 per cent reduction for the fourth quarter of FY20 announced last week and largely reflects the demand impact of severe quarantine requirements on people’s ability to travel overseas.

Total Group Domestic capacity will be cut by around 60 per cent until at least the end of May 2020. This is a major increase from the 5 per cent reduction for the fourth quarter of FY20 and reflects a rapid decline in forward travel demand due to government containment measures, corporate travel bans and a general pullback from everyday activities across the community.

This represents the grounding of around 150 aircraft, including almost all of the Group’s wide-body fleet.
Previously announced cuts in place from end-May through to mid-September remain in place and are likely to be increased, depending on demand.
The route-by-route detail of these changes across Qantas and Jetstar is currently being worked through and will be announced in coming days.

I get that it is a crisis but i think it is a bit rich for the cancelled flights to be kept as travel vouchers. Lots of international travellers would be booking 6 months out meaning they only have 6 months to use this voucher. Which isnt enough time to know what is happening with this event. Given QF has significant cash reserves covering precisely this sort of thing i would have thought that refunds, even in selected cases, would have been better.

Agreed! A voucher is a cop out.

Aviator34ID wrote:

Agreed! A voucher is a cop out.

There should at least be a refund option, even with a small penalty.

qf2220 wrote:

I get that it is a crisis but i think it is a bit rich for the cancelled flights to be kept as travel vouchers. Lots of international travellers would be booking 6 months out meaning they only have 6 months to use this voucher. Which isnt enough time to know what is happening with this event. Given QF has significant cash reserves covering precisely this sort of thing i would have thought that refunds, even in selected cases, would have been better.

I disagree because QF and VA are adhering to their terms and conditions and applicable laws. Consumers have an option to book fully flexible fares that entitle them to a full refund but they choose not to.

This is shocking news just in:

BREAKING: QANTAS CUTS INTERNATIONAL TRAVEL BY 90%

Qantas and Jetstar will cut 90 per cent of international capacity until the end of May, up from the 23 per cent reduction announced last week.

Meanwhile, group domestic capacity will be cut by 60 per cent during the same period.

In total, these cuts will total the equivalent to grounding 150 aircraft.

https://australianaviation.com.au/2020/ ... vel-by-90/

Like Air NZ did yesterday, REX have requested a trading halt.

All flights in and out of the Luzon Island, Philippines (MNL) will be suspended as of March 20. This will affect PR, 5J and QF flights between Australia and MNL.

https://www.rappler.com/business/254795 ... ch-20-2020

getluv wrote:

qf2220 wrote:

I get that it is a crisis but i think it is a bit rich for the cancelled flights to be kept as travel vouchers. Lots of international travellers would be booking 6 months out meaning they only have 6 months to use this voucher. Which isnt enough time to know what is happening with this event. Given QF has significant cash reserves covering precisely this sort of thing i would have thought that refunds, even in selected cases, would have been better.

I disagree because QF and VA are adhering to their terms and conditions and applicable laws. Consumers have an option to book fully flexible fares that entitle them to a full refund but they choose not to.

They've already suspended their rules in this crisis. And if there are no flights that are running to the destination then arguably the contract has been terminated by QF and they should refund the money.

qf2220 wrote:

getluv wrote:

qf2220 wrote:

I get that it is a crisis but i think it is a bit rich for the cancelled flights to be kept as travel vouchers. Lots of international travellers would be booking 6 months out meaning they only have 6 months to use this voucher. Which isnt enough time to know what is happening with this event. Given QF has significant cash reserves covering precisely this sort of thing i would have thought that refunds, even in selected cases, would have been better.

I disagree because QF and VA are adhering to their terms and conditions and applicable laws. Consumers have an option to book fully flexible fares that entitle them to a full refund but they choose not to.

They've already suspended their rules in this crisis. And if there are no flights that are running to the destination then arguably the contract has been terminated by QF and they should refund the money.

QF and VA are still compliant with whatever revised T&Cs and legal obligations they have. They will only refund the money once they are forced to.

getluv wrote:

qf2220 wrote:

getluv wrote:

I disagree because QF and VA are adhering to their terms and conditions and applicable laws. Consumers have an option to book fully flexible fares that entitle them to a full refund but they choose not to.

They've already suspended their rules in this crisis. And if there are no flights that are running to the destination then arguably the contract has been terminated by QF and they should refund the money.

QF and VA are still compliant with whatever revised T&Cs and legal obligations they have. They will only refund the money once they are forced to.

You're not wrong, but I expect the ACCC will intervene shortly. qf2220 is correct that by cancelling routes the airlines have effectively abrogated their side of the contract, namely to get you from A to B.

If you want to be dramatic you could argue the contract is effectively frustrated by current events.

RyanairGuru wrote:

You're not wrong, but I expect the ACCC will intervene shortly. qf2220 is correct that by cancelling routes the airlines have effectively abrogated their side of the contract, namely to get you from A to B.

If you want to be dramatic you could argue the contract is effectively frustrated by current events.

