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zkojq
Posts: 4321
Joined: Fri Sep 02, 2011 12:42 am

Re: Virgin Australia to enter voluntary administration

Wed Apr 29, 2020 12:17 am

VirginFlyer wrote:
Is anyone else beginning to find this a bit tedious? I mean, if anything given Cushing was the original and Borghetti the latter-day one, should it not be John ‘Cushing’ Borghetti?

V/F


Yes and I agree that it should be the other way around. I don't really see value in trying to brand someone this way.
First to fly the 787-9
 
Sydscott
Posts: 3513
Joined: Thu Oct 30, 2003 11:50 am

Re: Virgin Australia to enter voluntary administration

Wed Apr 29, 2020 4:43 am

zkojq wrote:
VirginFlyer wrote:
Is anyone else beginning to find this a bit tedious? I mean, if anything given Cushing was the original and Borghetti the latter-day one, should it not be John ‘Cushing’ Borghetti?

V/F


Yes and I agree that it should be the other way around. I don't really see value in trying to brand someone this way.


I think we can merely conclude that QF might the entirely right decision with Alan Joyce and not going with John Borghetti.
 
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qf2220
Posts: 1972
Joined: Fri Aug 16, 2013 9:16 pm

Re: Virgin Australia to enter voluntary administration

Wed Apr 29, 2020 4:53 am

Sydscott wrote:
zkojq wrote:
VirginFlyer wrote:
Is anyone else beginning to find this a bit tedious? I mean, if anything given Cushing was the original and Borghetti the latter-day one, should it not be John ‘Cushing’ Borghetti?

V/F


Yes and I agree that it should be the other way around. I don't really see value in trying to brand someone this way.


I think we can merely conclude that QF might the entirely right decision with Alan Joyce and not going with John Borghetti.


Who were the other candidates for VA CEO at the time?
 
Sydscott
Posts: 3513
Joined: Thu Oct 30, 2003 11:50 am

Re: Virgin Australia to enter voluntary administration

Wed Apr 29, 2020 7:56 am

qf2220 wrote:
Sydscott wrote:
zkojq wrote:

Yes and I agree that it should be the other way around. I don't really see value in trying to brand someone this way.


I think we can merely conclude that QF might the entirely right decision with Alan Joyce and not going with John Borghetti.


Who were the other candidates for VA CEO at the time?


From looking at media at the time there were only three candidates for Virgin CEO that were considered to replace Brett Godfrey:

- John Borghetti
- Andy Harrison
- David Baxby

JB was third in charge of Qantas when he left there.
 
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RyanairGuru
Posts: 8372
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Re: Virgin Australia to enter voluntary administration

Thu Apr 30, 2020 7:25 am

Apparently Virgin Australia have sought bankruptcy protection in the USA. Clearly this isn't Chapter 11, but can someone with more knowledge of US bankruptcy law explain what's going on. The article isn't very informative.

https://www.theguardian.com/business/20 ... ing-seized
Worked Hard, Flew Right
 
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vhtje
Posts: 1199
Joined: Sat Jan 10, 2009 12:40 pm

Re: Virgin Australia to enter voluntary administration

Thu Apr 30, 2020 9:32 am

RyanairGuru wrote:
Apparently Virgin Australia have sought bankruptcy protection in the USA. Clearly this isn't Chapter 11, but can someone with more knowledge of US bankruptcy law explain what's going on. The article isn't very informative.

https://www.theguardian.com/business/20 ... ing-seized


What do you mean, it isn't very informative?

TheGuardian wrote:
The administration has frozen debts in Australia, but on Wednesday the administrators told a bankruptcy court in New York that unless it orders the insolvency to be recognised in the US “there is nothing to prevent creditors in the United States from commencing enforcement actions against the foreign debtors [the Virgin group] or their assets”.

“This would undermine the administration process in Australia,” they said in documents filed with the court.

US holders of high-interest debt are owed US$775m and there are also American entities among a group of airline financiers and banks owed almost $2.3bn.

“It would be unfair and contrary to the policies underlying chapter 15 for any creditors in the United States to unilaterally pursue remedies in the United States that advantage them over similarly situated creditors in Australia that are complying with the stay and procedures in Australia,” the administrators told the court.

They said that because Virgin Australia was providing repatriation flights to bring Australians home from the US, it was also important “as a matter of public health to avoid disruption resulting from enforcement action taken by creditors in the United States”.

The US court is yet to rule on the request.


In other words: the administrators are asking for the US court to recognise the Australian process.
I only turn left when boarding aircraft. Well, mostly. All right, sometimes. OH OKAY - rarely.
 
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Phosphorus
Posts: 1014
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Re: Virgin Australia to enter voluntary administration

Thu Apr 30, 2020 11:24 am

For non-US entities, wishing to file for bankruptcy protection in the US, the relevant part is Chapter 15:
https://en.wikipedia.org/wiki/Chapter_1 ... tates_Code

Virgin Australia has filed for chapter 15 in the US. From the horse's mouth:
https://www2.deloitte.com/au/en/pages/f ... er-15.html
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aerohottie
Posts: 828
Joined: Mon Mar 29, 2004 3:52 pm

Re: Virgin Australia to enter voluntary administration

Sat May 02, 2020 3:13 am

Sydscott wrote:
qf2220 wrote:
Sydscott wrote:

I think we can merely conclude that QF might the entirely right decision with Alan Joyce and not going with John Borghetti.


