V-Flyer

Very interesting article here, probably nothing we don't already know. Some bouquets for VS amongst the brickbats.

Thanks for posting - interesting reading.

A rather worrying read.

By profession, I work in the airline space, managing start ups, turn arounds and M&A. Looking at thee CAPA report, there are some things in there that spook me.

The thrust of the analysis looks very sound - costs are clearly starting to run away, and all power to the new CEO for getting hold of this. Against rising revenues the op losses are mounting - and they can't really blame the fuel costs on this one, since they are surcharging to death for that. General and admin costs up 14% (!!!!!!!!) and all other costs up by more than 30% - hell's teeth, someone has taken their eye of those balls!

RPK is rising slower than pax revenues, which means a softening of the yields - that tends to imply fewer premium pax (perhaps they should listen more to the Golds and Silvers on here, hmm?)

My biggest shiver is reserved for the balance sheet.... the debt needs to be looked at pronto, gearing like this can kill off a even a huge company very, very quickly.

Shows just how much of costs is down to fuel

Yeah, I can understand the causes for concern, the finances do look more than a little neglected.

One thing I do find difficult is the net gearing percentage being calculated based on the leased aircraft. I think Virgin leasing aircraft actually avoids unnecessary costs, and it is a little unfair to categorise these arrangements as pure debt.

Yes, the debt on the lease is interesting. You are in essence correct - an operating lease does not normally cause a debt event (as opposed to a finance lease) but it may well be that the leases are pretty cast iron - meaning that unless VS failed entirely, they are liable for the remaining payments... in itself, that is a poor decision. I've never signed a lease for an aircraft that didn't give me a little wriggle room

Yes, this is quite worrisome. I have always been surprised that some basic costs and overheads haven't been looked at more closely, particularly in the USA. The stations seem to be managed in such a way that is contrary to Richard Branson's business philosophies, which is certain to do damage to future successes. Amidst financial crises, and the growing Virgin empire, with lack of oversight of the People (not the books or the stats), Virgin has lost sight of it's fun and uniqueness. To quote Sir Richard from Like a Virgin: "Remember to have fun. There is no point in being in business if it is not fun. Have fun with your team, your suppliers and the companies you work with. It is so much more rewarding to build up a healthy rapport than to find yourself in a constant battle. Don’t take everything so personally. Let your hair down now and again.”

Back to costs: the USA seems to have a very large Management to Staff ratio. For example, at least one US station (with one flight only) employs a total of four Virgin Managers (AM, two SDM's, and Club Manager) for one daily flight only - This is in addition to: an out-sourced Club Mgr, two out-sourced passenger service managers (to manage contracted staff and flight operations), and three or four turn coordinators. That's a very high overhead! Hopefully Virgin will ultimately be able to contain costs, without disrupting or impacting service quality.

It seems like someone needs to have overall control of decisions made. A new example is to do with little red, at LHR they are paying HAL to be able to bus pax from T1 to T3 and avoid security, it costs money as HAL don't really want the extra trafic on the airport roads and taxiways.
This itself isn't bad as its a good selling point, but insisting that the route the bus takes is three times as long than necessary, just to give the impression that VS are the only T3 carrier (avoiding passing BA stands and passing all the VS stands) doesn't seem as justifiable for the extra money. Or am i alone in thinking that its a waste?

Oddly the one thing that caught my eye was the list of aircraft. Namely that of 41 planes, 36 are leased and five owned. What are the five that are va owned? Is it the air Italia 747s?

The full fleet details are

http://www.planespotters.net/Airline/Virgin-Atlantic