New Virgin Pay Rates

[Flyer1015]

VA is still a private company, not public. So they can choose to release whatever they want. For the 3rd quarter as has been posted here numerous times:

Operating revenues from guests (pax): 266,842 and from other: 23,794. Total revenue disclosed is 290,636.

Expenses, including everything like wages, aircraft, fuel, depreciation, other expenses, landing fees, etc: 274,410

Difference is operating income: 16,226. So a 16.2 million operating profit.

Note then the "other expense" then is another 19,528, 19.5 million, for a total reported loss of 3.2 million.

Interesting how there is already a "other operating expenses" under the expenses tab, equaling 15,646. Even with these other operating expenses accounted for in net expenses, they made a net profit of 16 million. Randomly, there is a "other (income) expense" item that shows up to be another 19 million, and therefore a net loss. So what expense is this? What other expense could this be that wasn't already reported in the expenses tab in the table above? It still seems like for a private company, they can basically show whatever they choose.

 

[xjt40]

Seriously. When did an airline CBA truly guarantee anything (at least post de-regulation)? There is no integrity in this profession anymore. On the other hand, to date I don't recall reading anything about VA taking away improvements that had been promised.

S

You sound like a shoe in at Jetblue and would be hired for sure but please dont apply on behalf of those 857 of us that want to make this a career . And let the management clowns and Ford and Harrison use those anti CBA lines. Seriously VA and JB are non union and lowest in overall compensation in the industry, do you think thats a COINCIDENCE? Not sure where we get all the guys with no career expectations that are flying A320s or bigger, at least you guys at VA dont stoop to the level of throwing on Blue or red gloves and cleaning seat back pockets.

 

[tzskipper]

You sound like a shoe in at Jetblue and would be hired for sure but please dont apply on behalf of those 857 of us that want to make this a career . And let the management clowns and Ford and Harrison use those anti CBA lines. Seriously VA and JB are non union and lowest in overall compensation in the industry, do you think thats a COINCIDENCE? Not sure where we get all the guys with no career expectations that are flying A320s or bigger, at least you guys at VA dont stoop to the level of throwing on Blue or red gloves and cleaning seat back pockets.

Yawn.

Not that it means much, but I have been doing this for over 20 years at predominately Alpa carriers (I guess you could call it a career). What I can tell you with certainty, is that a Union cannot ensure "industry" anything in negotiations. The only assurance is that your negotiators and MEC will have a clear picture of what you particular airline can afford, and more importantly, what the mediator will consider acceptable in good faith negotiations. That is your leverage. On the other hand, once you do have a contract, if your management chooses to play hardball on your day to day stuff (grievances), you will find that there is no guarantee that the Association will always prevail in an appeal if one is needed. So in short, a Union is better than no Union, but it does not guarantee anything but a process. That is all I was trying to say.


S

 

[NEDude]

VA is still a private company, not public. So they can choose to release whatever they want. For the 3rd quarter as has been posted here numerous times:

Operating revenues from guests (pax): 266,842 and from other: 23,794. Total revenue disclosed is 290,636.

Expenses, including everything like wages, aircraft, fuel, depreciation, other expenses, landing fees, etc: 274,410

Difference is operating income: 16,226. So a 16.2 million operating profit.

Note then the "other expense" then is another 19,528, 19.5 million, for a total reported loss of 3.2 million.

Interesting how there is already a "other operating expenses" under the expenses tab, equaling 15,646. Even with these other operating expenses accounted for in net expenses, they made a net profit of 16 million. Randomly, there is a "other (income) expense" item that shows up to be another 19 million, and therefore a net loss. So what expense is this? What other expense could this be that wasn't already reported in the expenses tab in the table above? It still seems like for a private company, they can basically show whatever they choose.

Perhaps the "other expenses" are payments to investors. It has been reported within the company that management has been very aggressive in paying down its investor debt. This is a plausible explanation as to why the investors seem happy, and willing to continue to fund the growth, despite the company showing losses on paper. Don't know for sure though. But one thing is certain, VX investors are not acting like normal investors. Ualdriver thinks it is because the investors are "crazy", but the reality is that the investors are clearly seeing something he is not. Investors don't continue to throw money into something unless they feel secure in getting a decent ROI. One thing he has been accurate at pointing out how many times investors have cut and run from failing airlines. What he apparently cannot grasp is that the investor behavior is very different in this case and it is driving him mad that he cannot figure out why.

 

[ualdriver]

Do you even read what you write?