Who were the other candidates for VA CEO at the time?


From looking at media at the time there were only three candidates for Virgin CEO that were considered to replace Brett Godfrey:

- John Borghetti
- Andy Harrison
- David Baxby

JB was third in charge of Qantas when he left there.

Not exactly a line-up that would get an executive search professional excited... Surely there were other "better" options available at the time???
 
strfyr51
Posts: 4989
Joined: Tue Apr 10, 2012 5:04 pm

Re: Virgin Australia to enter voluntary administration

Sat May 02, 2020 5:30 am

PANAMsterdam wrote:
ben175 wrote:
PANAMsterdam wrote:
I'm stunned by the unwillingness of the Australian government to help Virgin, reminds me of Ansett's demise. I admit that both companies weren't doing great before their respective major crises (9/11 and Covid19) but leaving the entire Australian aviation market in the hands of Qantas is not a very great competitive way of doing business.


The main argument at play here is "why should the Australian government bail out Virgin if it's 90% foreign-owned".

I'm really hoping someone buys them out and restructures the airline into a smaller, domestic-only "Jetblue" hybrid style carrier.
A 737-only fleet, with a subfleet of 6-8 fitted with Business for the transcons to PER.


Named: Virgin Ansett Australian Airlines :bigthumbsup:
or sold.
Yeah, it's true that Virgin is 90% owned by foreign companies, but over 10.000 people would lose their jobs and I assume most of those 10.000 folks are Australians. This is a cry for help due to an unprecedented crisis. Corona is not something you can blame Virgin for of course :)

Edit: also, local governments of Australia were willing to help (see article), but only A$200m not the A$1.4b Virgin asked for from the federal government.

the REAL question? Why don't those who OWN Virgin Australia bail them out? Obviously they are not going to put themselves out?
so it' stands to reason VA might be broken up or sold. Globalism at it's best!
 
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SCFlyer
Posts: 598
Joined: Tue Oct 23, 2018 11:14 pm

Re: Virgin Australia to enter voluntary administration

Sat May 02, 2020 5:36 am

strfyr51 wrote:
PANAMsterdam wrote:
ben175 wrote:

The main argument at play here is "why should the Australian government bail out Virgin if it's 90% foreign-owned".

I'm really hoping someone buys them out and restructures the airline into a smaller, domestic-only "Jetblue" hybrid style carrier.
A 737-only fleet, with a subfleet of 6-8 fitted with Business for the transcons to PER.


Named: Virgin Ansett Australian Airlines :bigthumbsup:
or sold.
Yeah, it's true that Virgin is 90% owned by foreign companies, but over 10.000 people would lose their jobs and I assume most of those 10.000 folks are Australians. This is a cry for help due to an unprecedented crisis. Corona is not something you can blame Virgin for of course :)

Edit: also, local governments of Australia were willing to help (see article), but only A$200m not the A$1.4b Virgin asked for from the federal government.

the REAL question? Why don't those who OWN Virgin Australia bail them out? Obviously they are not going to put themselves out?
so it' stands to reason VA might be broken up or sold. Globalism at it's best!


The VA 'owners' chose not to 'bail VA out' (Instead the VA's owners' governments chose to bail themselves out), so the administrators had 'stood them down' from the ownership roles at Virgin Australia once the administrators were called in. They're now just "shareholders" by name only.

Those 'owners' are bound to lose money and basically have to write their investments off regardless if VAH gets a seller or ends up being liquidated by the administrators.
 
81819
Posts: 2008
Joined: Fri May 23, 2008 9:13 pm

Re: Virgin Australia to enter voluntary administration

Fri May 08, 2020 9:53 am

Interesting comments from SIA.

“We have been equity accounting for our share of losses in Virgin Australia. As at 31 December 2019, our carrying value was zero and we have no exposure to further losses incurred by the company.

“We have no outstanding loans to the airline.”


https://www.flightglobal.com/airlines/n ... 87.article

In other words as of 31 December, SIA had written off their entire investment in Virgin Australia. This is nearly three and a half months after VA brought the remaining share in Velocity for $700 million and three and a half months before the airline went into administration.

To put this into perspective, as at 31 March 2019 SIA valued its 20% share as S$315 million, which at the time was fairly close to AUD$304 million. This would have valued the airline at AUD$1.52 billion at this date.

With Virgin Australia reporting an operating loss AUD$315 million for the 2019 financial year and AUD$97 million for the 2020 half year, we have total losses close to AUD$412 million for the 9 months between 31 March 2019 and 31 December 2020 (the end of year results included substantial write downs on assets).

If we subtract $412 million from 1.52 billion, in theory there is a spread of AUD$1,108 billion between SIA's valuation of the airline and the actual losses the airline reported.

This could raise some questions about what was known about the financial affairs of Virgin Australia at the 31 December 2019 and what was actually reported.

This news article questions the AUD$ 2 billion valuation placed on the 5% share purchase of Velocity.