I think principles of force majeure or act of god should be coming into this.

VA's S&P Ratings Update (17 March 2020). Ratings remain at B-, and VAH knows that ALL of their parents have 'financial' difficulties of their own to come help.

Source: https://www.asx.com.au/asxpdf/20200317/ ... 35m16b.pdf

Although Voluntary Administration for VAH seems unlikely at this stage, the questions remain if any (remaining) interested parties (if any at all) are 'waiting' on VAH to go into 'Voluntary Administration' then to pick up the 'assets' at a 'fire sale' (namely half the 737 fleet and SYD/MEL slots) to start a separate bare-bones domestic operation (without the Virgin licensing fees and the debt from VA).

Or whether if VA are able to ride out the COVID-19 situation (with or without government assistance), with a restructed operation and different/less 'shareholders' at the table (with little to no International Operations left).
Edit: I'm tipping TT is likely to be a goner (before most if not all VA'Intl ops) either way. Even more so for TT if any potential 'government assistance' to VAH was to be tied with conditions.

Keep in mind the contentious contender for VA's assets doesn't exactly have a stellar track history at their overseas investments (NZ/AN, VS, TT, VA, etc). I'd predict that mob would be way too cautious before having a "4th" go at the Australian market.

NZ suspends all routes except AKL-SYD/MEL/BNE, SYD-WLG and SYD-CHC

https://www.executivetraveller.com/news ... cellations

AA has extended cancellation to SYD to end of May

https://twitter.com/xjonnyc/status/1239 ... 37217?s=21

It is somewhat of an anathemic suggestion, but if VA were in significant trouble, would an NZ takeover be a different thing now compared to the Ansett one?

SCFlyer wrote:

VA's S&P Ratings Update (17 March 2020). Ratings remain at B-, and VAH knows that ALL of their parents have 'financial' difficulties of their own to come help.

Source: https://www.asx.com.au/asxpdf/20200317/ ... 35m16b.pdf

Although Voluntary Administration for VAH seems unlikely at this stage, the questions remain if any (remaining) interested parties (if any at all) are 'waiting' on VAH to go into 'Voluntary Administration' then to pick up the 'assets' at a 'fire sale' (namely half the 737 fleet and SYD/MEL slots) to start a separate bare-bones domestic operation (without the Virgin licensing fees and the debt from VA).

Or whether if VA are able to ride out the COVID-19 situation (with or without government assistance), with a restructed operation and different/less 'shareholders' at the table (with little to no International Operations left).
Edit: I'm tipping TT is likely to be a goner (before most if not all VA'Intl ops) either way. Even more so for TT if any potential 'government assistance' to VAH was to be tied with conditions.

Keep in mind the contentious contender for VA's assets doesn't exactly have a stellar track history at their overseas investments (NZ/AN, VS, TT, VA, etc). I'd predict that mob would be way too cautious before having a "4th" go at the Australian market.

Actually the rating was downgraded. But that analysis is far more positive than I was expecting, or portrayed by your speculation. It is, of course, contingent on things not dragging on for too long and probably a fairly rapid bounceback. I can't imagine a 1.2 per cent growth rate for Australia's economy in 2020 now.

The next debt maturity is in October 2021, which if I'm reading it right, they've already set aside $350 million for. This then reduces their cash on hand to $900 million, still a fair chunk.

Given I think it's pretty likely we'll see some temporary government support - loans, lines of credit, not cash handouts for those that are easily outraged - I think the situation is a little brighter than otherwise portrayed. Don't get me wrong, still extremely serious and likely to result in a massive change to the business and upheaval for staff. Hopefully the government support is able to stave off any further decline in market conditions.

It's going to be a long winter.

qf2220 wrote:

It is somewhat of an anathemic suggestion, but if VA were in significant trouble, would an NZ takeover be a different thing now compared to the Ansett one?

There won't be any takeovers of anyone by anyone any time soon.

qf2220 wrote:

It is somewhat of an anathemic suggestion, but if VA were in significant trouble, would an NZ takeover be a different thing now compared to the Ansett one?

I second what aerokiwi said above, and I'm sure the current NZ management won't want to repeat the incompetence Selwyn Cushing had with his handling of the "Ansett Takeover" over 2 decades ago.

aerokiwi wrote:

The next debt maturity is in October 2021, which if I'm reading it right, they've already set aside $350 million for. This then reduces their cash on hand to $900 million, still a fair chunk.

Given I think it's pretty likely we'll see some temporary government support - loans, lines of credit, not cash handouts for those that are easily outraged - I think the situation is a little brighter than otherwise portrayed. Don't get me wrong, still extremely serious and likely to result in a massive change to the business and upheaval for staff. Hopefully the government support is able to stave off any further decline in market conditions.

It's going to be a long winter.

What about VA and QF sitting down with some of these debt financiers and renegotiating terms? Id be thinking many airlines will be doing the same thing. I would hope that governments have a hard line on this before any support is given so that the support isnt just about paying back finance companies for debt that has an inherent risk in it.