Virgin America QOL

[bri5150]

Virgin America Cancels 20 A320s

Posted byBRIAN BOSTICK2:13 PM on Jan 17, 2013



Virgin America has cancelled 20 A320s, bringing its total orders for the type from 69 to 49.

In December 2005, Virgin America placed an order for nine A320s, all of which have since been delivered. In December 2010, Virgin America placed another order for 60 aircraft (30 A320s and 30 A320neos), the total of which has now been reduced to 40.

Eight A319s were also ordered in December 2005, all of which have also been delivered.

I guess I am extremely confused by your post. It says it happened two days ago, but it is actually the news from November, right? Even if we cancelled all of the orders we still have, it wouldn't make a difference at this point because they aren't supposed to be here until 2019 now. Just a few things can happen in this industry in 6 years.

 

[Splert]

Using returned deposits to buy dead dinosaurs.

 

[Andy]

Who do our lease payments go to?

VA's planes are leased from quite a few different lessors.
GECAS owns 10 aircraft
Wells Fargo owns ~9 aircraft
Aviation Capital Group owns 6 aircraft
Jackson Square Aviation owns 4 aircraft
Sahaab Aircraft Leasing (a subsidiary of Jazeera Airlines) owns 4 aircraft
AWAS Aviation Capital owns 2 aircraft
Ds 128 Flugzeugfonds III Trust A Statutory Trust owns 2 aircraft
FLY Leasing owns 1 aircraft

The rest are leased from single aircraft leases from trusts that are set up, making it difficult to know where the money goes.

Not a single aircraft is owned by VX; they are all leased.

Does Branson pay our investors through back doors?

I have no idea. Do you know if he pays VX's investors through back doors? If so, please elaborate.

Is the fight to get this airline going in the first place worth just giving up on after just 6 years?

Virgin Brides (1996-2007)
Virgin Clothing (1998-2000)
Virgin Cars (2000-2005)
Virginware (2003-2005)
Virgin Megastore (1992-2009)
VirginStudent (2000-2005)
Virgin Express (1996-2006) - airline
Virgin Charter (2007-2009) - airline

Virgin Atlantic has been bleeding cash and just got a new CEO last week.

Sir Richard has neither unlimited patience nor funds.

Your comment on Q1 shows that you really don't know much about what is going on here. "Probably" a draw down?

So the 3 percent capacity reduction and voluntary leaves of absence offered in Cush's October letter was my imagination? http://skift.com/2012/10/17/virgin-...ployee-leaves-to-cut-costs-for-a-slow-winter/

Does the word 'probably' by me indicate that I have no idea what's going on? Things can change significantly between October and January in this business.

What will our network look like a year from now, since you are in the know?

I don't know what VX's route network will look like in a year, and neither do you. I'm waiting to see the response from other carriers to VX's foray into the LAX-LAS market. We've already seen UAL's response to their SFO-EWR addition. I wouldn't be surprised to see AS and LUV join in on the feeding frenzy in markets shared by VX.

Aren't we overstaffed? Why would we need to hire because of the loss of 14 guys to United if we are overstaffed?

Overstaffed? Are you new to the airline industry? (No need to answer that; my guess is that you've been flying professionally since ~2005). Winter is always overstaffed vs summer.

Do you think that the loss of 14 is the end of VX's pilot losses when the majors are spooling up hiring?
How many AMR furloughees are at VX? AMR's going to be recalling and then hiring for a long time.

Okay, more cheerleading I guess. IF we have a net profit q4 as rumored, I guess I don't see how we are in a death spiral. Obviously it wouldn't mean we are instantly viable and will be around forever, but it would certainly mean we are more on the upswing instead of the death spiral everyone thinks we are in. Unless you base your ups and downs on aircraft deliveries I guess.

Q4 net profit? Is that with creative accounting? Q3 has always been VX's strongest quarter and VX still didn't make a net profit.

 

[RiddleEagle18]

I guess I am extremely confused by your post. It says it happened two days ago, but it is actually the news from November, right? Even if we cancelled all of the orders we still have, it wouldn't make a difference at this point because they aren't supposed to be here until 2019 now. Just a few things can happen in this industry in 6 years.

