Virgin Australia possible takeover?

[chiraagnt]

Hi everyone!

I'm sure all the AVGeeks would have seen the news about Air NZ being keen to offload its stake in Virgin Australia due to not wanting to sink anymore money into the airline!

Most news outlets are suggesting SIA to be in pole position and to have the most interest in taking over this stake and privatizing VA to become part of the group, with its long standing interest in the Australasia market! Any thoughts on the possibly mind blowing synergies such a takeover can lead to? Or will this be possibly Ansett 2.0, just with SIA in charge?

Thoughts?

Source: http://www.smh.com.au/business/aviat...08-go1xto.html

http://www.theaustralian.com.au/busi...08b585be9c5dc8
Source:

[FN-GM]

Whats happened to the contents of this post?

[chiraagnt]

Title

I have no idea what happened to the contents of my original post but here it goes


With Air NZ looking to offload it's 25+% stake in Virgin Australia, and SIA choosing this time (of all times) to up its stake to 22%, most mainstream media is reporting SIA to be the frontrunner in taking over this stake and possibly privatizing Virgin, especially with its ambitions regarding the Southwest Pacific. (i.e. Australia and NZ)

SIA certainly has the most resources, and the most to lose if it loses the airline to a competitor with Australia and NZ making up a significant portion of its network and ASKs, so with a possible take over on the cards, one can imagine the game changing dynamics a possible take over may have! Or will it turn out to be a disaster, like Ansett 2.0, just with SIA in charge instead.

Thoughts?

Source: http://www.theaustralian.com.au/busi...08b585be9c5dc8

[Durian]

I read a Bloomberg article on this this morning, but for some reason can't find it anymore...
Anyway, beyond the strategic questions raised by other posters here, the big problem is that Virgin Australia is NOT a good investment, financially speaking, as it is loss making since a couple of years... (I have not had time to go through their annual report in details, but a very quick look at the 2015 financial statements seems to point in that direction).
So, it could be that SQ raising their stake would only be a defensive move to prevent the airline from falling into "hostile" hands...

[vasqflyer]

I read a Bloomberg article on this this morning, but for some reason can't find it anymore...
Anyway, beyond the strategic questions raised by other posters here, the big problem is that Virgin Australia is NOT a good investment, financially speaking, as it is loss making since a couple of years... (I have not had time to go through their annual report in details, but a very quick look at the 2015 financial statements seems to point in that direction).
So, it could be that SQ raising their stake would only be a defensive move to prevent the airline from falling into "hostile" hands...

Actually Virgin is now profitable (as at the half year results). The problem seems to be that it is not making as much money as Qantas. They are not exactly like for like since Qantas is so much larger (which also meant it made much larger losses than Virgin during the capacity war).

What everyone seems to forget is that Virgin is still working to build its business. It was not that long ago it was a low cost carrier that was much smaller than the Qantas group. In the period it has gone full service, acquired and started to turn tiger around to compete with Jetstar, acquired VARA to compete with Qantas link and is in the process of building its cargo business. Given all that and the capacity war where Qantas threw two extra flights for every one from Virgin to effectively destroy them and when it failed went running to Canberra for a bail out, it is not unreasonable that their profits are lower and that it will take a bit of time for the strategy to really take off (pun intended).

Oh and for SQ, the benefit would also be the rights to the transpacific routes.

[qantas_flyer]

I have no idea what happened to the contents of my original post but here it goes


With Air NZ looking to offload it's 25+% stake in Virgin Australia, and SIA choosing this time (of all times) to up its stake to 22%, most mainstream media is reporting SIA to be the frontrunner in taking over this stake and possibly privatizing Virgin, especially with its ambitions regarding the Southwest Pacific. (i.e. Australia and NZ)

SIA certainly has the most resources, and the most to lose if it loses the airline to a competitor with Australia and NZ making up a significant portion of its network and ASKs, so with a possible take over on the cards, one can imagine the game changing dynamics a possible take over may have! Or will it turn out to be a disaster, like Ansett 2.0, just with SIA in charge instead.

Thoughts?

Source: http://www.theaustralian.com.au/busi...08b585be9c5dc8

The reported issues in Australian papers in the last week quotes Air New Zealand's annoyance that it is dipping into its pockets to raise capital. However, it was either the Australian or Sydney Morning Herald reporting this morning, that Air New Zealand states there is no imminent pending sale of its Virgin share holding.

Furthermore, as a traveller (I must admit I only fly Qantas), in my conversations with fellow travellers, Virgin's variable offerings with meals and baggage bothers some travellers. I believe all Virgin's flights offer a snack and baggage. But this has only been a recent development to my understanding. For a long time, food and baggage was extra expense. I personally find Qantas is consistent in its offerings and has been for years. This historical consistency has in my view (for what it's worth) trumped Virgin in the minds of most travelling Australians.

[chiraagnt]

Old news since a few days but SQ opted to increase its stake in VA through equity swaps.. I guess the timing is interesting considering they only chose now to do so. Additionally, instead of a cash swap, they chose an equities one, giving them more of a say in the airline and showing they have no qualms of pumping money into the airline. Interesting times ahead for both airlines if this goes if 'rumours' from various publications and aviation analysts are to be believed.

Also interesting is that the other airline shareholder (Etihad) has openly stated it will not be taking over or increasing its stake while SIA chose to not comment. Thoughts?

Source: http://i.stuff.co.nz/business/world/...ustralia-stake

[leops1984]

Add to the rumor mill: CX wants in on the Air New Zealand stake.

http://www.thestandard.com.hk/sectio....php?id=169165

[SQ228]

Add to the rumor mill: CX wants in on the Air New Zealand stake.

http://www.thestandard.com.hk/sectio....php?id=169165

What fun it would be to watch SQ, CX and EY run an airline together!

[ADL_SQ]

Whilst I would be more than happy for SQ to takeover Virgin Australia, the Australian government won't be. The Foreign Investment Review Board (FIRB) would almost certainly not allow it on the advice of the minister.

[SMARTDODO]

Whilst I would be more than happy for SQ to takeover Virgin Australia, the Australian government won't be. The Foreign Investment Review Board (FIRB) would almost certainly not allow it on the advice of the minister.

I thought it was possible for a foreign entity to own 100% of a domestic airline?

[vasqflyer]

Whilst I would be more than happy for SQ to takeover Virgin Australia, the Australian government won't be. The Foreign Investment Review Board (FIRB) would almost certainly not allow it on the advice of the minister.

Actually it is the Treasurer who gets to make the decision based on advice from FIRB. I don't think it is a given that a takeover would be blocked. Australia and Singapore have just expanded the free trade agreement which allows private companies to invest up to 1bn without needing approval.

While SQ would need permission it is controlled by the SG Govt, blocking it would be highly awkward given the fact the the normal investment has just increased. Particularly as the Air NZ is govt controlled anyway and that was already approved. Not to mention the shares with Etihad being in the same position.

[vasqflyer]

I thought it was possible for a foreign entity to own 100% of a domestic airline?

It is. But Australia requires all govt controlled entities to get foreign investment approval before investing.

[259850]

Now Virgin Australia has another foreign shareholder - Hainan Air. It's going to be interesting to see how all the major shareholders get along.

http://www.smh.com.au/business/aviat...30-gp7peo.html

[Durian]

and that's not all...
http://m.4-traders.com/news/Air-Fran...HNA--22441371/

Servair has been on permanent sale for years, yet nobody has ever been interested, let's see how the Chinese will deal with the French unions (and Servair like their parent company Air France has lots of them)