In one sentence you write that our financials are easy to find and understand. In the next you say our management has to put on a happy face for the financial community. Don't you think the financial community can see the easy to find and read quarterly reports? If the financial community is fooled by happy statements from management then they really are a pretty sad financial community.

I know what the reports say. Apparently you are forgetting the portions of the reports that state we are on the most solid financial ground in our history, with the most liquidity we have ever had.

As for Skybus, the comparisons are a bit weak. Just before launch there was a shakeup in the upper management that resulted in the dismissal of the original CEO. As for your assessment that things looked rosy at Skybus up until the end do not jive with actual history. The airline launched in May 2007 and by October, less than five months after start-up, there were warning signs as two destinations were cut and service reduced to another. In February 2008, less than nine months after launch, it was announced all service to the west coast would be dropped with the exception of one flight to BUR. In March, ten months into operations, more cutbacks were announced when previously planned services were dropped. On top of that the CEO resigned suddenly. In April 2008 Skybus shut the doors, less than 11 months into operations. Skybus lasted less than a year and never grew past 13 airplanes. The rosy outlook at Skybus lasted less than five months, despite what you chose to remember.

You said yourself that you don't know how our board operates or what is on the mind of the investors. I don't know either, but the best bet to find out is look at their behavior. Their behavior clearly indicates they believe the company is on par with what they thought it would be doing during growth and pre-IPO. I am sure they really do not care if you think they are crazy.

I think I implied that they're pretty easy to find. Understand, well, obviously that is not the case. All is well at VA right now, right? Nothing to see here! (he-he)

Nope, the financial community is likely not fooled. That's why you got your last pay out from a hedge fund and not more conventional sources. However, as Petzinger wrote in Hard Landings, there's something about the airline industry where people get stupid with money (I'm paraphrasing). And obviously "the financial community" does do stupid things with money and behave quite sadly sometimes. I mean, we're living through the aftershocks of that right now, aren't we? Maybe your current savior is doing something stupid too? I mean, would you lend your personal funds to VA on a long term note?

My point about Skybus was the behavior of the CEO and their aircraft order. The CEO was in the press telling the world how everything was just dandy. They had shiny new airplanes on order. All turned out well, huh? Airline management puts a happy face on everything. Everything is always "OK." And it's not just in the airline industry, either. Your airline management team is doing that right now. They can't allow the perception of financial duress leak into the media and have people stop buying tickets on your airline.

But hey, if you believe your management's behavior means everything is just hunky-dory- man whatever keeps you going. I remember Tilton was the same way during our bankruptcy, even things were getting REALLY ugly with the bird flu that basically shut down our most profitable Asian flying. I remember shaking my head wondering if anyone at the airline actually believed what he was saying. I guess many did.......and they had no clue how close we were to the edge.

So in summary (as I believe we are going in circles):

You believe everything is OK because of management behavior, your aircraft deliveries, your new training center, etc. You also believe that everything is OK because VA tapped another credit card to the tune of 150M and now you have the most liquidity you have ever had.

I believe you guys are in serious trouble because I'm reading the quarterly reports, watching you guys burn through bucketfuls of cash. I'm also noting that in your entire existence, you've only had one profitable quarter while just about every other airline out there is currently making money. I've also noticed that 150M loan and feel that is yet another example of your airline's troubles.

So I think I'll be done here and I'll just let the reader decide who is more likely right than wrong. You really are in too deep to be even remotely objective IMO.

 

[ualdriver]

VA is still a private company, not public. So they can choose to release whatever they want. For the 3rd quarter as has been posted here numerous times:

Operating revenues from guests (pax): 266,842 and from other: 23,794. Total revenue disclosed is 290,636.

Expenses, including everything like wages, aircraft, fuel, depreciation, other expenses, landing fees, etc: 274,410

Difference is operating income: 16,226. So a 16.2 million operating profit.

Note then the "other expense" then is another 19,528, 19.5 million, for a total reported loss of 3.2 million.

Interesting how there is already a "other operating expenses" under the expenses tab, equaling 15,646. Even with these other operating expenses accounted for in net expenses, they made a net profit of 16 million. Randomly, there is a "other (income) expense" item that shows up to be another 19 million, and therefore a net loss. So what expense is this? What other expense could this be that wasn't already reported in the expenses tab in the table above? It still seems like for a private company, they can basically show whatever they choose.

Um.......no.

First of all, you're reporting on the strongest quarter of the year. Your airline lost money.