No.

In November there were aircraft deferrals. These were cancellations.

 

[bri5150]

VA's planes are leased from quite a few different lessors.
GECAS owns 10 aircraft
Wells Fargo owns ~9 aircraft
Aviation Capital Group owns 6 aircraft
Jackson Square Aviation owns 4 aircraft
Sahaab Aircraft Leasing (a subsidiary of Jazeera Airlines) owns 4 aircraft
AWAS Aviation Capital owns 2 aircraft
Ds 128 Flugzeugfonds III Trust A Statutory Trust owns 2 aircraft
FLY Leasing owns 1 aircraft

The rest are leased from single aircraft leases from trusts that are set up, making it difficult to know where the money goes.

Not a single aircraft is owned by VX; they are all leased.



I have no idea. Do you know if he pays VX's investors through back doors? If so, please elaborate.



Virgin Brides (1996-2007)
Virgin Clothing (1998-2000)
Virgin Cars (2000-2005)
Virginware (2003-2005)
Virgin Megastore (1992-2009)
VirginStudent (2000-2005)
Virgin Express (1996-2006) - airline
Virgin Charter (2007-2009) - airline

Virgin Atlantic has been bleeding cash and just got a new CEO last week.

Sir Richard has neither unlimited patience nor funds.




So the 3 percent capacity reduction and voluntary leaves of absence offered in Cush's October letter was my imagination? http://skift.com/2012/10/17/virgin-...ployee-leaves-to-cut-costs-for-a-slow-winter/

Does the word 'probably' by me indicate that I have no idea what's going on? Things can change significantly between October and January in this business.




I don't know what VX's route network will look like in a year, and neither do you. I'm waiting to see the response from other carriers to VX's foray into the LAX-LAS market. We've already seen UAL's response to their SFO-EWR addition. I wouldn't be surprised to see AS and LUV join in on the feeding frenzy in markets shared by VX.



Overstaffed? Are you new to the airline industry? (No need to answer that; my guess is that you've been flying professionally since ~2005). Winter is always overstaffed vs summer.

Do you think that the loss of 14 is the end of VX's pilot losses when the majors are spooling up hiring?
How many AMR furloughees are at VX? AMR's going to be recalling and then hiring for a long time.



Q4 net profit? Is that with creative accounting? Q3 has always been VX's strongest quarter and VX still didn't make a net profit.

I don't know if he pays them through back doors, that's my point. Nobody knows except Branson and the investors. If Branson is backing us, then I imagine we would stick around longer.

Virgin Express was merged with another airline. They didn't get shut down...which is better in my book. They also had 26 737's. We have twice that amount of aircraft. Again, I don't think we have unlimited money. I think the new exec is the last push to get this place functional. If his strategy doesn't work, I believe we will be done, either through merger or shutdown. Hopefully the former. According to wiki (weak source) Virgin Charter wasn't an airline. It was a "marketplace for selling, purchasing, and booking charter flights on private aircraft".

Yes, you said "probably", so I didn't know what year you were talking about. It is already Q1, so it isn't "probably" anymore.

I don't think that the 14 is the end of it. It is just the beginning of people leaving here. Fine by me. I plan to stick it out (as of now...I know things change).

As far as Q4 profits are concerned, I guess we'll see. If it is a net profit, then we are in good shape going forward (my opinion). If not, then I think we have a long road to hoe.

 

[Pez D. Spencer]

No.

In November there were aircraft deferrals. These were cancellations.

Paragraph 4 of the November earnings press release shows that there was a reduction of 20 orders -- cancellations. So, this isn't new.

 

[Pez D. Spencer]

VA's planes are leased from quite a few different lessors.
GECAS owns 10 aircraft
Wells Fargo owns ~9 aircraft
Aviation Capital Group owns 6 aircraft
Jackson Square Aviation owns 4 aircraft
Sahaab Aircraft Leasing (a subsidiary of Jazeera Airlines) owns 4 aircraft
AWAS Aviation Capital owns 2 aircraft
Ds 128 Flugzeugfonds III Trust A Statutory Trust owns 2 aircraft
FLY Leasing owns 1 aircraft

The rest are leased from single aircraft leases from trusts that are set up, making it difficult to know where the money goes.

