VBA - Virgin Blue Holdings

Ann of big profit increase, still plans for V Australia, and new plans for NZ market.. But still no love for VBA?
I know the market isnt really running on fundamentals right now, but even the 2% boost it had the other day was knocked back agaian..

I reckon VBA looks ripe for takeoff (excuse the pun).

Strong profit, stable & well-managed company, I just got a buy signal on my software. I'm longing with stops at 1.78.

I've been waiting a while on VBA but it just hasnt been going anywhere.
Ann of increased profit barely made a sound. as so with other recent positives.
Been a slow down hill since I bought in.

What makes you think ready now?

It's making a few higher highs and I got a buy signal on the indicator I made (it's generally pretty accurate), I think it has more upside than downside.

Any thoughts?
I guess it depends on how they sell their stake, if its an individual buying it, bits and pieces, or selling the shares back to virgin??

From SMH: ARTICLE

"Toll Set to Sell Virgin Blue"

VIRGIN BLUE looks set for its fifth major change of ownership in five years, after its controlling shareholder, Toll Holdings, provided its strongest hint that it is preparing to offload its 62 per cent stake in the airline......

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I dont get it, there is always good news about VBA but it just never catches on. Named best low-cost carrier for 2008, and its the worlds 3rd most profitable airline. So why no love for vba?

http://www.etravelblackboardasia.com/article.asp?id=51111&nav=51

http://www.businessday.com.au/news/company/VBA

First time poster so be nice

V Australia is due to launch their long haul USA flights in the next 1-2 weeks, surely this has to help the share price ?

next 2 weeks? I thought it wasn't till much later in the year. They are still discussing the open-air agreement with the US no?

hoooollly crap. down 22% yesterday.
OUCH.

Guess there were people in there simply hoping for the TOLL sell to go through, now theyve canned that - they jumped. Tanking the share price.

Not even worth selling out now??
Scared to think what I bought in at.

Airlines are never a good investment - if you could make money owning an airline Packer, Buffett (or insert any seriously wealthy person's name) would own a couple of them. Even Branson doesn't own them for long - he just sets them up with minimal capital (I think he put 6mil into VB) pulls his money and profit out asap and then holds a small shareholding.

Even Qantas - one of the most successful airlines in the world - floated in 1995 for $1.90 and is worth $3.68 today. 13 years later and it still hasn't even doubled. Sure it has paid dividends but even still!!!!!!!

The last 5 years have been the best years in aviation for decades. We are about to see a fairly tough 5 years (at least) coming up now. Fuel is incredibly expensive, landing fees are going through the roof, access to airports is being reduced, noise restrictions are on the increase, there is a huge skilled pilot shortage worldwide (this hasn't happened since the 60s), carbon trading/penalties are soon to come into effect, etc - I could go on but you get the picture.

For most of this year we have seen at least one airline declare bankruptcy/go into chapter 11/disappear into oblivion every week - Aloha went belly up this week, Oasis last week. These may not be big names in OZ but overseas they are airlines not much smaller than VB and in some case larger.

Now VB are about to start crossing the pond to the US. This is in direct competition with Q, Air NZ and United. Any one who thinks this wont be a dirty fight is dreaming. Sure, it will be a great song and dance and you might be able to pick up some cheap airfares but at the end of the day - do you really think the big boys are going to let VB (believe it or not they are actually not a huge airline in the grand scheme of things) take alot of profit from them.

My advice - stay away from airlines - all of them. As the saying goes - the only way to make a small fortune in aviation is to start off with a large fortune!!

PS - I need to declare - I work in the industry (for Q) in the flying (pilot) side and I also own shares in Q - only because it is part of my bonus and they wont let me sell them for 5 years!

PPS - Before someone jumps on me - I am NOT saying VB will go belly up - just that is a bad investment in a bad industry during a bad time - in my opinion.

good points. not sure why I held on to them so long, id been thinking about selling them for a while. now its dropped so far though selling would realize a bad loss but maybe worth it and putting the cash into a better forming stock..

there goes another 6.5%

from bloomberg

June 2 (Bloomberg) -- Virgin Blue Holdings Ltd., Australia's second-biggest airline, fell to a record low in Sydney trading after UBS AG forecast the carrier will have a loss in fiscal 2009 as jet-fuel costs surge.

UBS estimates a loss of A$40 million ($38.2 million) for Virgin Blue in the year to June 30, 2009, compared with a previous target of a A$60 million profit, analysts Simon Mitchell and Ramoun Lazar said today in a report. Virgin Blue, based in Brisbane, slumped 6.5 percent.

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Is it even worth selling a stock when its tanked 80%

nobody else really seems to follow VBA (smart) but Im a bit confused today.
It went from previous close of .60 up to .67 then back to its open of .63. Im guessing it was a bounce off the bottom low,
But right at time of closing, they announced if they dont increase fairs, VBA will go bust. So im wondering if this will trigger sell off tomorrow, or interest as they will increase fairs and its at all time low.

