V Australia

[Gerald A]

Ch 10 news reported that V Australia has lost 100mil on the Pacific route, will they pull out. ???

[Michael Morrison]

Operating loss is between 30-35 Million. The other costs would be their startup costs.

The DJ group will continue to fund VA from operating cash for the next year or 2, so NO they are not pulling out and remain committed to VA in the long term.

[Robert S]

Originally Posted by Gerald A

Ch 10 news reported that V Australia has lost 100mil on the Pacific route, will they pull out. ???

Unlikely.

You can read today's market releases at http://www.asx.com.au/asx/statistics...ame=D&period=W if you want the story rather than a soundbite. The Presentation and Update are the ones worth looking at.

V Australia's startup costs are listed as 60-65m this year (and 9m last year) and trading losses as 30-35m this year. They expect load factor to end up being around 75% in July and describe guest response as "exceptional" (so I guess I'm not the only one raving about their product). They expect to be able to continue fund V Australia's losses from group cash flow.

[Montague S]

in other words, the trading halt was about raising capital to keep VA flying?

[Bruce Bramwell]

No

[Nic P]

Originally Posted by Michael Morrison

Operating loss is between 30-35 Million. The other costs would be their startup costs.

The DJ group will continue to fund VA from operating cash for the next year or 2, so NO they are not pulling out and remain committed to VA in the long term.

Good point, however the operating loss is only for the Feb-June period. This could mean the annual figure is closer to 70million.

Whilst I understand loads are likely to improve the second half of the calendar year, there are equally more flights flying (ie. if they're losing money on flying then there's more capacity for losses the more flights they have.)

[D Chan]

The moment they went for it there was no return. Timing is a matter of luck and they were committed to launch. Well - the timing could not have been worse as things were going downhill (the global economy) in February, not helped especially with Delta's entry in the market.

The only thing they could hope for is for times (and the economy) to improve (quickly). LAX has become a bloodbath and if you look at 4 carriers you would have to say VA has by far the weakest position of the 4 carriers in SYD-LAX.

As I have always thought VA would be a substantial burden for DJ and will continue to bleed cash for a while. It has ruined an otherwise solid performance in by DJ domestically. With the benefit of hindsight if they were to launch in another 12 month's time when the economy rebounds it would have been a different story. I think it's a question of what could have been.

I believe things will eventually improve for them and suspect one of the players will bail out. And when that happens the remaining 3 carriers will have a little bit more breathing space.

[Robert S]

Originally Posted by Nic P

Good point, however the operating loss is only for the Feb-June period. This could mean the annual figure is closer to 70million.

Given they are in start-up phase and launched right in the low season, right when people were really getting nervous and just before swine flu hit and brought its own fear, I'm not convinced that this is a reasonable conclusion. Obviously they are expecting V Australia to continue to be a drag in the short term, as is stated in what they put out... but they've also said they expect to be able to continue supporting this with the overall group's cash flows.

Whilst I understand loads are likely to improve the second half of the calendar year, there are equally more flights flying.

The load factor is reported in percentages as it is.

[NickN]

I think the VA story is far from over. Conditions are at their absolute worst in history right now and as the saying goes.... "the only way is up".

Perhaps in 2 years if things are still awful they may withdraw but they made a rather large committment.

I was chatting to a guy at the mount the other day who put forward the idea that United would be the first to go before the other three.

[Arthur T]

I think business starting up with a relatively huge loss could be acceptable, particularly in such a competitive environment and high operating cost like what V Australia is in.

I think rather than open more US Routes to a higher loss, they should consider more Asia Routes, like take over VS200/201 to run SYD-HKG/MEL-HKG/BNE-HKG/SYD-HND/OOL-HND/SYD-SIN-LCY etc.