Not a single aircraft is owned by VX; they are all leased.

Leaving the rest of the quote out, but good research.

(Having a small background in buying and selling jet aircraft, but not on this scale...) This is quite typical of airline financing. Jetblue and Spirit probably have many of the same types of leases set up -- as a matter of fact I woukd bet you a beer that if you pulled up all of the individual LLC's or trusts that actually own those airplanes, you will find one or two that hold Jetblue and Spirit aircraft as well. Without a detailed breakdown of VA's earnings, which will not happen unless they go public, it is likely the actual losses will not be apparent. The earnings press releases they issue lack those details -- in the November report aircraft rents and fuel are counted... and they make a profit... then you hit that last line and it says something like "interest expense, net" -- goes to a loss. Well, I would want to know, interest on what? Aircraft rents were itemized. My guess is that it is interest paying back the principles in the deal. I don't understand that logic, but it's Cushman that has to answer for it ultimately.

 

[clickclickboom]

JB actually owns a very small percentage of planes.. many are leased or financed but we have started in the last two years paying cash for planes and owning them outright. A smart move in my opinion as it is an asset and not a liability.

As for VA I cant see any angle that shows a silver lining. I cant even see an even slight incentive for any type of possible merger. Your route system is horrible and was based on the premise that people would like VA more an as a result pay more for your product. That experiment failed

What is possibly left of value? The new lax-las route? low yield transcons with $3 jet fuel and legacy capacity?

It's like the hot girl at the party that is hot as hell yet dumb as a rock and a bad lay to boot...

 

[Pez D. Spencer]

JB actually owns a very small percentage of planes.. many are leased or financed but we have started in the last two years paying cash for planes and owning them outright. A smart move in my opinion as it is an asset and not a liability.

As for VA I cant see any angle that shows a silver lining. I cant even see an even slight incentive for any type of possible merger. Your route system is horrible and was based on the premise that people would like VA more an as a result pay more for your product. That experiment failed

What is possibly left of value? The new lax-las route? low yield transcons with $3 jet fuel and legacy capacity?

It's like the hot girl at the party that is hot as hell yet dumb as a rock and a bad lay to boot...

I don't work for VA. But, I think you have missed on their "premise". I do agree that their route structure needs some serious work, and they hired a guy to do that. I would want to add some shorter routes -- however, their market is primarily bigger cities and catering to a different clientele -- and Bubba from Des Moines will probably not give a hoot about mood lighting. Maybe some north to south and vacation destinations outside of the west coast. We'll see what they come up with. If you have not had the chance to ride them, you ought to try it out, it really is a good product.

 

[Flyer1015]

No.

In November there were aircraft deferrals. These were cancellations.

No, November cancelled 20 Airbus orders. What you posted was the news in November. The original plan was 60 planes. 30 current engine A320s from 2013-2016, and then 30 A320 NEOs from 2016-2019. The change was NEOs deferred to 2020-2022, and the current engine airplanes the order changed to 5 in 2015 and 5 in 2016. Down from the original 30, so that means 20 were cancelled. In conclusion, in November both deferrals and cancellations were announced. No new upate on aircraft orders/deliveries since the November annoucement.

 

[Flyer1015]

Andy, what's your point? That...... what?

 

[Andy]

Andy, what's your point? That...... what?

I was directly answering Bri5150's questions directed at me. I directly quoted him and then responded; it wasn't hard to follow and should not have generated your followup questions.

I don't know if he pays them through back doors, that's my point. Nobody knows except Branson and the investors. If Branson is backing us, then I imagine we would stick around longer.

Virgin Express was merged with another airline. They didn't get shut down...which is better in my book. They also had 26 737's. We have twice that amount of aircraft. Again, I don't think we have unlimited money. I think the new exec is the last push to get this place functional. If his strategy doesn't work, I believe we will be done, either through merger or shutdown. Hopefully the former. According to wiki (weak source) Virgin Charter wasn't an airline. It was a "marketplace for selling, purchasing, and booking charter flights on private aircraft".