Barnz2k,

As you previously guessed with my previous post - I'm not a fan of investing in aviation. I cant see VB going broke (although it is a real possibility - we seemed to see more going broke/cutting back/going into chap 11 all the time), but I can see major cut backs. The aircraft they operate while being efficient are not designed with a $120+ per barrel oil price in mind. We saw Q last week grounding aircraft and canceling orders as well as reducing flights on the older aircraft. They are preparing for the worst and are due to make a further announcement next week about reducing flying internationally. Some of the biggest airlines in the world have made reference to cutbacks and lowering profit estimates. I think it was BA who said last week that the expect the increase in oil to completely wipe out this years profit!

The delay in delivery of more efficient aircraft (A380 and B787) is only making this whole thing worse.

However - the world will never stop flying. It has got to a stage where aviation has become so much of our everyday life/business that we cannot do without it. We may reduce the flying but we will never completely stop. This will mean survival of the fittest. Companies like Q and Virgin Blue (if they announce cutbacks) will survive so long as they are smart and dont try to push on regardless. They will just become smaller and less profitable. Not what you want to hear as a shareholder.

The other point I'd like to make is that oil is only one (admittedly a major one) of some of the huge challenges facing aviation in the short to medium term (In my more pessimistic moments I would also include long term!). There are major union issues, landing fees, delayed deliveries, noise restrictions, greenhouse gas, legislation, maintenance and skill issues to be faced and this is only scratching the surface. If you really want to know about more issues sit down with anyone employed in the industry over a beer and let them tell you their sob story - and an individual will only recognize maybe 5% of the issues that we face!! Read some of Dixon's dire warnings and you'll get some idea. Not all of what he says is just to try and settle down the unions - he's actually pretty spot on with a lot of his assessments!

I go back to my original statements in my previous post - the only way to make a small fortune in aviation is start with a large fortune and if there was money in aviation, Packer (and every other wealthy tycoon) would own at least 2!!

malachii

PS see declaration of interest in previous post!!

Thanks for the reply Malachii

I basically agree with everything you say.

I just wonder now what kind of affect this news will have on the price tomorrow. It may go even further down, but sitting at 75% loss and at the bottom end of 52week closing, it seems almost pointless to sell.

malachii said:

Barnz2k,
However - the world will never stop flying. It has got to a stage where aviation has become so much of our everyday life/business that we cannot do without it. We may reduce the flying but we will never completely stop.

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At some point the oil will be gone completely. Then we'll have no choice but to stop flying unless someone has come up with a viable electric or hydrogen aircraft by that time - and even the hydrogen optimists admit aviation is a massive hurdle.

Shorter term, we're faced with outright consumption falls for oil at some point once production peaks (if it hasn't already). So we'll certainly see less flying and that means the industry is stuck with over capacity for at least the next couple of decades (unless they simply write off a lot of fairly new aircraft).

Personally, I'm keen to get any long distance trips done before real trouble hits. By "long distance" I mean (for someone living in Tas) anywhere further than Sydney or Melbourne.

malachii said:

the only way to make a small fortune in aviation is start with a large fortune !!

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I think richard branson was quoted as saying to become a millionaire, start by being a billionaire investing in airlines,... lol

barnz2k said:

Thanks for the reply Malachii

I basically agree with everything you say.

I just wonder now what kind of affect this news will have on the price tomorrow. It may go even further down, but sitting at 75% loss and at the bottom end of 52week closing, it seems almost pointless to sell.

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Don't beat yourself up to much,... just take all the lessons you can from the experiance,

I know the feeling of having one of your investments tank is absoultly awful, but you just have to march on.

Smurf1976 said:

So we'll certainly see less flying and that means the industry is stuck with over capacity for at least the next couple of decades (unless they simply write off a lot of fairly new aircraft).

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Most airlines these days do not own aircraft. I'm sure there are some but none that I can think of at the moment. In fact aircraft are not "owned" by any one company. Most often one company owns the hull, someone owns one engine, someone else owns the other engine, different lease companies own each wheel bogie etc. So it is not as big a deal as some may think for an airline to say "ground the lot" - we usually pay power by the hour meaning we only pay for the time we fly.

I'm also of the belief (unpopular as it may be) that oil will always be available at a certain price - I don't think aviation will stop - I just think it will shrink or maybe not be in the current "large scale" form.

malachii

malachii said:

I'm also of the belief (unpopular as it may be) that oil will always be available at a certain price - I don't think aviation will stop - I just think it will shrink or maybe not be in the current "large scale" form.

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I'd agree that oil will always be available at a certain price. But I'd expect it to be somewhat like gold is - always available but the price is so high it precludes large scale use for anything.

I do think we'll still have aviation too. But I doubt we'll see people flying from Sydney to Melbourne to watch a football game, at least not unless they're truly wealthy.

To my understanding, the airline industry has collectively (all airlines worldwide) not been profitable thus far. Some airlines are profitable, but as a whole it works only due to government bailouts. Now, if airlines don't work financially with cheap oil at $20 then they're going to be in serious trouble at $125 per barrel...