Airline management LOVES to talk about operating profits and losses, especially when their airline is losing money. After all, the operating losses don't count the "cost" of money, does it? And when you're a highly leveraged, capital intensive business like an airline, it's nice to leave out that big expense and just talk "operating profit." Sounds nice when you're talking to the press and your employees who don't know any better, doesn't it? We made an "operating profit" this quarter. Yeah! NEdude is probably tickled pink when management happily states that! Screw you ualdriver! We made an operating profit!!!

Yup, in the 3rd quarter VA made an operating profit. And if money were free it would be a big deal. But you gotta look at what they're paying to service all that debt. And for airlines, especially bleeding airlines, it ain't cheap. Traditionally, if you look at other airlines' consolidated statement of operations the other income (expense) line is pretty much the interest you earn on your cash and the interest you pay on your debt. Notice how that wiped out your operating profit? Ah, Cush didn't mention that part, did he? He didn't say, "We made an operating profit but that profit was completely wiped out by all the interest we had to pay to service our debt." Doesn't sound so nice when you say it that way. Also notice how that number keeps going up YOY on your statement of operations. Paying down debt? I don't think so. They're probably just rolling it as it comes due. And now you'll add interest on 150M to contribute to that expense category.

The other line you are referring to is "other operating expenses." If it is like other airlines, and I think it is, that is for stuff like the electricity that illuminates your CEO's corner office and the custodial company that empties his trash, and all the other costs that doesn't fit in the other expense categories. There's nothing "random" or "interesting" about it. It appears to be reported just like any other airline does.

 

[tzskipper]

Um.......no.

First of all, you're reporting on the strongest quarter of the year. Your airline lost money.

Airline management LOVES to talk about operating profits and losses, especially when their airline is losing money. After all, the operating losses don't count the "cost" of money, does it? And when you're a highly leveraged, capital intensive business like an airline, it's nice to leave out that big expense and just talk "operating profit." Sounds nice when you're talking to the press and your employees who don't know any better, doesn't it? We made an "operating profit" this quarter. Yeah! NEdude is probably tickled pink when management happily states that! Screw you ualdriver! We made an operating profit!!!

Yup, in the 3rd quarter VA made an operating profit. And if money were free it would be a big deal. But you gotta look at what they're paying to service all that debt. And for airlines, especially bleeding airlines, it ain't cheap. Traditionally, if you look at other airlines' consolidated statement of operations the other income (expense) line is pretty much the interest you earn on your cash and the interest you pay on your debt. Notice how that wiped out your operating profit? Ah, Cush didn't mention that part, did he? He didn't say, "We made an operating profit but that profit was completely wiped out by all the interest we had to pay to service our debt." Doesn't sound so nice when you say it that way. Also notice how that number keeps going up YOY on your statement of operations. Paying down debt? I don't think so. They're probably just rolling it as it comes due. And now you'll add interest on 150M to contribute to that expense category.

The other line you are referring to is "other operating expenses." If it is like other airlines, and I think it is, that is for stuff like the electricity that illuminates your CEO's corner office and the custodial company that empties his trash, and all the other costs that doesn't fit in the other expense categories. There's nothing "random" or "interesting" about it. It appears to be reported just like any other airline does.[/QUOTE

UD-

Quick question; in the case of a start up, private company that is financed through investors, what is the impact on income once an ipo takes place and the investors debt is paid back from the proceeds of the ipo? It would seem that the balance sheet and income statement would see significant improvement.

This seems to be the plan in VA's case.

Thoughts?

S

 

[NEDude]

I think I implied that they're pretty easy to find. Understand, well, obviously that is not the case. All is well at VA right now, right? Nothing to see here! (he-he)

Nope, the financial community is likely not fooled. That's why you got your last pay out from a hedge fund and not more conventional sources. However, as Petzinger wrote in Hard Landings, there's something about the airline industry where people get stupid with money (I'm paraphrasing). And obviously "the financial community" does do stupid things with money and behave quite sadly sometimes. I mean, we're living through the aftershocks of that right now, aren't we? Maybe your current savior is doing something stupid too? I mean, would you lend your personal funds to VA on a long term note?

My point about Skybus was the behavior of the CEO and their aircraft order. The CEO was in the press telling the world how everything was just dandy. They had shiny new airplanes on order. All turned out well, huh? Airline management puts a happy face on everything. Everything is always "OK." And it's not just in the airline industry, either. Your airline management team is doing that right now. They can't allow the perception of financial duress leak into the media and have people stop buying tickets on your airline.