"Did Velocity really double in value over 5 years and is it worth AUD $2bn?"

https://www.traveldatadaily.com/virgin- ... -for-700m/
 
Flying-Tiger
Posts: 4049
Joined: Mon Aug 23, 1999 5:35 am

Re: Virgin Australia to enter voluntary administration

Fri May 08, 2020 10:05 am

travelhound wrote:
If we subtract $412 million from 1.52 billion, in theory there is a spread of AUD$1,108 billion between SIA's valuation of the airline and the actual losses the airline reported.

This could raise some questions about what was known about the financial affairs of Virgin Australia at the 31 December 2019 and what was actually reported.


Not only that. It raises the question why there are prices for VA considered to be in the range of 3 to 4 bn AUD, as discussed in the last posts in the April Australian Aviation Thread if one oe the major share holders de facto said that no substance is left.

Even if the 1.1 bn valuation is the sales price it can only be a mix of assuming (heavily) hair-cut liabilities and a thick layer of fresh working capital, leaving effectively zero to existng share holders and many creditors. You will need someone with deep pockets being willing to move into a high-risk and less-than-stellar-performing business with a more than dizzy [market] outlook, and the business still being fully loaded with debt.

One has to ask if it wouldn´t be more opportune for any investor - if there are really any - to start from scratch. Any business without such a debt load will be a far better performer that one highly-lverage. And in terms of brand acceptance: in this airline market price counts... There´s little to hinder an Indigo to move into the Australian market in say two years, setup an own airline and target QF and VA, still licking their [financial debt] wounds and undercut both on price. People won´t care about brand value if you´ve a lower priced competitor around.

In other words: I´m not sure if there´s really a way forward for VA except for bits and pieces (e.g. the FiFo market).
Flown: A319/320/321,A332/3,A343/346, A359, A380,AT4,AT7,B712, B732/3/4/5/7/8/9,B742/4,B752/3, B762/763,B772/77W,CR2/7/9/K,ER3/4,E70/75/90/95, F50/70/100,M11,L15,SF3,S20, AR8/1, 142/143,... 330.860 miles and counting.
 
81819
Posts: 2008
Joined: Fri May 23, 2008 9:13 pm

Re: Virgin Australia to enter voluntary administration

Fri May 08, 2020 11:12 am

Flying-Tiger wrote:
travelhound wrote:
If we subtract $412 million from 1.52 billion, in theory there is a spread of AUD$1,108 billion between SIA's valuation of the airline and the actual losses the airline reported.

This could raise some questions about what was known about the financial affairs of Virgin Australia at the 31 December 2019 and what was actually reported.


Not only that. It raises the question why there are prices for VA considered to be in the range of 3 to 4 bn AUD, as discussed in the last posts in the April Australian Aviation Thread if one oe the major share holders de facto said that no substance is left.

Even if the 1.1 bn valuation is the sales price it can only be a mix of assuming (heavily) hair-cut liabilities and a thick layer of fresh working capital, leaving effectively zero to existng share holders and many creditors. You will need someone with deep pockets being willing to move into a high-risk and less-than-stellar-performing business with a more than dizzy [market] outlook, and the business still being fully loaded with debt.

One has to ask if it wouldn´t be more opportune for any investor - if there are really any - to start from scratch. Any business without such a debt load will be a far better performer that one highly-lverage. And in terms of brand acceptance: in this airline market price counts... There´s little to hinder an Indigo to move into the Australian market in say two years, setup an own airline and target QF and VA, still licking their [financial debt] wounds and undercut both on price. People won´t care about brand value if you´ve a lower priced competitor around.

In other words: I´m not sure if there´s really a way forward for VA except for bits and pieces (e.g. the FiFo market).


From where I sit, the airline as a sound going concern and multiples around seven ($400m profit PA) should have a market capitalization somewhere close to $3.5 billion. My previous numbers suggest a purchase price just above $2 billion, new capital of $1 billion, and a little bit more (good will) for the asset as a going concern. The airline would retain close to $2 billion of existing debt meaning approximately. $2.5-3 billion of the $7 billion owing to creditors would be lost through the re-organisation process.

One Virgin Australia asset with considerable value is its tax losses. I'd suggest many of the Australian parties interested in the airline could be looking at these tax losses as a means to offset profits from other companies.

I think there is close to $2.7 billion in tax losses. At a tax rate of 30 cents in the dollar, this asset would have close to $800 million in value. If we give it a commercial value of 70%, the liquidated value of the tax losses could be close to $560 million.

I'd suggest a person like Ziggy Forrest is interested in the airline as it would allow him to offset incomes from other businesses. Once the tax losses are exhausted, he would probably want to on sell a shareholding to another (airline) entity with experience in actually operating airlines.

The value in VA is not straight forward.
 
moa999
Posts: 947
Joined: Tue Mar 13, 2018 6:37 am

Re: Virgin Australia to enter voluntary administration

Fri May 08, 2020 12:28 pm

Change of control also puts tax losses at risk (many of which I suspect are buried in the separate shareholder international division).

Particularly if you can't pass the similar business test (eg. If you reorient to a LCC).

Not simple at all
 
81819
Posts: 2008
Joined: Fri May 23, 2008 9:13 pm

Re: Virgin Australia to enter voluntary administration

Fri May 08, 2020 1:36 pm

I wasn’t aware of the similar business test, a relatively new tax rule. I’d suggest the intent of the new rule is to minimise the ability of companies to Price Transfer from one company to another.

