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tphuang
Posts: 4835
Joined: Tue Mar 14, 2017 2:04 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:13 am

DobboDobbo wrote:
tphuang wrote:
DobboDobbo wrote:

Therein lies the fault in your argument.

VS has traded for 36 years through 9/11, SARS, MERS and the 2008 crash surviving each of those. The correct start point is therefore that VS is demonstrably viable absent Covid.

If you want to argue that VS is unviable because of Covid, then I’d say every airline under the sun is not viable.

No one is pretending that all will go back to normal when this is over - or course it won’t. The point is to give airlines the space to restructure to face this new normal going forward.


Why does it matter how viable vs was 20 years ago? The fact is that their two most recently reported years had negative margins. And now the market is heading to its worst crisis in possibly its entire history. What justification is there to keep around the weakest airline that has neither cash nor assets to back the loans. At some point, the loan would have to make sense commercially.

When other airlines get support, they normally have positive cash flow and assets to secure the loans.


I’m not saying the relevant issue is whether it was viable it was 20 years ago - the relevant issue is whether it was viable prior to Covid-19 and in any sensible measure it was. If you are forming your view having (once again) ignored VS’s financial structure - in particular how VS returns value to its shareholders - that is for you but it undermines your opinion.

If you keep ignoring the relevant facts, it doesn’t assist your argument it undermines it.

The wider benefits to the U.K. taxpayer and society from VS have been explained at length in this thread and I won’t repeat them here.


It was losing money for 2 years before this. Unless you think it can stop paying Virgin group for royalty or money to DL for a JV partnership that clearly benefits DL more, then it's clearly stuck with what it has. And this current brand of business was not profitable when other airlines are generating all time high margins. VS needs to show it can change its business brand.

Why doesn't VS find a business model that can stop paying DL and Virgin group so much money and doesn't compete against BA's core business as much rather than complaining all day? As I said, lanes have been cleared for it to become more of a LH leisure/VFR carrier. Maybe it should try to do that instead of just taking orders from DL.

No, please keep explaining the other benefits. Because those arguments do not have validity. People keep making the argument that # of jobs is dependent on having one more airline around, when the reality is that the number of jobs is dependent on capacity level of the airlines. It's actually better for public if one of the airlines is not giving any minimal money it makes as royalty payment to virgin group or to its masters in America.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:27 am

RexBanner wrote:
Only on the proportion of work that is carried out in the U.K. For a Virgin pilot that amount is obviously minimal, usually falls inside the tax free allowance and, for the extreme case where it doesn’t, is normally taken care of by the dual tax agreements betwe⁸en the two countries. Anyway thread drift..


That is my understanding as well... I would think it relevant as some keep going on about how much tax revenue will get list from VS pilots if they fold...
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:31 am

tphuang wrote:
DobboDobbo wrote:
tphuang wrote:

Why does it matter how viable vs was 20 years ago? The fact is that their two most recently reported years had negative margins. And now the market is heading to its worst crisis in possibly its entire history. What justification is there to keep around the weakest airline that has neither cash nor assets to back the loans. At some point, the loan would have to make sense commercially.

When other airlines get support, they normally have positive cash flow and assets to secure the loans.


I’m not saying the relevant issue is whether it was viable it was 20 years ago - the relevant issue is whether it was viable prior to Covid-19 and in any sensible measure it was. If you are forming your view having (once again) ignored VS’s financial structure - in particular how VS returns value to its shareholders - that is for you but it undermines your opinion.

If you keep ignoring the relevant facts, it doesn’t assist your argument it undermines it.

The wider benefits to the U.K. taxpayer and society from VS have been explained at length in this thread and I won’t repeat them here.


It was losing money for 2 years before this. Unless you think it can stop paying Virgin group for royalty or money to DL for a JV partnership that clearly benefits DL more, then it's clearly stuck with what it has. And this current brand of business was not profitable when other airlines are generating all time high margins. VS needs to show it can change its business brand.

Why doesn't VS find a business model that can stop paying DL and Virgin group so much money and doesn't compete against BA's core business as much rather than complaining all day? As I said, lanes have been cleared for it to become more of a LH leisure/VFR carrier. Maybe it should try to do that instead of just taking orders from DL.

No, please keep explaining the other benefits. Because those arguments do not have validity. People keep making the argument that # of jobs is dependent on having one more airline around, when the reality is that the number of jobs is dependent on capacity level of the airlines. It's actually better for public if one of the airlines is not giving any minimal money it makes as royalty payment to virgin group or to its masters in America.


Given that you have stated in clear terms that you are not willing to give credit for acknowledged facts there seems to be little point engaging with you further. As with others, simple arguments generate simple (but wrong) conclusions.
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:52 am

Westerwaelder wrote:
RexBanner wrote:
Only on the proportion of work that is carried out in the U.K. For a Virgin pilot that amount is obviously minimal, usually falls inside the tax free allowance and, for the extreme case where it doesn’t, is normally taken care of by the dual tax agreements betwe⁸en the two countries. Anyway thread drift..


That is my understanding as well... I would think it relevant as some keep going on about how much tax revenue will get list from VS pilots if they fold...


That is also my understanding.

One point I had not appreciated is that VS recognises it’s revenue net of VAT. As VS’s revenue in 2018 (the most recent period) was £2.8bn, you could expect VS to have paid circa £560m in VAT alone.

That is likely to be by far the largest slice of tax paid - if you add in fuel duty, personal taxation VS is directly worth around £1bn per annum to the U.K. treasury before the wider benefits are accounted for.
 
Junglejames
Posts: 69
Joined: Sat Jan 05, 2019 4:07 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:58 am

Westerwaelder wrote:
Junglejames wrote:
JannEejit wrote:

I questioned Delta's part in this in terms of responsibility to it's share holding and was met with a round of comments suggesting Delta would be too busy saving itself to worry about Virgin. I'd still like to know what the official Delta opinion is on the current VS debacle ?
Haha.
So it's ok for Delta to ignore Virgin as they are apparently busy elsewhere, but it's not ok to suggest Branson may also have other companies to worry about.
I think the response you were met with says it all on here.

People have decided that because Virgin have a famous owner who has more money than them and lives out his retirement outside the UK, they are fair game.
But because Delta I assume have loads of individual shareholders, and no famous owner, they are the good guys.
Although to be fair, this forum does seem to have a bit of a love in with Delta.
Delta are the best.
Virgin are awful.
IAG are awful.

That's what I get from this forum.


Sent from my SM-G930F using Tapatalk


That is utter tosh and you know it. Delta are not asking for anything in relation to VS. They have resigned themselves to accept whatever happens. This is not about victimising anyone (though Virgin like to show themselves in that role). This is about the reality of a company with deep pocketed owners wanting an unsecured loan from the taxpayer to save them. In an industry with overcapacity. In one of the deepest recessions we have ever seen. What is so difficult about this to accept? There is no need for a VS and therefore there is no need to risk £500 million.
Oh, so you know exactly what Delta are thinking? Ok, as you were

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Junglejames
Posts: 69
Joined: Sat Jan 05, 2019 4:07 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 12:21 pm

Westerwaelder wrote:
Junglejames wrote:
bennett123 wrote:
So this British firm is owned by a US Company and a guy resident in the BVI.