But hey, if you believe your management's behavior means everything is just hunky-dory- man whatever keeps you going. I remember Tilton was the same way during our bankruptcy, even things were getting REALLY ugly with the bird flu that basically shut down our most profitable Asian flying. I remember shaking my head wondering if anyone at the airline actually believed what he was saying. I guess many did.......and they had no clue how close we were to the edge.

So in summary (as I believe we are going in circles):

You believe everything is OK because of management behavior, your aircraft deliveries, your new training center, etc. You also believe that everything is OK because VA tapped another credit card to the tune of 150M and now you have the most liquidity you have ever had.

I believe you guys are in serious trouble because I'm reading the quarterly reports, watching you guys burn through bucketfuls of cash. I'm also noting that in your entire existence, you've only had one profitable quarter while just about every other airline out there is currently making money. I've also noticed that 150M loan and feel that is yet another example of your airline's troubles.

So I think I'll be done here and I'll just let the reader decide who is more likely right than wrong. You really are in too deep to be even remotely objective IMO.

I guess I am trying to figure out what your ultimate goal in posting here is. You admit you have no insight as to the business plan, mindset of the investors, or where the money is really coming from or going. You dismiss all the signs that the investors are confident in where we are going, the new pay raises, expanded office space, new training facilities; only offering that the investors must be "crazy". You then claim that we should all have our resumes out because the party might end, but we should not jump ship unless we have another job. But where to jump ship to? The options are limited and one of the few out there has a pay rate significantly lower than ours and a six year old seniority dispute that shows no signs of being resolved in our lifetimes.

So tell me, what is your point? To flame? So you can brag and feel good about yourself if at some point in the future VX does go under? What is it?

PS- The other airlines that are making money are not growing at 35% or more per year, or structuring themselves for an IPO in the next year or two, factors you conveniently forget in your comparison.

 

[Flyer1015]

The other line you are referring to is "other operating expenses." If it is like other airlines, and I think it is, that is for stuff like the electricity that illuminates your CEO's corner office and the custodial company that empties his trash, and all the other costs that doesn't fit in the other expense categories. There's nothing "random" or "interesting" about it. It appears to be reported just like any other airline does.

No, "other operating expenses" was already included in the total expenses column.

 

[ualdriver]

UD-

Quick question; in the case of a start up, private company that is financed through investors, what is the impact on income once an ipo takes place and the investors debt is paid back from the proceeds of the ipo? It would seem that the balance sheet and income statement would see significant improvement.

This seems to be the plan in VA's case.

Thoughts?

S

Yeah, my thoughts are VA won't see an IPO unless they turn things around or if they're not nearly indebted as I think they might be.

Let me give you an admittedly simplistic (and long) example. Let's say I invest $100,000 in a corporation. The corporation takes the $100,000 and buys a restaurant. The restaurant starts operations and over its entire existence it loses money. So the corporation borrows against the value of the $100,000 restaurant in order to continue funding operations. At the end of the year, the corporation still has a $100,000 asset (the restaurant) and a $100,000 loan against the asset. That $100,000 was needed to keep the restaurant going.

I'm the only private shareholder of this corporation, and after a year of losses, I'm like- screw this. I'm going to go to an investment house, list my corporation on a public market, and sell my one share of my corporation to unload it. You tell the investment bank to look for potential investors, and the deal will be structured such that the you'll be responsible for paying off the debt so the new owner (the public shareholder) will have their newly acquired corporation free of debt- just like your question is phrased. Ok great.

As the seller, what do I need to recoup my losses? Well, I need my share to sell for $200,000 to break even. I need $100,000 to pay off the loan and another $100,000 to get my initial $100,000 investment back. And really, I need a few percentage points above $200,000 to cover the additional costs associated with my little IPO. Bankers ain't cheap, you know.

Now you're the buyer. You see this share for sale and the restaurant building in the corporation is worth $100,000. You don't care about the debt because that's not your problem. It's the original investor's problem. You say OK, the restaurant is worth $100,000, so I'll pay $100,00.

Back to me. I get a $100,000 offer for my share, and it's a fair offer at that because that's what the restaurant is worth. But I'm going to take OVER a $100,000 bath on that price. Why? Well, if I take the offer, I have to use the $100,000 to pay off the debt. But I am still out my original $100,000 investment AND I have to pay fees to that investment bank to the tune of a few percentage points of the value of the deal and likely some fixed fees.