Yes, you said "probably", so I didn't know what year you were talking about. It is already Q1, so it isn't "probably" anymore.

I don't think that the 14 is the end of it. It is just the beginning of people leaving here. Fine by me. I plan to stick it out (as of now...I know things change).

As far as Q4 profits are concerned, I guess we'll see. If it is a net profit, then we are in good shape going forward (my opinion). If not, then I think we have a long road to hoe.

If Branson's paying anyone through the back door, VX will be out of business because DOT would likely take action and there would be significant negative publicity from it. In today's electronic world, it's very hard to hide that kind of thing and you can bet that competitors are watching for it.

Don't assume that Branson is a cash cow. He's not. His assets are tied up in many different companies and there are only so many credit lines that he can tap. There comes a point where investors stop throwing good money after bad and my personal opinion (not worth much; I've been wrong plenty of times in the past) is that the $150M from the hedge funds last year was the last source of funds that would be available to VX - once depleted, it would be chap 7 time.
The order deferral/cancellation appears to indicate that's the case, as Splert hinted with his 'using returned deposits to buy dead dinosaurs' comment.

I'd normally agree with you that if Q4's a net profit, things are looking up. However, the order deferrals/cancellations in Q4 allow for accounting hijinx. I'd be a lot more impressed if 1Q2013 can limit operating losses to less than $10M.

Leaving the rest of the quote out, but good research.

(Having a small background in buying and selling jet aircraft, but not on this scale...) This is quite typical of airline financing. Jetblue and Spirit probably have many of the same types of leases set up -- as a matter of fact I woukd bet you a beer that if you pulled up all of the individual LLC's or trusts that actually own those airplanes, you will find one or two that hold Jetblue and Spirit aircraft as well. Without a detailed breakdown of VA's earnings, which will not happen unless they go public, it is likely the actual losses will not be apparent. The earnings press releases they issue lack those details -- in the November report aircraft rents and fuel are counted... and they make a profit... then you hit that last line and it says something like "interest expense, net" -- goes to a loss. Well, I would want to know, interest on what? Aircraft rents were itemized. My guess is that it is interest paying back the principles in the deal. I don't understand that logic, but it's Cushman that has to answer for it ultimately.

Thanks, but it's pretty easy to look up aircraft ownership. I just had to confirm some items prior to posting. One website listed listed Royal Bank of Scotland as the leaseholder on several aircraft but their leasing arm was sold to http://www.tse.or.jp/english/index.htmlSumitomo Mitsui Financial Group last year (Wells unsuccessfully bid for RBS's leasing arm) and it appears from the FAA database that Sumitimo turned around and resold some of the RBS leases; all of VX's RBS leases were bought by Wells.

The generic database showed some aircraft owned by VX but when I pulled up the FAA records, the ownership was shown to be someone other than VX. So I'm also a bit confused by the interest payments, as it appears that VX no longer has any assets that could be used as collateral. As you well know, VX's financial statements are extremely opaque due to being a private company so the average Joe can't find what items are generating that cost to VX.
I suspect that there are interest payments due on the $150M from hedge funds last year along with interest on lines of credit that VX has tapped. And although interest rates are low, VX is probably paying double digit interest rates on any borrowed money.

I don't work for VA. But, I think you have missed on their "premise". I do agree that their route structure needs some serious work, and they hired a guy to do that. I would want to add some shorter routes -- however, their market is primarily bigger cities and catering to a different clientele -- and Bubba from Des Moines will probably not give a hoot about mood lighting. Maybe some north to south and vacation destinations outside of the west coast. We'll see what they come up with. If you have not had the chance to ride them, you ought to try it out, it really is a good product.