Not happy to give them an unsecured loan.
Or....
This British firm is 51% owned by a British company that are based in the UK, and 49% owned by a US company.

The British company is owned by a family whom also own an island in the BVI, and a couple of members of said family live on that island.

Sent from my SM-G930F using Tapatalk


Did not someone earlier in this thread establish that ownership ultimately is linked back to the BVI?


Virgin Atlantic is 51% owned by Virgin Group. They are registered in the UK.

It's Virgin Group Holdings (The parent of Virgin Group) which is registered in BVI.

Some want to look purely at Branson living on Necker, and it is easier then for them to call him the owner of Virgin Atlantic (as in the post I replied to).
But Virgin Group are the owners (51%) of Virgin Atlantic.

People need to stop looking at the shareholders of Virgin Group Holdings. They aren't there to throw loads of money at a single arm of Virgin Group and possibly end up with an empty bank account themselves. Anyway, in Bransons case, he has a lot of other arms that he needs to think about as well. Plus, I believe it was mentioned that Branson has put money in.

I believe Iberia received state support from Spain? Why are people not shouting that they should be getting bailed out by their ultra rich largest shareholder who doesn't even pay Spanish tax? Ie the Qatar government if I'm not mistaken?
Yes I know you have to go through IAG and Qatar Airways, but that's what some on here are doing in regards to Virgin Atlantic. Going through all the layers needed to find a scape goat who is rich and doesn't pay UK tax.
Crikey, in the Qatari government case, I doubt they have ever paid tax in Spain.

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JibberJim
Posts: 140
Joined: Tue Nov 08, 2016 1:33 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 12:50 pm

DobboDobbo wrote:
JibberJim wrote:
DobboDobbo wrote:
The key question is whether, but for the Covid-19 crisis, the relevant airline would have had any viability issue. Anyone arguing that the test is something different is quite frankly ignoring reality.


No it's not, viability is not binary, pre the financial crash the banks were all "viable", but the reality was they were mis-managed and didn't have sufficient resources to deal with changed circumstances. Simply because the scale of this crisis is so large doesn't mean there's a free reign to not have any reserves or assets for any slight road-bump.


Okay - to apply your criteria against some airlines who have received government support to deal with what you describe as this “slight road bump”


No, Covid is a massive road bump - but the other airlines were viable because they could have dealt with a slight one - they had reserves and / or assets to get cash via collateralised loans, Virgin has neither, banks now have to carry lots of cash to deal with road bumps, but they could still be wiped out by a large one.
 
FluidFlow
Posts: 638
Joined: Wed Apr 10, 2019 6:39 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 12:53 pm

DobboDobbo wrote:
Westerwaelder wrote:
RexBanner wrote:
Only on the proportion of work that is carried out in the U.K. For a Virgin pilot that amount is obviously minimal, usually falls inside the tax free allowance and, for the extreme case where it doesn’t, is normally taken care of by the dual tax agreements betwe⁸en the two countries. Anyway thread drift..


That is my understanding as well... I would think it relevant as some keep going on about how much tax revenue will get list from VS pilots if they fold...


That is also my understanding.

One point I had not appreciated is that VS recognises it’s revenue net of VAT. As VS’s revenue in 2018 (the most recent period) was £2.8bn, you could expect VS to have paid circa £560m in VAT alone.

That is likely to be by far the largest slice of tax paid - if you add in fuel duty, personal taxation VS is directly worth around £1bn per annum to the U.K. treasury before the wider benefits are accounted for.


I do not think that this is true. If they sell Products abroad there will be no VAT for GB, only £1.8bn is generated in the UK. Certain Services are VAT free as well. I am not sure, but providing services for partners might generate revenue but will be VAT exempt. Also this "£1bn" is only generated if VS flies any passengers, and passengers can also fly with other airlines. Due to the fact that VS does not generate taxable profits (or not really, certain tax will have to be paid), all the "return" for GB comes from income tax or operation related tax, that can be either compensated by giving someone else £500m to continue paying staff or by passengers flying with other airlines.

The argument for suppliers losing business does not count, because they will lose business anyway. If the market reduces by 50% for the next year, 50% less services will be bought. If VS survives and is responsible for 2% of said business in GB and the other carriers for 48% of the original 100% (50% are gone), it is the same as if VS goes bust and the other airlines use 50%.

Demand is not dependant on specific airlines, as long as prices are reasonable (which is given with TATL staying competitive without VS) and routes will still be served (what is given on TATL routes, at least with additional stops).

So VS should not be kept alive just for the sake of it, if they really think their business is survivable, they can sell it for £1 to anyone who is willing to buy it and keep it afloat until it will bring all the profits for the owners.

On the premise that VS has a net revenue of £2.8bn of which 1bn goes to the treasury,
 
JibberJim
Posts: 140
Joined: Tue Nov 08, 2016 1:33 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 1:00 pm

DobboDobbo wrote:
One point I had not appreciated is that VS recognises it’s revenue net of VAT. As VS’s revenue in 2018 (the most recent period) was £2.8bn, you could expect VS to have paid circa £560m in VAT alone.


What services does VS supply that are rated at 20% VAT? I thought they obtained most of their revenue from flights within VAT notice 744A part 5 ?
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 1:28 pm

JibberJim wrote:
DobboDobbo wrote:
One point I had not appreciated is that VS recognises it’s revenue net of VAT. As VS’s revenue in 2018 (the most recent period) was £2.8bn, you could expect VS to have paid circa £560m in VAT alone.


What services does VS supply that are rated at 20% VAT? I thought they obtained most of their revenue from flights within VAT notice 744A part 5 ?


Happy to stand corrected if that is correct?
 
3AWM
Posts: 228
Joined: Sat Jul 23, 2016 1:01 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 1:30 pm

No VAT on flights but they collect APD for the government.
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 1:30 pm

JibberJim wrote:
DobboDobbo wrote:
JibberJim wrote:

No it's not, viability is not binary, pre the financial crash the banks were all "viable", but the reality was they were mis-managed and didn't have sufficient resources to deal with changed circumstances. Simply because the scale of this crisis is so large doesn't mean there's a free reign to not have any reserves or assets for any slight road-bump.


Okay - to apply your criteria against some airlines who have received government support to deal with what you describe as this “slight road bump”


No, Covid is a massive road bump - but the other airlines were viable because they could have dealt with a slight one - they had reserves and / or assets to get cash via collateralised loans, Virgin has neither, banks now have to carry lots of cash to deal with road bumps, but they could still be wiped out by a large one.


Agree it is a massive road bump - as things stand VS has been grounded for coming up to two months and is still operating. I consider that a circa two month grounding would constitute more than a slight road bump, yet VS is still here (for now).
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 1:31 pm

3AWM wrote:
No VAT on flights but they collect APD for the government.


Many thanks - I stand corrected.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 2:36 pm

Junglejames wrote:
Westerwaelder wrote:
Junglejames wrote:
Haha.
So it's ok for Delta to ignore Virgin as they are apparently busy elsewhere, but it's not ok to suggest Branson may also have other companies to worry about.
I think the response you were met with says it all on here.