The rule could explain why Virgin Australia decided to write off future tax credits from its 2019 accounts.

I’ll have to ask some questions!
 
moa999
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Re: Virgin Australia to enter voluntary administration

Fri May 08, 2020 2:49 pm

Believe the rule is primarily to stop you selling a tax loss shell company, hence the similarity test.
 
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qf2220
Posts: 1972
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 1:06 am

moa999 wrote:
Change of control also puts tax losses at risk (many of which I suspect are buried in the separate shareholder international division).

Particularly if you can't pass the similar business test (eg. If you reorient to a LCC).

Not simple at all


The difference between full cost and LCC is not enough to fail the similar business test.

And in any case, im sure the ATO is going to be reasonably pragmatic when assessing these sort of tests.
 
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qf2220
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 1:11 am

travelhound wrote:
I wasn’t aware of the similar business test, a relatively new tax rule. I’d suggest the intent of the new rule is to minimise the ability of companies to Price Transfer from one company to another.

The rule could explain why Virgin Australia decided to write off future tax credits from its 2019 accounts.

I’ll have to ask some questions!


The rule has been around for years and isnt new.

And it has nothing to do with the future tax credit write-off. This is most likely a conservative accounting position and is based purely on whether those future tax credits will be realised through generating profit in the near term. This they expected not to so have written them off as unrecoverable. Note that they are still an asset and can be written back at a later period should the profits be generated in the future.

So assuming that they are able to meet the ATO tests, these most likely will have value for a profitable airline in the future.
 
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qf2220
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 1:15 am

moa999 wrote:
Believe the rule is primarily to stop you selling a tax loss shell company, hence the similarity test.


Its also designed to stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry'
 
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SCFlyer
Posts: 598
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 1:36 am

Friday deadline for Virgin Australia's billion-dollar buyers

"Virgin's suitors will have been running the numbers across a range of scenarios, ranging from a return to the airline's low-cost Virgin Blue roots, a hybrid mid-market position between Qantas and Jetstar, and a smaller but still full-service 'boutique' model."

Leading contenders include BGH and Temasek (Note: Temasek IS NOT SQ/SIA, but their parent company), Macquarie Group, Wesfarmers, Indigo Partners LCC comglomerate based in Arizona, USA, Twiggy from WA and Bain Capital led by ex-JQ ceo Hrdlicka.

IMO, at least there are many Australian based investment firms in there, though personally not keen on the rumoured Oakland/Etihad Aviation Group joint bid or the Twiggy bid. Temasek (instead of SQ) would be more interesting, even if it forces SQ and VA 2.0 to get along as Sister Companies under the Temasek/BGH umbrella.

https://www.executivetraveller.com/news ... lar-buyers
 
Pentaprism
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 5:55 am

I agree with Flying Tiger that the Business doesn't really have any value. Once all the Interested Parties have done their due diligence I expect the number interested to either drop to zero - or maybe there will some conditional bids that amount to little more than asset stripping, along the lines of we'll take over the Airline as long as the debt is written off.

But then I am reminded of Geoff Dixon's remark that "there is always somebody wanting to start an Airline" and he knows a bit more on the subject than me. So just maybe somebody actually will buy it. Good luck to them if they do, Australia could certainly do with the competition.
 
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Phosphorus
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 7:34 am

qf2220 wrote:
moa999 wrote:
Believe the rule is primarily to stop you selling a tax loss shell company, hence the similarity test.


Its also designed to stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry'


Dog industry today could be a goldmine tomorrow. And vice versa. Isn't that the whole raison d'etre for conglomerate model -- some parts could be dogs for now, while others carry them through. And the other way around.
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eta unknown
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 11:46 am

Channel Nine News interviewed an aviation consultant, Neil Hansford, who is calling the Deloitte Administrators out on their press release promises, the most audacious being the claim no mass redundancies will happen after VA is restructured. However, now Deloitte is walking back on their words by adding there will be no mass redundancies while they are in charge. IMO Hansford is completely right and also questions why Deloitte is sending out so many press releases.
https://www.9news.com.au/national/virgi ... 4b8cf79db3
 
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trinidadeG
Posts: 224
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 2:05 pm

Indian airline giant flies into Virgin with low cost plan
India's biggest passenger airline is putting together a proposal for Virgin Australia that would take the company back to the future.
Street Talk understands IndiGo - a low cost airline with 48 per cent market share in India - is in the Virgin Australia data room and seeking to put together an indicative proposal for administrator Deloitte.
Sources said IndiGo's interest was in taking Virgin back to its roots as a low cost carrier, and look to return it to profitability by running a lean and mean operation.

https://www.afr.com/street-talk/indian- ... 511-p54rns
 
Westerwaelder
Posts: 241
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 2:26 pm

trinidadeG wrote:
Indian airline giant flies into Virgin with low cost plan
India's biggest passenger airline is putting together a proposal for Virgin Australia that would take the company back to the future.
Street Talk understands IndiGo - a low cost airline with 48 per cent market share in India - is in the Virgin Australia data room and seeking to put together an indicative proposal for administrator Deloitte.
Sources said IndiGo's interest was in taking Virgin back to its roots as a low cost carrier, and look to return it to profitability by running a lean and mean operation.

https://www.afr.com/street-talk/indian- ... 511-p54rns


Are they confusing Indigo the Indian low cost carrier with Indigo Partners, the (part) owners of Frontier and Wizzair?
 