So why even bother with my little IPO? Even if I get the fair value for my one share which is $100,000K, I'm still out over $100,000 after IPO costs. It's cheaper for me to just have the corporation declare bankruptcy and just be out $100,000 instead of $100,000 + investment bank fees by trying to sell it.

What if the corporation is $150,000 in debt? $200,000 in debt? Things look even worse!

OK, so.......let's say VA is the restaurant. How much debt does that restaurant......er......airline have vs. the value of its assets? I don't know for sure, but I suspect they are deeply in debt because of the high interest payments they are reporting and the latest source of their financing. So how in the world can they sell their corporation for enough money to cover their debt and get their original investment returned?

Back to my corporation. I said I needed $200,000 plus a little more to break even. How do I get someone to pay $200,000 for my share that is only "worth" $100,000? Or even better......how do i get more than $200,000 for my share? Well, one thing I didn't consider was the value of the restaurant's FUTURE profits.

We already figured out that my share is only worth $100,000. But what if my restaurant, just before the sale, started to turn a corner? Maybe just before my little corporate IPO, my restaurant started making money? What if I can convince potential buyers of my share that my corporation has had a rough past, but it's now poised to post profits in the future?

Well, now my share is potentially worth more than $100,000, isn't it? Those future profits have some value. Depending upon the size of the profits, maybe those future profits have a value such that a buyer might be willing to pay $200,000 for the hope of future profits. Maybe $300,000. The market determines what the discounted present value of those future profits are.

And that's what I think Cush is trying to do. He's just trying to get VA to the point where it can "turn the corner" so that those future profits have some sort of value that he can try to sell to the public. But he's walking a tightrope. Obviously VA isn't making any money, so it is continually having to borrow to sustain operations. That puts the "restaurant" deeper in debt. At what point does the airline have so much debt that even if the private owners got a realistic price, it still would make more sense to just walk away? How long can you keep borrowing before even finally turning a corner still can't garner a high enough share price to make an IPO even worth it?

I guess that's the question for VA, isn't it?

Again, it's admittedly a simplistic example, but it illustrates the position that the current owners of VA are in. And if the waiters think everything is going great at the Cush Diner..........well.......

 

[anewunion]

wow. that's a lot of time behind a computer.

 

[Kalifornia]

So tell me, what is your point? To flame? So you can brag and feel good about yourself if at some point in the future VX does go under? What is it?

PS- The other airlines that are making money are not growing at 35% or more per year,

I think your answer is right there,, while the established carriers have exercised capacity restraint to price the ticket with reduced supply of seats that actually reflects the expenses with profit of transporting someone from sea to shining sea, it is quite frustrating to see new a carrier come in and grow like wildfire with reduced fares which seem to be partly funded by reduced wages and investors who have enough play money for a real life game of Aerobiz.

 

[NEDude]

I think your answer is right there,, while the established carriers have exercised capacity restraint to price the ticket with reduced supply of seats that actually reflects the expenses with profit of transporting someone from sea to shining sea, it is quite frustrating to see new a carrier come in and grow like wildfire with reduced fares which seem to be partly funded by reduced wages and investors who have enough play money for a real life game of Aerobiz.

Name an airline that is not guilty of reducing fares and fighting for lower wages to expand market share. Name an airline that has not undercut other carriers, even to the point of unprofitability, to maintain or gain market share. Even mighty Southwest used low wages and low fares to grow. Alaska actively lobbied for de-regulation so it could expand by undercutting. EVERY airline is guilty of doing that at one point in their history. Don't come on here acting holier than thou when your company is guilty of doing the same thing. There have only been brief periods of time since de-regulation when the airline industry has reported profits. Massive losses are the norm, not the exception. Which means managers at Delta, or United or any other airline have not suddenly figured out the correct formula, they have just caught a brief period of profitability - think of the blind squirrel and nut analogy.

 

[Kalifornia]

Name an airline that is not guilty of reducing fares and fighting for lower wages to expand market share.

You are correct along with the rest of your paragraph omitting though that pilots at a present day well established carriers fight back at lower wages, not always successfully, but at least there's an effort.
With now 30 years since regulation, quite a bit more established history to wish/prompt/voice that the merry-go-round of competition and start-ups subside....one can only hope.....stability would be nice

Maybe you could take a trip to Great Britian and talk to these guys about Richard's Koolaid??...

http://www.guardian.co.uk/business/2011/aug/09/virgin-atlantic-pilots-call-off-strike-threat

 

[jayme]

I am pretty sure RASM at VA is finally at industry average. We are not undercutting anybody.