People have decided that because Virgin have a famous owner who has more money than them and lives out his retirement outside the UK, they are fair game.
But because Delta I assume have loads of individual shareholders, and no famous owner, they are the good guys.
Although to be fair, this forum does seem to have a bit of a love in with Delta.
Delta are the best.
Virgin are awful.
IAG are awful.

That's what I get from this forum.


Sent from my SM-G930F using Tapatalk


That is utter tosh and you know it. Delta are not asking for anything in relation to VS. They have resigned themselves to accept whatever happens. This is not about victimising anyone (though Virgin like to show themselves in that role). This is about the reality of a company with deep pocketed owners wanting an unsecured loan from the taxpayer to save them. In an industry with overcapacity. In one of the deepest recessions we have ever seen. What is so difficult about this to accept? There is no need for a VS and therefore there is no need to risk £500 million.
Oh, so you know exactly what Delta are thinking? Ok, as you were

Sent from my SM-G930F using Tapatalk


What? I have not seen any kind of comment coming from Delta that would suggest otherwise. They were seemingly happy to run VS as a thinly capitalised airline and that game is now up.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 2:54 pm

Junglejames wrote:
Westerwaelder wrote:
Junglejames wrote:
Or....
This British firm is 51% owned by a British company that are based in the UK, and 49% owned by a US company.

The British company is owned by a family whom also own an island in the BVI, and a couple of members of said family live on that island.

Sent from my SM-G930F using Tapatalk


Did not someone earlier in this thread establish that ownership ultimately is linked back to the BVI?


Virgin Atlantic is 51% owned by Virgin Group. They are registered in the UK.

It's Virgin Group Holdings (The parent of Virgin Group) which is registered in BVI.

Some want to look purely at Branson living on Necker, and it is easier then for them to call him the owner of Virgin Atlantic (as in the post I replied to).
But Virgin Group are the owners (51%) of Virgin Atlantic.

People need to stop looking at the shareholders of Virgin Group Holdings. They aren't there to throw loads of money at a single arm of Virgin Group and possibly end up with an empty bank account themselves. Anyway, in Bransons case, he has a lot of other arms that he needs to think about as well. Plus, I believe it was mentioned that Branson has put money in.

I believe Iberia received state support from Spain? Why are people not shouting that they should be getting bailed out by their ultra rich largest shareholder who doesn't even pay Spanish tax? Ie the Qatar government if I'm not mistaken?
Yes I know you have to go through IAG and Qatar Airways, but that's what some on here are doing in regards to Virgin Atlantic. Going through all the layers needed to find a scape goat who is rich and doesn't pay UK tax.
Crikey, in the Qatari government case, I doubt they have ever paid tax in Spain.

Sent from my SM-G930F using Tapatalk


Do you not see how desperate these arguments are? Iberia is by far the biggest airline in Spain and Spain gave a loan against collateral (clearly seeing value in Iberia's survival). IAG have heavily invested into Iberia and restructured it (to a point where it is profitable I believe?). Do you see any parallels to VS? I don't. IAG shares are also held by many pension funds and individuals. Not just QR. If QR and a private group/holding owned by a billionaire owned all if IAG or Iberia, I am sure the situation would be different.
 
BealineV953
Posts: 138
Joined: Fri Jul 26, 2019 10:00 am

Re: Virgin Atlantic facing collapse

Mon May 11, 2020 3:01 pm

zkojq wrote:

Opus99 wrote:
I wouldn’t necessarily see VS as an airline that has made air travel more affordable if they’re charging the same price as the main brand or sometimes more? Maybe at the beginning but not anymore

BealineV953 wrote:
Virgin does not compete on price. Virgin fares are typically the same as BA's.


That's how competition works. If the prices are the same then that's a good sign that the market is working and keeping both suppliers/producers "honest".



At the strategic level, airlines position themselves on product quality and price. This is the same for any business; see, for example, Philip Kotler’s price / quality matrix.
Some airlines occupy the ‘economy’ position in the market. They focus on minimising costs to enable them to offer fares lower than those offered by competitors. These airlines can be said to seek competitive advantage through price. The product quality is ‘low’, but so is the price; so long as the consumer sees the relationship between quality and price as rational they will regard the offer as being value for money. Ryanair and Spirit have adopted this strategy.
Virgin’s pricing strategy is ‘high-value’. Compared to competitors, Virgin aim to offer a high quality product at a ‘medium’ price.
For example, Virgin’s premium economy fares are the same as BA’s, but unlike BA Virgin offer free seat selection at time of booking, dedicated check-in, priority boarding and priority baggage handling. So, Virgin competes on product quality, not price.
Consumers like a high quality product at a medium price. However, a high quality product is likely to have higher costs, and these may not be fully covered by a medium price. Over the long term, it may be difficult to be consistently profitable in the high quality, medium price position.
At the tactical level, day to day Virgin’s approach to pricing is ‘going rate’. Typically Virgin simply matches BA fares.
Historically Virgin pricing has been reactive, but did become a little more proactive when Delta began to influence their pricing to and from the USA. However, Virgin prices remain on a par with BA / AA, UA et al. This is not a sign that the market is working, it is evidence of Virgin’s ‘going rate’ approach to pricing.

Note:
See Philip Kotler’s nine marketing-mix strategies on price and quality (the price / quality matrix).
Marketing Management, Analysis, Planning, Implementation and Control – Philp Kotler.
Ever since childhood, when I lived within sight of London Airport, I have seldom seen a plane go by and not wished I was on it.”
With apologies to Paul Theroux - ‘The Great Railway Bazaar’
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 3:16 pm

Junglejames wrote:
Westerwaelder wrote:
Junglejames wrote:
Or....
This British firm is 51% owned by a British company that are based in the UK, and 49% owned by a US company.

The British company is owned by a family whom also own an island in the BVI, and a couple of members of said family live on that island.

Sent from my SM-G930F using Tapatalk


Did not someone earlier in this thread establish that ownership ultimately is linked back to the BVI?


Virgin Atlantic is 51% owned by Virgin Group. They are registered in the UK.

It's Virgin Group Holdings (The parent of Virgin Group) which is registered in BVI.

Some want to look purely at Branson living on Necker, and it is easier then for them to call him the owner of Virgin Atlantic (as in the post I replied to).
But Virgin Group are the owners (51%) of Virgin Atlantic.

People need to stop looking at the shareholders of Virgin Group Holdings. They aren't there to throw loads of money at a single arm of Virgin Group and possibly end up with an empty bank account themselves. Anyway, in Bransons case, he has a lot of other arms that he needs to think about as well. Plus, I believe it was mentioned that Branson has put money in.

I believe Iberia received state support from Spain? Why are people not shouting that they should be getting bailed out by their ultra rich largest shareholder who doesn't even pay Spanish tax? Ie the Qatar government if I'm not mistaken?
Yes I know you have to go through IAG and Qatar Airways, but that's what some on here are doing in regards to Virgin Atlantic. Going through all the layers needed to find a scape goat who is rich and doesn't pay UK tax.
Crikey, in the Qatari government case, I doubt they have ever paid tax in Spain.

