COVID-19 impacts on Australian airlines

Hope you didn’t buy in too much

 

Got multiples more in the banks. I like the idea that if Qantas becomes a monopoly, even temporarily, I have a stake in them

Btw, I know it's a very volatile industry, I worked in Travel 2003-2012. It's not groceries.

I would not be putting my money into Carnival though.

 

It won’t become a monopoly. Wait for the surprise tomorrow morning

 

@kierank
eeeeer…...no can do... I own Qantas shares...

 

Sure, but you cannot help them all. Just not possible.
Businesses at some point need to be responsible for themselves.
i.e. Don't run at a loss.
Accumulate cash and or debt facilities in the good times to see through the bad.

I accept that this is a unique situation but Qantas still managed to raise capital during the crisis because their business was run better financially.

As is being reported, I think you will find that Virgin will find a buyer once they go into administration. Their shareholders, debt holders and creditors will take a bath but hopefully the majority of staff will retain their jobs.

 

Totally agree.

I sold a very good and profitable business in 2010. Thirty months later in 2012, they went belly-up, 80 staff lost their jobs, in the end, creditors were owed $12M (I am still owed $42,500 which I will never see), the new owners lost everything, ...

Reason for demise (IMHO):- no/wrong strategic focus, too much debt and poor financial management.

These three are in the top five reasons why businesses fail. I wouldn’t be surprised if Virgin is suffering some/all of these.

That is why administration is far better than liquidation. With my old business, the Australian taxpayers had to cough up $1.6M in FEG costs.

 

Heard today a report that Virgin's domestic links are profitable - but the money loss is on international. There is simply too much international competition.

May mean the administrators ditch the international arm completely (perhaps sell off at a reduced rate to lower debt) and keep the domestic operating. They may even cut back to the most profitable routes - ie - Bris/Syd etc - and lose the small town jaunts

A leaner and more profitable end company

 

That would be good, because these are routes that Aussies rely on. Need to maintain competition on these routes.

 

Well l hope your right because thank God for that . Their prices are ridiculous enough with at least some competition l'd hate to see'em with none. We'd all have to buy wings.

 

Absolutely agree. Every business and person should have enough cashflow to see them through the bad times.
Virgins CEO said something relating to all businesses will change the way they run and factor events like the black swan event.

My question to you 2, and anyone else that would like to answer, is how much cashflow should a business hold to see them through the bad times, and will this time frame now change due to events like this black swan.
6 months?
12 months?
18 months?
Or more?

 

Could make things tough or even tougher for regional centres unless carriers such as Rex step in which they may not if the routes aren't profitable.

 

That is the worry

 

The Syd-bne-Mel triangle is the most profitable part of the business, it's bread and butter. International sectors like donkey Kong were losing money hard. It's also the A330 aircraft type which are expensive to run due to current contracts , I bet they go soon with the restructure, they were planning to ditch them anyhow. I was looking forward to flying to Japan but not sure if that will go ahead now.

By the time this administration is over virgin will wipe a lot of debt and restructure, be cashed up, maybe more Australian ownership with new investors, and I have a very good feeling government will support the airline. Well that's me hoping anyhow.

I want to know whats going to happen to Qantas by the end of the year, they have a lot more aircraft and holding expenses compared to virgin, gov said something about no international flying until next year most likely, that's what read/heard.
They are burning millions per day just sitting around, although they have cash now they will be weak by the time they start operating at full capacity, or perhaps need an injection of cash.

 

All businesses should already be doing that as part of their SWOT.

For senior management and board members not to being that is unbelievable.

Maybe at their strategic planning workshops they conduct on a regular basis, they were too busy on the golf course.

6 months cash to cover all operating expenses and at least another 6 months on-call financial instrument eg overdraft or whatever (like a line of credit that property investors are familiar with).

One doesn’t want to be seeking finance when/after the ***** has hit the fan. Probably won’t get it.

Seek finance when you don’t need it (as you will more likely get it) so that it is there if/when you do need it.

One of the first rules of business/investing.

 

Only if the onions are on top which could well be the case at 35,000 ft. And where are they going to place the signs showing which social group is fundraising on the flight?

 

I run a small business so I am not as qualified to answer as Kierank.
My business can survive multiple years with capital injections from it's majority shareholder, me

However for larger businesses, through a mix of cash and secured debt facilities I would want 12 months minimum. Black swan events are not new. Shut downs due to a pandemic is somewhat new, but not really, just different in a modern world.
But a stock market shock type event could mean some companies running a tight ship with negative profits for multiple years, rather than complete shutdown for several months.

Also the type and size of business has an impact. If you are a blue chip company you can always do a capital raising, so having too much capital tucked away for emergencies may not be a prudent use of capital.

There is no once size fits all, but if you have a successful business and can't last a year if a things go bad, then I would be concerned. Major economic events happen with an uncanny regularity. Black swan basically just means unforeseen, but for me, I know it's coming, I just don't know what form it will come in.

 

I gather Virgin are pretty determined to stay in one form or another

Virgin Australia enters voluntary administration

 

Yeah looks like they are thank God , although it should be a truly Australia airline not so much virgin with zero oz in it. l know , the employees , apart from.
With such loaded owners though why don't they all just throw in another bill each , no more debt . They won't miss it , then do whatever the things needed that have been running it down , well befor virus .
Hey l hear stuff about Ansett today wasn't that Australian ? What happened there l must be losin it can't remember .