Not directed at me, but my dos centavos is that VX badly misjudged both the premium the the public would pay for a higher quality product and the response from established carriers.
I am well aware that VX's product experience is superior than what other carriers deliver. However, while consumers state that they will pay extra for better service, that is generally not true, especially in the airline industry. Complain as they may, the vast majority of leisure travelers use only one metric to decide on which carrier to fly ... the lowest travelocity/priceline/kayak priced ticket. VX cannot compete for the majority of business travel (much less price sensitive) because it doesn't offer the frequency that business travelers want.
The established carriers really started to go after VX in 2012 by adding frequency and pricing their tickets competitively with VX. If you look at VX's 2012 results through Q3, you'll see that other carriers have been able to reduce VX's load factors by 1.3% (may not sound like much but it adds up) while reducing their PRASM by 1.8%. Part of that is self-inflicted; VX increased their ASMs by 30.9% and are now adding routes with lower yields. VX is already utilizing their aircraft in excess of 12 hours/day so they can't increase utilization rates by very much to reduce CASM.

 

[clickclickboom]

I don't work for VA. But, I think you have missed on their "premise". I do agree that their route structure needs some serious work, and they hired a guy to do that. I would want to add some shorter routes -- however, their market is primarily bigger cities and catering to a different clientele -- and Bubba from Des Moines will probably not give a hoot about mood lighting. Maybe some north to south and vacation destinations outside of the west coast. We'll see what they come up with. If you have not had the chance to ride them, you ought to try it out, it really is a good product.

My whole point is what you bring up. They bet that consumers would pay more for more.. Its a great concept but has been proven time and time again in the airline industry that it doesnt work..

One such example is Jetblue when they came into atlanta.. JB clearly had a better product than delta or airtran yet we had our asses handed to us ten fold. People would NOT pay more to ride us period

VA sure they have some nice seats up front that bring in some revenue but thats coming to an end as well.

jb is getting ready to put a first class lie flat product right on top of va's routes for less than half of what va is charging.

Here is a good article that discusses this further


http://business.time.com/2012/10/25/why-an-airline-that-travelers-love-is-failing/

 

[Tomct]

So Click,
What you are saying is that JB is going to be STUPID ENOUGH to come into our markets and pull down F/C seat prices?? That would be the DUMBEST thing you could possibly do! But hey, since we have now taken over YOUR old position (donkey in the industry) I find it really funny how you always throw your rocks at our glass house!
Thats fine, go ahead! Our product will ALWAYS trump Blues and everyone elses for that matter...hence all the awards!
Cracks me up to hear all the "wisdom" (and I use that term Loosely) here on this board. Everyone has been wrong from day one!:cartman:
Do I think this new guy is going to fix things...YES! If he doesn't, we will most likely fly west. Oh well...that's just how it goes in this industry.

 

[BlueSurfer]

Bro..

Legend Airlines had a great product... Midwest Express had a great product...

Good luck out there...

 

[Andy]

What you are saying is that JB is going to be STUPID ENOUGH to come into our markets and pull down F/C seat prices??

Seriously? YOUR markets? SFO and LAX were United's hubs long before VX showed up.

 

[Tomct]

Andy,
We are flying those same markets, so wouldn't that make them OUR markets....right???? (potatoe...pototoe)

Blue, with all due respect, the one (Ace in the hole) that none of those other carriers had was Branson. The fact that we are still around after all the BS that has gone on in this industry since 08'...all those others gone, but we are still a ticking. Only because of him of course.

Again, He (Branson) is the wild card and for anyone to compare VX to anyone else that has gone out of business is just talking out their a@*!
Like I said before, hopefully this new guy is our answer...I believe he is, if not, then that's the way the cookie crumbles......I think that is from a movie or something. :laugh:

 

[Mad Dog 80]

Any info on how many pilots Virgin America wants to hire in this window?

 

[Andy]

Andy,
We are flying those same markets, so wouldn't that make them OUR markets....right???? (potatoe...pototoe)

No, they're nobody's markets. The industry is deregulated. I can't believe someone from a startup is laying claim to any city pair.
On second thought, you guys can have JFK-PSP nonstop.

 

[Mud]

From MB...about 20 pilots will be brought on line and another 10-20 to re-fill the pool.

Saw a demo on the narrow body 1st class lie flats for Transcons a legacy is installing. It is unbelievably cool. Huge IFE screens, One by one configuration, basically your own little room. The Business class is nearly comparable to VX's first but VX economy seats are still better, not that that matters. The only detractor is weight. Each lie flat cubicle is 6,000 pounds. Finding the right price point will be interesting but it looks like a game changer to me.