Sent from my SM-G930F using Tapatalk


Having just read your post again, the first bit makes no sense. VS is 51% owned by Virgin group whose parent company is Virgin Group Holding in the BVI. So the ultimate owners of VS are Virgin Group Holdings? So why should we stop looking who is behind them? That is exactly the point.

And I quote: "they (the shareholders of Virgin Group Holding) are not there to throw lots of money at a single arm". That is exactly their responsibility as the ultimate owners. Who do you think should throw their money at the various arms then?
 
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cv990Coronado
Posts: 372
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Re: Virgin Atlantic needs government support?

Mon May 11, 2020 3:16 pm

It is now reported that SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html
SSC-707B727 737-741234SP757/762/3/772/WA300/10/319/2/1-342/3/6-880-DAM-VC10 TRD 111 Ju52-DC8/9/10/11-YS11-748-VCV DH4B L
 
Boeing74741R
Posts: 1376
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Re: Virgin Atlantic needs government support?

Mon May 11, 2020 3:27 pm

cv990Coronado wrote:
It is now reported the SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html


https://www.bbc.co.uk/news/business-52596273

Not sure if Pan Am can be compared to Virgin Atlantic, but this again shows how SRB sees VS given he once sold Virgin Records (his "family silver" at the time) to prop VS up during the height of the BA Dirty Tricks scandal. USD $500m for whatever slice of his stake he's selling is a hefty amount.

The BBC article mentions Greybull as one potential investor. I'm more worried about Greybull's potential involvement when you look at what happened to Monarch under their watch, as well as Comet and British Steel.
 
BealineV953
Posts: 138
Joined: Fri Jul 26, 2019 10:00 am

Re: Virgin Atlantic facing collapse

Mon May 11, 2020 3:34 pm

zkojq wrote:

tphuang wrote:
1) VS doesn't serve anywhere out of London non-stop that's not covered by other airlines. Now, if it wants to transform itself to be the lifeblood of northern england economy and build up Manchester and new castle, it should make that pitch now.


Which is a pointless argument because it's providing competition on routes that it does fly. VS detractors have mentioned multiple times that VS prices are often the same as BA's thus inadvertently proving the point that it is providing competition. In the recovery, rivals, as well as VS itself will be cutting back on a capacity aggressively which makes competition even more important.



Virgin pricing being the same as BA's demonstrates that Virgin’s approach to pricing is ‘going rate’, with Virgin typically simply matching BA fares. Over the past twenty years or more Virgin pricing has been reactive, but did become a little more proactive when Delta began to influence their pricing to and from the USA. However, Virgin prices remain on a par with BA / AA, UA et al.
Ever since childhood, when I lived within sight of London Airport, I have seldom seen a plane go by and not wished I was on it.”
With apologies to Paul Theroux - ‘The Great Railway Bazaar’
 
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cv990Coronado
Posts: 372
Joined: Thu Nov 08, 2007 4:38 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 3:48 pm

Boeing74741R wrote:
cv990Coronado wrote:
It is now reported the SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html


https://www.bbc.co.uk/news/business-52596273

Not sure if Pan Am can be compared to Virgin Atlantic, but this again shows how SRB sees VS given he once sold Virgin Records (his "family silver" at the time) to prop VS up during the height of the BA Dirty Tricks scandal. USD $500m for whatever slice of his stake he's selling is a hefty amount.

The BBC article mentions Greybull as one potential investor. I'm more worried about Greybull's potential involvement when you look at what happened to Monarch under their watch, as well as Comet and British Steel.


Good points, selling something of value to prop up something of less or no value. It didn't work for Pan Am and I doubt it will for Virgin Atlantic. SRB does have some interesting associates.
I don't think any of this will change the fact that the airline business will be radically different when we eventually come out of this nightmare virus situation. Only the very strongest will survive and although I personally have had many excellent flights on Virgin I can't see them making it long term.
SSC-707B727 737-741234SP757/762/3/772/WA300/10/319/2/1-342/3/6-880-DAM-VC10 TRD 111 Ju52-DC8/9/10/11-YS11-748-VCV DH4B L
 
jomur
Posts: 334
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Re: Virgin Atlantic needs government support?

Mon May 11, 2020 3:57 pm

DobboDobbo wrote:
JibberJim wrote:
DobboDobbo wrote:

Okay - to apply your criteria against some airlines who have received government support to deal with what you describe as this “slight road bump”


No, Covid is a massive road bump - but the other airlines were viable because they could have dealt with a slight one - they had reserves and / or assets to get cash via collateralised loans, Virgin has neither, banks now have to carry lots of cash to deal with road bumps, but they could still be wiped out by a large one.


Agree it is a massive road bump - as things stand VS has been grounded for coming up to two months and is still operating. I consider that a circa two month grounding would constitute more than a slight road bump, yet VS is still here (for now).


Virgin are still operating because they have not paid back millions owed to customers whose flights have been cancelled going back to the beginning of April. Now that the CAA is stated they will go after airlines dragging out repayments Virgin could run out of money pretty quickly if they target Virgin, the worse of alll UK airlines not repaying refunds in the legally obligatory 7 days.
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 4:05 pm

jomur wrote:
DobboDobbo wrote:
JibberJim wrote:

No, Covid is a massive road bump - but the other airlines were viable because they could have dealt with a slight one - they had reserves and / or assets to get cash via collateralised loans, Virgin has neither, banks now have to carry lots of cash to deal with road bumps, but they could still be wiped out by a large one.


Agree it is a massive road bump - as things stand VS has been grounded for coming up to two months and is still operating. I consider that a circa two month grounding would constitute more than a slight road bump, yet VS is still here (for now).


Virgin are still operating because they have not paid back millions owed to customers whose flights have been cancelled going back to the beginning of April. Now that the CAA is stated they will go after airlines dragging out repayments Virgin could run out of money pretty quickly if they target Virgin, the worse of alll UK airlines not repaying refunds in the legally obligatory 7 days.


I’m pretty sure Virgin have not been offering refunds to their customers as they are obliged to - They are far from on their own as pretty much every other business in this sector has been doing the same thing to a greater or lesser degree.

I am also sure that you have no evidence or basis (other than personal prejudice) to make the following statements:

jomur wrote:
Virgin are still operating because they have not paid back millions owed to customers whose flights have been cancelled going back to the beginning of April
.


jomur wrote:
Virgin, the worse of alll UK airlines not repaying refunds in the legally obligatory 7 days .
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 4:11 pm

cv990Coronado wrote:
Good points, selling something of value to prop up something of less or no value. It didn't work for Pan Am and I doubt it will for Virgin Atlantic. SRB does have some interesting associates.
I don't think any of this will change the fact that the airline business will be radically different when we eventually come out of this nightmare virus situation. Only the very strongest will survive and although I personally have had many excellent flights on Virgin I can't see them making it long term.


Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs? Which airline needs to generate more revenue to pay for its costs? You all think that the future is brighter for the bigger airlines when it is the total opposite. That's the reason why all bigger airlines in US are downsizing. In a world of diminished revenues, the winners are the players with less costs.
 
BealineV953
Posts: 138
Joined: Fri Jul 26, 2019 10:00 am

Re: Virgin Atlantic facing collapse

Mon May 11, 2020 4:27 pm

zkojq wrote:

What is the actual brand fee?
Thus it would be great to know ….some numbers for how much it costs per year currently and how much it would cost per year going forwards if they are going to use this as a rallying cry to oppose government support for VS.