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trinidadeG
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 2:31 pm

Westerwaelder wrote:
trinidadeG wrote:
Indian airline giant flies into Virgin with low cost plan
India's biggest passenger airline is putting together a proposal for Virgin Australia that would take the company back to the future.
Street Talk understands IndiGo - a low cost airline with 48 per cent market share in India - is in the Virgin Australia data room and seeking to put together an indicative proposal for administrator Deloitte.
Sources said IndiGo's interest was in taking Virgin back to its roots as a low cost carrier, and look to return it to profitability by running a lean and mean operation.

https://www.afr.com/street-talk/indian- ... 511-p54rns


Are they confusing Indigo the Indian low cost carrier with Indigo Partners, the (part) owners of Frontier and Wizzair?


Ah, no. The article clarifies that in the next paragraph (sorry about that. I didn't want to paste the whole article here)
IndiGo - not to be confused with Arizona-based aviation investor Indigo Partners - is owned by Indian-listed InterGlobe Aviation, which has about a $7.5 billion market capitalisation and whose revenue and earnings was soaring before the COVID-19 outbreak
 
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trinidadeG
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Re: Virgin Australia to enter voluntary administration

Mon May 11, 2020 4:23 pm

Indian media is now reporting that "IndiGo the airline" isn't interested in VA, but InterGlobe Enterprises (which owns 37% of InterGlobe Aviation) is.

Can safely say that VA won't be re-branded as Indigo Australia. :D

InterGlobe Enterprises, the joint owner of India's largest airline IndiGo, has evinced interest in Virgin Australia. IndiGo is not involved in the deal and an InterGlobe team is overseeing the bid process. The Rahul Bhatia-owned enterprise has appointed an Australian consultant for the process. “The entity has accessed data room and may take the process forward. However, no formal interest has been submitted,” said a person about InterGlobe Enterprises’ plans.

https://www.business-standard.com/artic ... 137_1.html
 
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qf2220
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Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 12:35 am

Phosphorus wrote:
qf2220 wrote:
moa999 wrote:
Believe the rule is primarily to stop you selling a tax loss shell company, hence the similarity test.


Its also designed to stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry'


Dog industry today could be a goldmine tomorrow. And vice versa. Isn't that the whole raison d'etre for conglomerate model -- some parts could be dogs for now, while others carry them through. And the other way around.


Not sure what your point is? Im taking about transferring tax losses, not corporate diversification strategies?
 
flyinghippo
Posts: 768
Joined: Thu Aug 11, 2005 12:48 am

Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 3:19 pm

There might be a buyer coming from China interested in VA. The buyer is a full service, international player. Wondering if they would position VA as a domestic feeder...?
 
xiaotung
Posts: 1075
Joined: Fri Jan 06, 2006 7:58 pm

Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 4:22 pm

flyinghippo wrote:
There might be a buyer coming from China interested in VA. The buyer is a full service, international player. Wondering if they would position VA as a domestic feeder...?


This is nothing new. There were reports even before VA going into administration that one or more of the big three were circling VA. Can't see it happening as VA serves no strategic purpose to their network. Chinese airlines don't care about feeders. Their entire business models are largely based on point to point routes catered to Chinese tourists.

Also with the trading war that's going on at the moment they can probably forget it.
 
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Phosphorus
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Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 6:27 pm

qf2220 wrote:
Phosphorus wrote:
qf2220 wrote:

Its also designed to stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry'


Dog industry today could be a goldmine tomorrow. And vice versa. Isn't that the whole raison d'etre for conglomerate model -- some parts could be dogs for now, while others carry them through. And the other way around.


Not sure what your point is? Im taking about transferring tax losses, not corporate diversification strategies?


Well, that is the point -- governments overreach, by installing rules that are presumed to "stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry' ". One of the outcomes is they effectively kill one of the pillars of a prudent corporate diversification strategy.
As long as full profit tax from a group is paid, gov's should be happy. If there is a chronically money-losing sector, politicos and taxmen should have a right to look for foul play (who knows? if it is a critical part of the national infrastructure -- then maybe regulate it, so it makes money, and does not erode?). If there's no foul play, they should be on their merry way, and mind their own business, no?
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flyinghippo
Posts: 768
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Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 6:47 pm

xiaotung wrote:
flyinghippo wrote:
There might be a buyer coming from China interested in VA. The buyer is a full service, international player. Wondering if they would position VA as a domestic feeder...?


This is nothing new. There were reports even before VA going into administration that one or more of the big three were circling VA. Can't see it happening as VA serves no strategic purpose to their network. Chinese airlines don't care about feeders. Their entire business models are largely based on point to point routes catered to Chinese tourists.

Also with the trading war that's going on at the moment they can probably forget it.


I wouldn't be so quick writing this one off... Sources indicate the buyer is already lining up financial institutions for this purchase. Maybe the buyer is just lining up all the right players in case the respective government allows this (or they could simply buy the VA stakes from SQ or EY), or from Sir Branson who owns 10%. The buyer can buy Sir Branson's share, which might not need Australia's approval, and Sir Branson can invest that into VS.
 
