Virgin America Cuts Airbus Order, Delays 30 Jets

[fam62c]

That makes no sense. The issue is the debt, not daily expenses. We made $12 mil this quarter with just paying daily expenses. I am not sure why people here want VA to go away. They don't seem to have a problem with other airlines existing. Everyone bitches that customer sevice is gone, they bitch about wearing hats and ties, they bitch the fa's are triple g's (we have two covered at least), but now an airline comes around that takes care of all that and they want it gone. Whatever, I guess I should stop trying to figure out FI.com.

I don't want VA to go away, I don't want to see anybody lose their jobs but that does nothing to change the reality of their financial situation and that's what is being discussed. You can have the best product in the world but if the ticket prices don't cover all the costs (operating cost AND cost of capital) and leave room for some net profit it isn't going to matter at some point.

VA is just following a long standing tradition in this industry that's been practiced by pretty much every airline at some point; pricing your product below cost. Some carriers that did this went on to become profitable, some failed and are gone, some were absorbed by other carriers and some reorganized in bankruptcy and are still with us. Nobody knows which road VA is going to go down. This is probably the worst industry for investment capital in the world.

 

[Splert]

I do not wish VA away.

However, reporting VA's consistent TTM negative double digit OM somehow means that means I do.

Good luck to all.

 

[flyboyike]

This is probably the worst industry for investment capital in the world.

I think we're well beyond probably by now.

 

[LoveGun]

VA's debt is the big question. Who did we borrow all that money from? If it all came from our primary investor, Cyrus Capital, there might be some flexibility. However, if we borrowed the money from banks and other investors, VA might not be able to defer payments. I don't know the answer. I can't find any useful information about Cyrus Capital on the web. My guess is that Cyrus Capital is composed of just a few people, mainly Cyrus Freidheim and Stephen Cyrus Freidheim. But, I could be wrong.

I found this on the Cyrus Capital website:

"Stephen Freidheim and his senior team of investment professionals have more than a ten-year track record, in excess of 225 years combined experience and a significant portion of their liquid net worth invested in the fund. The investment strategy has been developed through years of deep fundamental research, and the philosophy has remained steadfast since the inception of the firm in 1999. The investment and operations teams are highly talented and experienced hedge fund professionals that are committed to making Cyrus Capital a “best in class” firm.

Cyrus Capital Partners invests across the capital structure of leveraged companies throughout their life cycles, including those in financial distress, and seeks to generate attractive absolute returns that are not correlated to or dependent upon the general equity and fixed income markets. The firm currently manages several Master/Feeder hedge fund structures. These funds commenced operations between August 2001 and May 2008.

With offices in New York and London, Cyrus Capital currently has a team of 40 people. As of 7/1/2012 assets under management are approximately $2.2 billion."

 

[climbhappy]

whoever said there's never been a IPO where there was debt on the company balance sheet doesn't have a clue about finance...

the dot com era and the recent virtual company IPOs like facebook and groupon had hundreds of millions in debt and had the prospect of future revenue...future earnings...

debt isn't a bad thing.....many IPOs are done with expectaion of future profits and they are used as third and fourth round financing to continue to expand and provide working capitial for operations...

ever heard of a debt to equity ratio? all companies have them....

some are higher than others ...so to suggest this on FI is pure bs...

and since VA is private you say? guesss what? the shareholders all paid for stock that was issued to start the company...and have all been asked to pony up more dough to cover the losses...or they have borrowed from banks.....if they're private, we dont know how they have financed the losses...could have been done with more stock being issued..... but it only dliutes their initial investment.....

so if the company and grows to the plan they have, and it goes public, then they would recover their outlay from the stock value...

but no one knows how the debt was financed? their may be a foreign bank holding short term debt for them right now....company can offer several debt instruments...for example a debenture is a debt security that is not covered by physical assets....just the creditworthiness of the borrower.....or they could have issued convertible bonds that could be converted to common stock if the company makes it........so the lender if there is one may have a stake in the success of VA also....

and finally, they be be massively behind on lease peayments for the 320s, and since they are private, we dont know how much debt in accounts payable is on the balance sheet....?????????? the leasing companies dont want the planes back....and this why airlines continue to go bankrupt, shareholders get hosed, leasing companies get renegotiated contracts and still have a revenue stream from the lease of planes....

if they are using general accounting principles then if they are showing a quarterly profit then they are not behind on the lease payments...may have renegotiated the leases and put the back payments on the tail end of the lease...a very common thing......

and this what Wells fargo did on my house which was ten months under water last year...

i hate BS when i see it....i hope VA makes it. i have many friends there..

 

[redflyer65]

Yea. The dot-com era IPO's turned out really well.

Carry on.

 

[hyflyin]

Yea. The dot-com era IPO's turned out really well.

Carry on.

It did for the 1% and a few more.

 

[climbhappy]

what's you point? southwest went public in 1971 and i assure you they had debt on their balance sheet.....If VA is making a quarterly profit.. which they are...then what they are doing now is simply a prelude to getting a better financial condition to go public some time later..or so it would seem..

 

[ackattacker]

what's you point? southwest went public in 1971 and i assure you they had debt on their balance sheet.....If VA is making a quarterly profit.. which they are...then what they are doing now is simply a prelude to getting a better financial condition to go public some time later..or so it would seem..

Huh.

The first and only time Virgin America reported a quarterly profit was in the 3rd quarter of 2010. Until they show a real profit, their financial situation is deteriorating, not improving.

When Southwest airlines was formed and almost immediately went public in 1971 they offered 650,000 shares at $11 a share. That's $7.1 million market capitalization, which pretty handily covered their startup expenses for their 3 airplane operation. I don't think you want to make a comparison there.

Nobody has claimed a company never went public when carrying debt. That would be an absurd claim. I think someone claimed no company ever had a successful IPO while so deeply in the hole. I think that's probably a valid claim. Debt doesn't just magically go away in an IPO, the IPO would have to raise enough money to pay it off and also fund future growth. In this case we are talking about in the range of over $1 billion dollars (cue Dr. Evil finger gesture). Their operation is too small to support such a valuation. Delta airlines, currently the most valuable airline in the US in terms of market capitalization, is hugely profitable, is valued over $8 billion dollars, and flies roughly 250 *billion* airline seat miles annually. Virgin America flies roughly 10 billion airline seat miles. It's only 4 percent of the size of Delta, so there's no way they're 12% of the value particularly when they can't make dime one.

 

[climbhappy]

the only reason i commented was a guy said

no company has ever gone public riddled with debt

just reab back a few pages.... his understanding of what debt is ,also, is totally misunderstood.

debt is not equity...he seems to think it is when he said

VAs debt is owed to its investors

if the investors received stock for their cash, they are owed nothing unless they purchase bonds the company issues, or buy more stock.....shares of stocks is not debt...

really? i thought debt was owed to lenders such as banks...since the company is private , we dont't know who carries the debt...banks? hedge funds? or even richard branson personally....who knows...