A detailed report in the Business section of The Times on 22nd April states that Virgin Atlantic pays an "undisclosed" royalty to Virgin Enterprises.
Virgin Enterprises is the 'licencing division' of the Virgin organisation. The article says that for 2018 Virgin Enterprises reported revenues of £75m. That included £11m from Virgin Money, £10m from Virgin Media and undisclosed royalties from Virgin Active, Virgin Australia and Virgin Cruises.
Virgin Enterprises made a pre-tax profit of £51m. It paid an £85m dividend to its sole shareholder, Virgin Group Holdings, headquartered in the BVI. £85m is not a typo, the dividend was greater than the annual revenue.
Virgin Enterprises is based in London. However, in a piece in the Times on 22nd April, Tom Bower says “…his finances have been concealed in offshore tax havens – not only the Caribbean but also in Switzerland, which became the headquarters of his fortune-saving operation to licence the Virgin brand.”
Tom Bowers has written a number of books on Branson, including ‘Branson: Behind the Mask’. I guess we have to read the book to know more about the Switzerland link.
Ever since childhood, when I lived within sight of London Airport, I have seldom seen a plane go by and not wished I was on it.”
With apologies to Paul Theroux - ‘The Great Railway Bazaar’
 
sevenheavy
Posts: 961
Joined: Tue Mar 23, 2004 3:30 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 4:32 pm

jomur wrote:
DobboDobbo wrote:
JibberJim wrote:

No, Covid is a massive road bump - but the other airlines were viable because they could have dealt with a slight one - they had reserves and / or assets to get cash via collateralised loans, Virgin has neither, banks now have to carry lots of cash to deal with road bumps, but they could still be wiped out by a large one.


Agree it is a massive road bump - as things stand VS has been grounded for coming up to two months and is still operating. I consider that a circa two month grounding would constitute more than a slight road bump, yet VS is still here (for now).


Virgin are still operating because they have not paid back millions owed to customers whose flights have been cancelled going back to the beginning of April. Now that the CAA is stated they will go after airlines dragging out repayments Virgin could run out of money pretty quickly if they target Virgin, the worse of alll UK airlines not repaying refunds in the legally obligatory 7 days.


Do you have a source, or is this just a personal opinion? VS are no better or worse than most of the other airlines and (as I mentioned in a previous, and conveniently ignored, post) the majority of the money for future ticket sales will still be with the credit card companies anyway. It’s purely resource driven and no airlines are able to suddenly meet such a huge increase in demand
So long 701, it was nice knowing you.
 
BealineV953
Posts: 138
Joined: Fri Jul 26, 2019 10:00 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 4:38 pm

VS11 wrote:
cv990Coronado wrote:
Good points, selling something of value to prop up something of less or no value. It didn't work for Pan Am and I doubt it will for Virgin Atlantic. SRB does have some interesting associates.
I don't think any of this will change the fact that the airline business will be radically different when we eventually come out of this nightmare virus situation. Only the very strongest will survive and although I personally have had many excellent flights on Virgin I can't see them making it long term.


Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs? Which airline needs to generate more revenue to pay for its costs? You all think that the future is brighter for the bigger airlines when it is the total opposite. That's the reason why all bigger airlines in US are downsizing. In a world of diminished revenues, the winners are the players with less costs.


The thing that puts an airline out of business is not it's fixed costs, it is cash flow. Swissair and Sabena went out of business because revenue dried up and they could not cover their immediate need for cash.
BA's fixed costs are likely to be higher than Virgin's. However, bear in mind that a lot of fixed cost that used to sit with BA now sits centrally with IAG (eg IT). Also, IAG and BA are very, very good at managing costs.
In any case, to compare fixed costs you need to look at comparisons like fixed cost per ASK, fixed cost per revenue passenger mile and so on.
For BA and Virgin that would be a very interesting exercise, but as a privately held company Virgin may not publish enough detail to make the comparison.
Ever since childhood, when I lived within sight of London Airport, I have seldom seen a plane go by and not wished I was on it.”
With apologies to Paul Theroux - ‘The Great Railway Bazaar’
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 5:15 pm

BealineV953 wrote:
VS11 wrote:
cv990Coronado wrote:
Good points, selling something of value to prop up something of less or no value. It didn't work for Pan Am and I doubt it will for Virgin Atlantic. SRB does have some interesting associates.
I don't think any of this will change the fact that the airline business will be radically different when we eventually come out of this nightmare virus situation. Only the very strongest will survive and although I personally have had many excellent flights on Virgin I can't see them making it long term.


Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs? Which airline needs to generate more revenue to pay for its costs? You all think that the future is brighter for the bigger airlines when it is the total opposite. That's the reason why all bigger airlines in US are downsizing. In a world of diminished revenues, the winners are the players with less costs.


The thing that puts an airline out of business is not it's fixed costs, it is cash flow. Swissair and Sabena went out of business because revenue dried up and they could not cover their immediate need for cash.
BA's fixed costs are likely to be higher than Virgin's. However, bear in mind that a lot of fixed cost that used to sit with BA now sits centrally with IAG (eg IT). Also, IAG and BA are very, very good at managing costs.
In any case, to compare fixed costs you need to look at comparisons like fixed cost per ASK, fixed cost per revenue passenger mile and so on.
For BA and Virgin that would be a very interesting exercise, but as a privately held company Virgin may not publish enough detail to make the comparison.


BA had at the end of 2019 302 aircraft. VS had 45 or so. Close to 7 times less than BA. It does not matter now many ASK they fly because they still have to pay for them...in a world of very decreased flying...BA is going to need to significantly cut its fleet and flying. So in simple terms, it will reduce a lot of its services where it competes with VS giving a lot of upside to VS.
 
sevenheavy
Posts: 961
Joined: Tue Mar 23, 2004 3:30 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 5:27 pm

cv990Coronado wrote:
It is now reported that SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html


Aside from PA and VS both being airlines, there’s no comparison. SRB isn’t selling Virgin Galactic, he’s a selling about 22% of his stake. He’ll still own over $1.5bn in company stock.

The example you use was almost 40 years ago and the differences are many. PA were already in serious trouble, having just recently spent a fortune on the National merger to finally give them a foothold in the US domestic market. Even so, it was another 10 years after the intercontinental sale (with almost constant annual losses) before they finally failed. They had an increasingly ageing fleet and massive costs as well as many other problems. This was in a time of relatively ‘normal’ economic stability.

There will be many (much more recent) examples where similar transactions went both ways. The fact that VS have already instigated a massive recovery and restructuring plan, and are in this position as a result of a once in a generation event says that should they survive the pandemic there is no basis to draw any similarity with PA
So long 701, it was nice knowing you.
 
DobboDobbo
Posts: 1105
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 5:38 pm

Boeing74741R wrote:
cv990Coronado wrote:
It is now reported the SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html


https://www.bbc.co.uk/news/business-52596273

Not sure if Pan Am can be compared to Virgin Atlantic, but this again shows how SRB sees VS given he once sold Virgin Records (his "family silver" at the time) to prop VS up during the height of the BA Dirty Tricks scandal. USD $500m for whatever slice of his stake he's selling is a hefty amount.