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eta unknown
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Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 7:23 pm

I'm willing to take a gamble and write this off:
a) As mentioned above, Chinese carriers don't need Australian feeders. Their business model is mainly flying Chinese tourists to Australia.
b) Isn't the Chinese govt. still anti foreign investment, especially after the HNA fiasco.
 
Sydscott
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Re: Virgin Australia to enter voluntary administration

Tue May 12, 2020 10:37 pm

Phosphorus wrote:
qf2220 wrote:
Phosphorus wrote:

Dog industry today could be a goldmine tomorrow. And vice versa. Isn't that the whole raison d'etre for conglomerate model -- some parts could be dogs for now, while others carry them through. And the other way around.


Not sure what your point is? Im taking about transferring tax losses, not corporate diversification strategies?


Well, that is the point -- governments overreach, by installing rules that are presumed to "stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry' ". One of the outcomes is they effectively kill one of the pillars of a prudent corporate diversification strategy.
As long as full profit tax from a group is paid, gov's should be happy. If there is a chronically money-losing sector, politicos and taxmen should have a right to look for foul play (who knows? if it is a critical part of the national infrastructure -- then maybe regulate it, so it makes money, and does not erode?). If there's no foul play, they should be on their merry way, and mind their own business, no?


Tax losses are an extremely complicated thing in Australia after the mischief that happened in the late 80's and late 90's. The Keating and Howard Government substantially changed the way entities can utilise their tax losses and have implemented tests, the key ones being same ownership and control tests, to ensure tax losses aren't "sold". So there is a fair chance that if Virgin is sold to a new owner that:

1) The Tax losses won't be able to be utilised; or
2) The value of the tax losses will be significantly diminished.

It largely depends on who the new owner is.

flyinghippo wrote:
xiaotung wrote:flyinghippo wrote:There might be a buyer coming from China interested in VA. The buyer is a full service, international player. Wondering if they would position VA as a domestic feeder...?This is nothing new. There were reports even before VA going into administration that one or more of the big three were circling VA. Can't see it happening as VA serves no strategic purpose to their network. Chinese airlines don't care about feeders. Their entire business models are largely based on point to point routes catered to Chinese tourists. Also with the trading war that's going on at the moment they can probably forget it.I wouldn't be so quick writing this one off... Sources indicate the buyer is already lining up financial institutions for this purchase. Maybe the buyer is just lining up all the right players in case the respective government allows this (or they could simply buy the VA stakes from SQ or EY), or from Sir Branson who owns 10%. The buyer can buy Sir Branson's share, which might not need Australia's approval, and Sir Branson can invest that into VS.


Considering what is happening at the moment with China and the trade restrictions / pressure campaign about the Covid enquiry, I'd not be surprised to see FIRB say no to a Chinese buyer if they got that far in the process or, if they said yes, to impose conditions on them similar to the Port of Darwin where if deemed in the National Security interest Australia can direct the new owner to sell the airline to an approved buyer. Either way, if I was advising them, I'd probably say that the risks are too high to do a transaction.
 
tullamarine
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Re: Virgin Australia to enter voluntary administration

Wed May 13, 2020 1:26 am

Tax losses are an extremely complicated thing in Australia after the mischief that happened in the late 80's and late 90's. The Keating and Howard Government substantially changed the way entities can utilise their tax losses and have implemented tests, the key ones being same ownership and control tests, to ensure tax losses aren't "sold". So there is a fair chance that if Virgin is sold to a new owner that:

1) The Tax losses won't be able to be utilised; or
2) The value of the tax losses will be significantly diminished.

It largely depends on who the new owner is.

It is complex and possible that the losses will be extinguished but if the actual company is resuscitated and continues to undertake the same type of business it did when the losses were incurred (ie airline) it is possible. Most of the consortia have engaged Big 4 accounting firms as advisors and that will undoubtedly be one of the things they will be considering when devising corporate structures.
Considering what is happening at the moment with China and the trade restrictions / pressure campaign about the Covid enquiry, I'd not be surprised to see FIRB say no to a Chinese buyer if they got that far in the process or, if they said yes, to impose conditions on them similar to the Port of Darwin where if deemed in the National Security interest Australia can direct the new owner to sell the airline to an approved buyer. Either way, if I was advising them, I'd probably say that the risks are too high to do a transaction.

The administrator has warned what happens from here on will be potentially political as well as financial. This is an example. Ideally the government would probably prefer the winning consortium to be Australian controlled at least for the reason Scott mentions. The issue will arise if the offer from the Chinese consortia is greater in value than the Aistralian offers. At this point, the administrator is technically bound to accept the Chinese offer as it generates the most value to the VA creditors. Were he to select a lower offer, it is possible the creditors, principally the US based debtholders, will issue proceedings and seek an injunction preventing the lower value bid proceeding.
717, 721/2, 732/3/4/5/7/8/9, 742/3/4, 752/3, 762/3, 772/E/W, 788/9, 300,310, 319,320/1, 332/3, 359, 388, DC9, DC10, F28, F100, 142,143, E75/90, CR2, D82/3/4, SF3, ATR
 
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qf2220
Posts: 1972
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Re: Virgin Australia to enter voluntary administration

Wed May 13, 2020 1:49 am

Phosphorus wrote:
qf2220 wrote:
Phosphorus wrote:

Dog industry today could be a goldmine tomorrow. And vice versa. Isn't that the whole raison d'etre for conglomerate model -- some parts could be dogs for now, while others carry them through. And the other way around.