The BBC article mentions Greybull as one potential investor. I'm more worried about Greybull's potential involvement when you look at what happened to Monarch under their watch, as well as Comet and British Steel.


I’m surprised at this, it can’t be an easy market to liquify an asset - especially a large shareholding as this.

If he pulls it off and can save a number of the businesses within the Virgin group, fair play to him. Also fair play to the UK government, who could have easily made an offer of some assistance. They are still there in the background if necessary, but with any luck this might secure the futures of 6,000+ employees and the airline in the long term at no cost to the taxpayer - which would be a good result.

A big if, but hopefully the first ray of light at the end of the tunnel.
 
GDB
Posts: 13617
Joined: Wed May 23, 2001 6:25 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 9:28 pm

Some business editorial comment;
https://www.theguardian.com/business/ni ... t-entirely

If it works for him and the airline, selling Virgin Galactic, fair play.
Myself, long been a skeptic of it, as a more caustic commentator noted, it's been ready to take fare paying pax next year since 2008.
It will help, how much is it worth though, to me it's flawed and in space tourism terms, bypassed technology.
 
Opus99
Posts: 700
Joined: Thu May 30, 2019 10:51 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 10:10 pm

VS11 wrote:
BealineV953 wrote:
VS11 wrote:

Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs? Which airline needs to generate more revenue to pay for its costs? You all think that the future is brighter for the bigger airlines when it is the total opposite. That's the reason why all bigger airlines in US are downsizing. In a world of diminished revenues, the winners are the players with less costs.


The thing that puts an airline out of business is not it's fixed costs, it is cash flow. Swissair and Sabena went out of business because revenue dried up and they could not cover their immediate need for cash.
BA's fixed costs are likely to be higher than Virgin's. However, bear in mind that a lot of fixed cost that used to sit with BA now sits centrally with IAG (eg IT). Also, IAG and BA are very, very good at managing costs.
In any case, to compare fixed costs you need to look at comparisons like fixed cost per ASK, fixed cost per revenue passenger mile and so on.
For BA and Virgin that would be a very interesting exercise, but as a privately held company Virgin may not publish enough detail to make the comparison.


BA had at the end of 2019 302 aircraft. VS had 45 or so. Close to 7 times less than BA. It does not matter now many ASK they fly because they still have to pay for them...in a world of very decreased flying...BA is going to need to significantly cut its fleet and flying. So in simple terms, it will reduce a lot of its services where it competes with VS giving a lot of upside to VS.

VS also has to significantly reduce its own services in relative terms, seeing as they've pulled out of Gatwick and of course are downsizing their fleet significantly. and following their restructuring they'll be even smaller. I have a change of opinion that they'll pull through.
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 10:42 pm

Opus99 wrote:
VS11 wrote:
BealineV953 wrote:

The thing that puts an airline out of business is not it's fixed costs, it is cash flow. Swissair and Sabena went out of business because revenue dried up and they could not cover their immediate need for cash.
BA's fixed costs are likely to be higher than Virgin's. However, bear in mind that a lot of fixed cost that used to sit with BA now sits centrally with IAG (eg IT). Also, IAG and BA are very, very good at managing costs.
In any case, to compare fixed costs you need to look at comparisons like fixed cost per ASK, fixed cost per revenue passenger mile and so on.
For BA and Virgin that would be a very interesting exercise, but as a privately held company Virgin may not publish enough detail to make the comparison.


BA had at the end of 2019 302 aircraft. VS had 45 or so. Close to 7 times less than BA. It does not matter now many ASK they fly because they still have to pay for them...in a world of very decreased flying...BA is going to need to significantly cut its fleet and flying. So in simple terms, it will reduce a lot of its services where it competes with VS giving a lot of upside to VS.

VS also has to significantly reduce its own services in relative terms, seeing as they've pulled out of Gatwick and of course are downsizing their fleet significantly. and following their restructuring they'll be even smaller. I have a change of opinion that they'll pull through.


I think Branson’s commitment to VS is pretty clear and I don’t have any doubt that he will continue to support the airline. The current episode was simply an issue of liquidity which with the sale of Virgin Galactic shares will be resolved.
 
Dmoney
Posts: 135
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:39 pm

If they manage to get out of Virgin Galactic anywhere near the current price it's the greatest feat in history. QE literally to the moon. A company losing hundreds of millions, with no revenue with a total addressable market of a handful of space tourists. Be lucky to crack a 100m in revenue. Mad stuff.

I'd count on Virgin Galactic cash when the shares sell and the money lands in the account. Till then not so much.

Anyway why would he invest his OWN money in VS.
 
Dmoney
Posts: 135
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:39 pm

If they manage to get out of Virgin Galactic anywhere near the current price it's the greatest feat in history. QE literally to the moon. A company losing hundreds of millions, with no revenue with a total addressable market of a handful of space tourists. Be lucky to crack a 100m in revenue. Mad stuff.

I'd count on Virgin Galactic cash when the shares sell and the money lands in the account. Till then not so much.

Anyway why would he invest his OWN money in VS.
 
Dmoney
Posts: 135
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:41 pm

DobboDobbo wrote:
Boeing74741R wrote:
cv990Coronado wrote:
It is now reported the SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html


https://www.bbc.co.uk/news/business-52596273

Not sure if Pan Am can be compared to Virgin Atlantic, but this again shows how SRB sees VS given he once sold Virgin Records (his "family silver" at the time) to prop VS up during the height of the BA Dirty Tricks scandal. USD $500m for whatever slice of his stake he's selling is a hefty amount.

The BBC article mentions Greybull as one potential investor. I'm more worried about Greybull's potential involvement when you look at what happened to Monarch under their watch, as well as Comet and British Steel.


I’m surprised at this, it can’t be an easy market to liquify an asset - especially a large shareholding as this.

If he pulls it off and can save a number of the businesses within the Virgin group, fair play to him. Also fair play to the UK government, who could have easily made an offer of some assistance. They are still there in the background if necessary, but with any luck this might secure the futures of 6,000+ employees and the airline in the long term at no cost to the taxpayer - which would be a good result.

A big if, but hopefully the first ray of light at the end of the tunnel.



Glad to see you've come around to my view that equity should stump up the cash or take a bath. It would be a great result for everyone but Branson. I'll believe it when I see it though.
 
x1234
Posts: 797
Joined: Mon Nov 28, 2016 3:50 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:43 pm

Also I find it weird that VS hasn't done fleet simplification and like BA has both the A350 & 787. Thank god all the A340 gas guzzlers are gone.
 
Dmoney
Posts: 135
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 11:44 pm

sevenheavy wrote:
cv990Coronado wrote:
It is now reported that SRB is selling shares in Virgin Galactic to help support Virgin Atlantic and other group companies.
This reminds me of when Pan Am sold Intercontinental hotels to keep Pan Am going. At the time it was said and subsequently proved that they should have sold the airline and kept the hotels.
I feel history is about to repeat itself.

https://www.cnbc.com/2020/05/11/richard ... llion.html


Aside from PA and VS both being airlines, there’s no comparison. SRB isn’t selling Virgin Galactic, he’s a selling about 22% of his stake. He’ll still own over $1.5bn in company stock.

The example you use was almost 40 years ago and the differences are many. PA were already in serious trouble, having just recently spent a fortune on the National merger to finally give them a foothold in the US domestic market. Even so, it was another 10 years after the intercontinental sale (with almost constant annual losses) before they finally failed. They had an increasingly ageing fleet and massive costs as well as many other problems. This was in a time of relatively ‘normal’ economic stability.

There will be many (much more recent) examples where similar transactions went both ways. The fact that VS have already instigated a massive recovery and restructuring plan, and are in this position as a result of a once in a generation event says that should they survive the pandemic there is no basis to draw any similarity with PA



Are we talking about the same airline? Virgin Atlantic ? The airline which has failed to make a profit in the longest economic expansion on record? That Virgin? They were unprofitable going into this at the end of a ten year economic expansion.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 5:01 am

VS11 wrote:
BealineV953 wrote:
VS11 wrote:

Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs? Which airline needs to generate more revenue to pay for its costs? You all think that the future is brighter for the bigger airlines when it is the total opposite. That's the reason why all bigger airlines in US are downsizing. In a world of diminished revenues, the winners are the players with less costs.


The thing that puts an airline out of business is not it's fixed costs, it is cash flow. Swissair and Sabena went out of business because revenue dried up and they could not cover their immediate need for cash.
BA's fixed costs are likely to be higher than Virgin's. However, bear in mind that a lot of fixed cost that used to sit with BA now sits centrally with IAG (eg IT). Also, IAG and BA are very, very good at managing costs.
In any case, to compare fixed costs you need to look at comparisons like fixed cost per ASK, fixed cost per revenue passenger mile and so on.
For BA and Virgin that would be a very interesting exercise, but as a privately held company Virgin may not publish enough detail to make the comparison.


BA had at the end of 2019 302 aircraft. VS had 45 or so. Close to 7 times less than BA. It does not matter now many ASK they fly because they still have to pay for them...in a world of very decreased flying...BA is going to need to significantly cut its fleet and flying. So in simple terms, it will reduce a lot of its services where it competes with VS giving a lot of upside to VS.


What makes you think BA will cut the routes it shares with VS? They tend to be the higher yield ones.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 5:04 am

VS11 wrote:
cv990Coronado wrote:
Good points, selling something of value to prop up something of less or no value. It didn't work for Pan Am and I doubt it will for Virgin Atlantic. SRB does have some interesting associates.
I don't think any of this will change the fact that the airline business will be radically different when we eventually come out of this nightmare virus situation. Only the very strongest will survive and although I personally have had many excellent flights on Virgin I can't see them making it long term.


Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs? Which airline needs to generate more revenue to pay for its costs? You all think that the future is brighter for the bigger airlines when it is the total opposite. That's the reason why all bigger airlines in US are downsizing. In a world of diminished revenues, the winners are the players with less costs.


The large US carriers are cutting back because demand is forecast to be lower. Not because smaller is better per se. And have you ever considered economies of scale?
 
JamesCousins
Posts: 483
Joined: Fri Jul 14, 2017 1:19 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 10:52 am

VS11 wrote:
Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs?


Relative to average revenue generated it's probably actually Virgin. Their fleet is basically entirely leased/financed compounded with the fact IAG/BA have far more in cash reserves and a much greater margin. As soon as people start flying again BA will find it much easier to breakeaven on a flight-by-flight basis than Virgin, and if we're talking long-term survival that is surely the most important factor.
Q400, A320-200, A321-200, 737-500, 737-800, 747-400, 757-200, 787-9 // FCA, TOM, TUI, MON, MT, BA, VS, DL, BE, X9, OLY // Upcoming: W6 A320, W6 A321, EVA 77W, VS 787-9m AS A320, VS A35K, KLM E190, KLM 738, LS 737
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 12:18 pm

Westerwaelder wrote:
VS11 wrote:
BealineV953 wrote:

The thing that puts an airline out of business is not it's fixed costs, it is cash flow. Swissair and Sabena went out of business because revenue dried up and they could not cover their immediate need for cash.
BA's fixed costs are likely to be higher than Virgin's. However, bear in mind that a lot of fixed cost that used to sit with BA now sits centrally with IAG (eg IT). Also, IAG and BA are very, very good at managing costs.
In any case, to compare fixed costs you need to look at comparisons like fixed cost per ASK, fixed cost per revenue passenger mile and so on.
For BA and Virgin that would be a very interesting exercise, but as a privately held company Virgin may not publish enough detail to make the comparison.


BA had at the end of 2019 302 aircraft. VS had 45 or so. Close to 7 times less than BA. It does not matter now many ASK they fly because they still have to pay for them...in a world of very decreased flying...BA is going to need to significantly cut its fleet and flying. So in simple terms, it will reduce a lot of its services where it competes with VS giving a lot of upside to VS.


What makes you think BA will cut the routes it shares with VS? They tend to be the higher yield ones.


The yield is not going to come by running 6-7 flights to NYC or 4 flights to Boston (one of which used to be 380).
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 12:34 pm

JamesCousins wrote:
VS11 wrote:
Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs?


Relative to average revenue generated it's probably actually Virgin. Their fleet is basically entirely leased/financed compounded with the fact IAG/BA have far more in cash reserves and a much greater margin. As soon as people start flying again BA will find it much easier to breakeaven on a flight-by-flight basis than Virgin, and if we're talking long-term survival that is surely the most important factor.


When the revenue is 5% of what it used to be and your fixed costs continue to be largely the same because you have hundreds and hundreds of expensive jets to pay for while they are on the ground for 1 to 3 years, how long do you think their reserves are going to last for? For the record, I never claimed BA won’t survive.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 12:44 pm

VS11 wrote:
Westerwaelder wrote:
VS11 wrote:

BA had at the end of 2019 302 aircraft. VS had 45 or so. Close to 7 times less than BA. It does not matter now many ASK they fly because they still have to pay for them...in a world of very decreased flying...BA is going to need to significantly cut its fleet and flying. So in simple terms, it will reduce a lot of its services where it competes with VS giving a lot of upside to VS.


What makes you think BA will cut the routes it shares with VS? They tend to be the higher yield ones.


The yield is not going to come by running 6-7 flights to NYC or 4 flights to Boston (one of which used to be 380).


That is correct. The yield is not going to come by cutting more than necessary to "give lot of upside to VS". BA will only cut what they have to. The cuts will not open any opportunity for competitors. That is just nonsense. The cuts will be in line with drop in demand. To see any opportunity here is just naive. BA can furthermore fill these planes with transfer traffic both ends and provide more frequency that way at a lower risk.
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 12:53 pm

Westerwaelder wrote:
VS11 wrote:
Westerwaelder wrote:

What makes you think BA will cut the routes it shares with VS? They tend to be the higher yield ones.


The yield is not going to come by running 6-7 flights to NYC or 4 flights to Boston (one of which used to be 380).