Not sure what your point is? Im taking about transferring tax losses, not corporate diversification strategies?


Well, that is the point -- governments overreach, by installing rules that are presumed to "stop you taking losses from an enterprise in a 'dog' of an industry and subsidise one in a gold mine 'industry' ". One of the outcomes is they effectively kill one of the pillars of a prudent corporate diversification strategy.
As long as full profit tax from a group is paid, gov's should be happy. If there is a chronically money-losing sector, politicos and taxmen should have a right to look for foul play (who knows? if it is a critical part of the national infrastructure -- then maybe regulate it, so it makes money, and does not erode?). If there's no foul play, they should be on their merry way, and mind their own business, no?


Yeah but you dont want to create value in zombie companies just based on tax deductions that people buy to offset profits elsewhere. That creates incredibly perverse incentives for loss making companies.... Now if you generate the losses in your own company across different enterprises thats a different thing.
 
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qf789
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Re: Virgin Australia to enter voluntary administration

Mon May 18, 2020 1:37 am

Virgin's administrators have confirmed the short list of 4 potential buyers

BGH Capital
Bain Capital
Cyrus Capital Partners
Indigo Partners

https://www.reuters.com/article/us-heal ... SKBN22U023
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tayser
Posts: 432
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Re: Virgin Australia to enter voluntary administration

Fri May 22, 2020 4:14 am

interesting data, more broadly about Melbourne & Virgin in this AFR piece on MEL's pitch for Virgin.

https://www.afr.com/companies/transport ... 520-p54upq

In the 12 months to February, RDC’s route profitability platform (Apex) estimated that Virgin made revenue of more than $1.6 billion and a profit of about $187 million across all domestic services from Melbourne.

That was well ahead of any other capital city, with Virgin's home base of Brisbane, Cairns and the Gold Coast running last in the model, making only a small profit or an estimated loss, according to the aviation data analysts.

"Six of the 10 busiest Australian routes originate from Melbourne, so if a leaner, fitter, stronger Virgin wants to rebuild, Melbourne has to be at the heart of the plan," Mr Strambi told The Australian Financial Review.

"Virgin’s Brisbane base has led to the airline being over-reliant on the leisure and resources sectors," he said. "Queensland is a fantastic tourism market. But it fails to provide the depth or diversity of traffic, particularly business traffic, to support an airline’s financial sustainability.”
 
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qf2220
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Re: Virgin Australia to enter voluntary administration

Fri May 22, 2020 5:30 am

I think it is erroneous to link revenue generation and head office location in this context.
 
81819
Posts: 2008
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Re: Virgin Australia to enter voluntary administration

Fri May 22, 2020 5:53 am

I think what it does illustrate is that (1) Virgin fundamentally service different markets and (2) the base product and cost base for these markets are fundamentally different.

This is why there is an argument for a Queensland based third airline. There is a mismatch between the Virgin and QANTAS product offerings and base needs of the market.
 
Pentaprism
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Re: Virgin Australia to enter voluntary administration

Fri May 22, 2020 12:33 pm

qf2220 wrote:
I think it is erroneous to link revenue generation and head office location in this context.
p

Absolutely it is. While there is some value in having HQ close to the most important Port(s) that value is small and quickly diminishing in this age of a large and increasing % of people working from home & almost everything done over the Internet or phone.

To justify moving HQ, which would obviously be expensive. you would need a lot better reason than the other Town having more key routes. Not to mention you would lose hundreds of experienced and skilled workers who would not be prepared to move.

Frankly I would find an argument to move HQ to the Phillipines or somewhere where there is plenty of well educated employees available at cheap hourly rates, lower Office Rent costs etc more compelling than moving to MEL!
 
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eta unknown
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Re: Virgin Australia to enter voluntary administration

Fri May 22, 2020 1:46 pm

Moving HQ to favour one city with more revenue potential is just a stupid statement- I'm surprised Strambi thinks people will fall for that. I mean, if you're going to go down that road you might as well start looking at Bermuda or the Caymans for taxation reasons...
Fun fact: MSC Cruises, the 4th largest cruise ship operator globally, has their HQ in Geneva. Now how many cruise ships depart from Switzerland?
 
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qf789
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Re: Virgin Australia to enter voluntary administration

Fri May 22, 2020 2:53 pm

Virgin has received recognition for Chapter 15 from the US Bankruptcy Court protecting US assets from creditors

https://www.flightglobal.com/airlines/v ... 91.article
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qf789
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Re: Virgin Australia to enter voluntary administration

Sun May 24, 2020 6:17 am

Bain Capital has confirmed they are preparing a second round proposal to become owners of Virgin. In a statement issued Sunday they say they want to bring back on Virgin Blue vibe back to Virgin Australia. The team of advisors and specialists for Bain Capital includes Jayne Hrdlicka, former CEO of Jetstar and was also tipped to be a candidate for CEO for Qantas. If Bain Capital is successful, Jayne Hrdlicka could potentially become CEO of Virgin.