That is correct. The yield is not going to come by cutting more than necessary to "give lot of upside to VS". BA will only cut what they have to. The cuts will not open any opportunity for competitors. That is just nonsense. The cuts will be in line with drop in demand. To see any opportunity here is just naive. BA can furthermore fill these planes with transfer traffic both ends and provide more frequency that way at a lower risk.


Yeah, I don't think I am the naive one. Good luck with your theories.
 
Brickell305
Posts: 934
Joined: Sat Jun 24, 2017 2:07 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 1:02 pm

VS has announced their proposed schedule for summer 2021.

https://www.godsavethepoints.com/virgin ... -schedule/
 
JamesCousins
Posts: 483
Joined: Fri Jul 14, 2017 1:19 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 1:56 pm

VS11 wrote:
JamesCousins wrote:
VS11 wrote:
Herein lies the greatest misconception folks here have about VS and airlines in general. The largest weak spot of any airline is its huge fixed costs which in times of difficulty are hard to maintain as the fixed costs are there but the revenue isn't. Now you tell me between BA and VS which one has higher fixed costs?


Relative to average revenue generated it's probably actually Virgin. Their fleet is basically entirely leased/financed compounded with the fact IAG/BA have far more in cash reserves and a much greater margin. As soon as people start flying again BA will find it much easier to breakeaven on a flight-by-flight basis than Virgin, and if we're talking long-term survival that is surely the most important factor.


When the revenue is 5% of what it used to be and your fixed costs continue to be largely the same because you have hundreds and hundreds of expensive jets to pay for while they are on the ground for 1 to 3 years, how long do you think their reserves are going to last for? For the record, I never claimed BA won’t survive.


Yes but I reiterate my point, it is all relative. 5% of BAs revenue equals a lot more than Virgin's 5%, so BA can "afford" (and by afford I mean manage/survive with the already allocated state aid) their higher fixed costs (which I say again are proportionally lower than BAs). Both BA and Virgin are facing severe financial harship, but just because BA has more aircraft and a higher cash sum of yearly fixed costs doesn't make them in a weaker position. This is not a game of fleet sizes or company size, it's a game of margins and paid off assets - BA are one of the strongest airlines globally in this area.

Furthermore, BA have a large number of assets which they can secure capital loans against over the long term should they require, Virgin don't have that ability - that is why the government has refused a bailout thus far and Virgin is teetering on the edge to a much more severe degree than BA.
Q400, A320-200, A321-200, 737-500, 737-800, 747-400, 757-200, 787-9 // FCA, TOM, TUI, MON, MT, BA, VS, DL, BE, X9, OLY // Upcoming: W6 A320, W6 A321, EVA 77W, VS 787-9m AS A320, VS A35K, KLM E190, KLM 738, LS 737
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 2:25 pm

JamesCousins wrote:
VS11 wrote:
JamesCousins wrote:

Relative to average revenue generated it's probably actually Virgin. Their fleet is basically entirely leased/financed compounded with the fact IAG/BA have far more in cash reserves and a much greater margin. As soon as people start flying again BA will find it much easier to breakeaven on a flight-by-flight basis than Virgin, and if we're talking long-term survival that is surely the most important factor.


When the revenue is 5% of what it used to be and your fixed costs continue to be largely the same because you have hundreds and hundreds of expensive jets to pay for while they are on the ground for 1 to 3 years, how long do you think their reserves are going to last for? For the record, I never claimed BA won’t survive.


Yes but I reiterate my point, it is all relative. 5% of BAs revenue equals a lot more than Virgin's 5%, so BA can "afford" (and by afford I mean manage/survive with the already allocated state aid) their higher fixed costs (which I say again are proportionally lower than BAs). Both BA and Virgin are facing severe financial harship, but just because BA has more aircraft and a higher cash sum of yearly fixed costs doesn't make them in a weaker position. This is not a game of fleet sizes or company size, it's a game of margins and paid off assets - BA are one of the strongest airlines globally in this area.

Furthermore, BA have a large number of assets which they can secure capital loans against over the long term should they require, Virgin don't have that ability - that is why the government has refused a bailout thus far and Virgin is teetering on the edge to a much more severe degree than BA.


No, it is not all relative. BA will retire paid-off assets precisely because they are paid-off. The more assets you have that do not earn to pay off their costs the higher your financial burden.
 
Westerwaelder
Posts: 203
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 2:47 pm

VS11 wrote:
JamesCousins wrote:
VS11 wrote:

When the revenue is 5% of what it used to be and your fixed costs continue to be largely the same because you have hundreds and hundreds of expensive jets to pay for while they are on the ground for 1 to 3 years, how long do you think their reserves are going to last for? For the record, I never claimed BA won’t survive.


Yes but I reiterate my point, it is all relative. 5% of BAs revenue equals a lot more than Virgin's 5%, so BA can "afford" (and by afford I mean manage/survive with the already allocated state aid) their higher fixed costs (which I say again are proportionally lower than BAs). Both BA and Virgin are facing severe financial harship, but just because BA has more aircraft and a higher cash sum of yearly fixed costs doesn't make them in a weaker position. This is not a game of fleet sizes or company size, it's a game of margins and paid off assets - BA are one of the strongest airlines globally in this area.

Furthermore, BA have a large number of assets which they can secure capital loans against over the long term should they require, Virgin don't have that ability - that is why the government has refused a bailout thus far and Virgin is teetering on the edge to a much more severe degree than BA.


No, it is not all relative. BA will retire paid-off assets precisely because they are paid-off. The more assets you have that do not earn to pay off their costs the higher your financial burden.


And in the case of BA, those assets flew profitably throughout the last years and resulted in a position of £9 billion in the bank. VS with around 1/7th of the fleet has more than £1.3billion in the bank? Good luck with your theory. You'll need it.
 
VS11
Posts: 1647
Joined: Mon Jul 02, 2001 6:34 am

Re: Virgin Atlantic needs government support?

Tue May 12, 2020 2:57 pm

Westerwaelder wrote:
VS11 wrote:
JamesCousins wrote:

Yes but I reiterate my point, it is all relative. 5% of BAs revenue equals a lot more than Virgin's 5%, so BA can "afford" (and by afford I mean manage/survive with the already allocated state aid) their higher fixed costs (which I say again are proportionally lower than BAs). Both BA and Virgin are facing severe financial harship, but just because BA has more aircraft and a higher cash sum of yearly fixed costs doesn't make them in a weaker position. This is not a game of fleet sizes or company size, it's a game of margins and paid off assets - BA are one of the strongest airlines globally in this area.

Furthermore, BA have a large number of assets which they can secure capital loans against over the long term should they require, Virgin don't have that ability - that is why the government has refused a bailout thus far and Virgin is teetering on the edge to a much more severe degree than BA.


No, it is not all relative. BA will retire paid-off assets precisely because they are paid-off. The more assets you have that do not earn to pay off their costs the higher your financial burden.


And in the case of BA, those assets flew profitably throughout the last years and resulted in a position of £9 billion in the bank. VS with around 1/7th of the fleet has more than £1.3billion in the bank? Good luck with your theory. You'll need it.


To achieve higher yields, airlines like BA, LH, KL, AF, DL, AA, UA will have to cut frequency and capacity. The money they have in the bank is not to fly empty planes but to keep empty planes parked. I don't really understand what you are arguing about.

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