Bain Capital marking director in Sydney Mike Murphy also said that a Virgin owned by Bain Capital

will be an airline for all Australians, with Australian management and staff, funded by significant Australian money, and Bain Capital, which has been investing in Australia for more than 20 years.


https://www.executivetraveller.com/news ... ralia-bain

https://www.reuters.com/article/us-heal ... SKBN23004W
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eta unknown
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Re: Virgin Australia to enter voluntary administration

Mon May 25, 2020 7:47 am

There's a rumour going round that Bain has no intention of running VA the way the administrators want- to the extent they even cut short the administrator's presentation. There's also talk that if a sale is achieved (to anybody) Scurrah now has little chance of being in the picture.
 
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qf2220
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Re: Virgin Australia to enter voluntary administration

Mon May 25, 2020 7:52 am

eta unknown wrote:
There's a rumour going round that Bain has no intention of running VA the way the administrators want- to the extent they even cut short the administrator's presentation. There's also talk that if a sale is achieved (to anybody) Scurrah now has little chance of being in the picture.


It amuses me that administrators think they know how to run businesses. If they did, they wouldnt be administrators. They'd be running businesses....

Re Scurrah whats the issue there? Ive always been of the view that he was captain of a ship that had the holes already torpedoed in it and he was fixing it up?
 
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eta unknown
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Re: Virgin Australia to enter voluntary administration

Mon May 25, 2020 8:09 am

As per Scurrah it may be a case of he didn't do enough to fix the problems during his short tenure. IMO this is harsh as it was often reported the more he dug, the more dirt he found that wasn't anticipated.
 
bwwt
Posts: 137
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Re: Virgin Australia to enter voluntary administration

Mon May 25, 2020 10:44 pm

tayser wrote:
interesting data, more broadly about Melbourne & Virgin in this AFR piece on MEL's pitch for Virgin.

https://www.afr.com/companies/transport ... 520-p54upq

In the 12 months to February, RDC’s route profitability platform (Apex) estimated that Virgin made revenue of more than $1.6 billion and a profit of about $187 million across all domestic services from Melbourne.

That was well ahead of any other capital city, with Virgin's home base of Brisbane, Cairns and the Gold Coast running last in the model, making only a small profit or an estimated loss, according to the aviation data analysts.

"Six of the 10 busiest Australian routes originate from Melbourne, so if a leaner, fitter, stronger Virgin wants to rebuild, Melbourne has to be at the heart of the plan," Mr Strambi told The Australian Financial Review.

"Virgin’s Brisbane base has led to the airline being over-reliant on the leisure and resources sectors," he said. "Queensland is a fantastic tourism market. But it fails to provide the depth or diversity of traffic, particularly business traffic, to support an airline’s financial sustainability.”


Something's a bit off here. Revenue per passenger and load factor is roughly the same amongst the three airports which would mean customers are spending similar amounts across the cities. Why would costs be so much higher at BNE than SYD or MEL? Is BNE somehow taking some type of cost for flights these other ports are not?
 
81819
Posts: 2008
Joined: Fri May 23, 2008 9:13 pm

Re: Virgin Australia to enter voluntary administration

Tue May 26, 2020 12:06 am

I think with Brisbane airport being a gateway to regional Queensland and to a lessor extent Northern NSW (all tourist destinations) as a percentage of sales, airfares out of Brisbane have lower yields compared to Melbourne which predominantly services major cities.

The article could be suggesting the VA business model is not properly suited to all of the markets the airline serves.

For instance, if we use QANTASLINK as a benchmark, the type of service offered by this airline is substantially different to the service offered by the main line carrier.

So from this perspective, QANTAS have three very distinct airline entities (QANTAS, QANTASLINK and Jetstar) to serve their once 62% share of the Australian market. In contrast Virgin has a the dominant Virgin Australia brand and to a lessor extent Tigerair, which has been an airline in retreat for many years now to serve............. their once 31% share.

So ultimately, the question revolves around..... What is it to be Virgin?

...and this is why a move from Brisbane to Melbourne could make sense. Base the airline in its core market and than do what you need to do to try and pick up the rest of the previous market. The current set-up is like trying to live with your mistress, whilst leaving the wife and kids at home.

The question is, will this be practically achievable?

I have been a fan of a third Queensland based airline. This airline could focus its marketing resources on the core Queensland markets (tourism, regional centres and resources) rather than trying to be a world airline trying to appease its international airline shareholders. Yes, it would probably need to have a substantially lower cost base and as such would not offer the services of a FSC, but for the most part, the core markets would be more price centric than service centric.

I suspect an airline with ten to fifteen 737 size aircraft and 15-20 regional aircraft would have the critical mass to be a sustainable airline.
 
bwwt
Posts: 137
Joined: Fri Jul 12, 2013 11:37 am

Re: Virgin Australia to enter voluntary administration

Tue May 26, 2020 8:00 am

But that's the thing - those details show yield between the cities is similar. Ranging from $202 to $204 per passenger. Of course there are no details on passenger kms, however, as you said, given BNE has a higher % of regional travel, this would seem to increase its yield compares to MELs.

The major difference between bases is evidently cost. Why this major disparity between base operating costs?
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