Turbulence in the VS Results for 2012/3

According to the Sunday Times VS is heading for a near record loss for the last financial year - pay freezes and cuts are planned as a consequence. I should the JV with Delta can't come soon enough ...

Extremely worrying -- JV approval probably a year away yet, VS already running behind the pack, freeze on pay will further demoralize staff, previous cut backs have already been disastrous as they are being seen and felt in all cabins. v(
Investment not cutbacks urgently needed in marketing [not promises but factual], frequent flyers are leaving in droves this urgently has to be addressed and of course investment and probably a new broom in the IT dept.

http://www.youtube.com/watch?v=TnfKmNRfLYU

The Sunday Telegraph article mentions £40m of cost cutting. That can only be bad news for passengers.

Obvious (but clearly unwelcome) cutbacks could include Clubhouse service being trimmed back drastically (even, perish the thought, to something akin to a US lounge), the end of the second meal service on all but the longest flights and the introduction of paid-for seating requests.

It's all very well saying they should invest rather than cut back, but when you're on course to lose £135m that's easier said than done. This is extremely worrying.

Just seen this headline whilst having a Costa...very worrying results and concern for e future SRB is no idiot though, so surely has a positive plan up his sleeve 8D
SELL SELL SELL ):

[Darren Wheeler]

£110k a day to save.

Unprofitable routes
Payed seat requests - works for others
Time limit on Clubhouse unless on thru-ticket
Redundancies
Pay freeze
Bye bye ammenity kis

How much of that loss is down to the LGW refits and the costs of setting up Little Red?

Other forums mentioning how acutely VS felt the loss of bmi.

Here's hoping Little Red restores feed to the Long Haul operation.

[buns]

The Times article pulls no punches and one can only hope that a clear strategy will allow short term pain to become long term gain

buns

Gumshoe wrote

It's all very well saying they should invest rather than cut back, but when you're on course to lose £135m that's easier said than done. This is extremely worrying.

Totally agree with you Gumshoe but investment does not have to be monetary but people led, IMHO VS has been mismanaged for a while now, I know we are in the deepest/hardest recession in living memory but that is no excuse for the amateur way it is run, its IT section is a disgrace and its failures must be losing many customers, customer service is too lengthy and impersonal in its replies, I could go on but feel these are the areas Craig Kreeger needs to address ASAP.

Gumshoe wrote

It's all very well saying they should invest rather than cut back, but when you're on course to lose £135m that's easier said than done. This is extremely worrying.

Totally agree with you Gumshoe but investment does not have to be monetary but people led, IMHO VS has been mismanaged for a while now, I know we are in the deepest/hardest recession in living memory but that is no excuse for the amateur way it is run, its IT section is a disgrace and its failures must be losing many customers, customer service is too lengthy and impersonal in its replies, I could go on but feel these are the areas Craig Kreeger needs to address ASAP.

If these figures are right, VS has a real problem. What this needs is not cost cutting, funnily enough, but a complete change of strategy.

I'm involved in the industry, and do a lot of turnaround work. Losses like this suggest something is fundamentally adrift - not just costs running away. I've posted before about how my perception was that VS were focusing more and more on the VH type traffic, and less and less on the premium paid traffic. It looks to me as though this is coming home to roost. Network carriers like Virgin do not make money by appealing to relatively low yield passengers, such as the one or two trip PE holiday maker. Yes, these folks are important, but unless you can keep hold of the "five returns a year in J class" sort of passenger, you have a REAL problem. And from reading these fora, and from personal experience, this is where VS are getting it wrong. BA get this, which is why they spend so much on the premium cabins, and so much time on maintaining their relationships with the Au/Ag folks in Executive club.

I'm gold with VS and with EK. EK call me now and again, mainly after a flight, just to see how I feel about them. They make a point of greeting me by name when I am on board. When I have an issue, I get a call from them to make sure it has been resolved. VS don't seem to care, and don't even answer my emails now. Couple that with my recent bad experiences with VS, and that's why I don't fly VS anymore, and am on my way to the new Emirates Skywards Platinum level.

I hope the new CEO really kicks butt in this area - and in IT. Keeping the high yield customers you have is turnaround 101. It is sooo much cheaper than getting new ones. Let's hope they don't just take the fool's way out and slash costs - and hence service - and hence premium customers.

How much of that loss is down to the LGW refits and the costs of setting up Little Red?

That's a good question, and it should remind us that (I assume!) none of us knows the underlying profitability of VS at the moment.

However, as someone who has not (yet) jumped ship, even I am starting to fear for VS. The cutbacks are so palpable now, they are in danger of dragging the airline beneath its competitors. And what do we have to look forward to? A joint venture with a US legacy carrier? :0

I also worry about the UK short-haul service. Is this going to make money? I have my doubts.

VS still seem to have a healthy cash balance so I dont think there is a risk of them going away in the next 5 or so years.

I also feel they came to the consolidation / alliance party a bit too late. Hopefully they will join Skyteam and have some extra business coming there way through little red and the Delta JV ans once more cash comes rolling in it is used to improve product and technology.

If they have a cash pile, why do they need Skyteam/Little Red income to let them invest?

Either they don't have the cash, or they have lousy management who have got the strategy wrong. If they want to become a long haul Thomas Cook they are going that way, in every sense.

According to the Sunday Times VS is heading for a near record loss for the last financial year - pay freezes and cuts are planned as a consequence. I should the JV with Delta can't come soon enough ...

Slinky, you will just have to fly more!

If they have a cash pile, why do they need Skyteam/Little Red income to let them invest? .

Presumably the have a cahs pile now that can allow them to survive the next 5 or so years but they need the new cash to further invest and secure a long term future I would have thought.

Either they don't have the cash, or they have lousy management who have got the strategy wrong. If they want to become a long haul Thomas Cook they are going that way, in every sense.

Lousy management - yes I believe wridgeway has been an uninspiring leader and quite useless to be honest. Lets hope there is change with the new CEO.

it is also worth noting in the past 18 months there has been a change in strategy vs being a p2p carrier to trying to become an aligned network carrier IMHO.

Sadly, if they don't use the cash they have to invest, they will just chew through the cash pile. The way they are going is a spiral dive - cut the quality, lose high yield customers, losses rise, look for savings, cut the quality - and round and round you go until the earth rises up to smite them.

I don't see any evidence that they are becoming more of a network carrier - quite the opposite. More and more like an IT operator by the day.

Let's assume Craig Kreeger knew exactly what he was getting himself into (even from his experience with AA in London). In my opinion (as a loyal but increasingly disenchanted VS fan) 1) the sooner 2-class A330's replace the entire LGW fleet and VH is reconstituted as the Caribbean market leader the better (the refit was pointless and expensive); 2) any downgrading of Clubhouses and the whole UC experience risks undermining the most positive point of differentiation in both hard and soft product with BA NCW; 3) targeted marketing should focus on the clear superiority of VS PE over BA WT+; 4)Premium pax and VFC Gold members should be nurtured and retained by entitlement to better redemption rates that neutralise attraction of BAEC MFU etc; and 5) VS at LHR urgently needs a non-aligned codeshare partner to African/Asian destinations to feed its TATL routes as well as a return to LHR-YYZ and new routes to SEA and GRU.

A lot there I agree with, VSCXFan. But just a thought - why is VS trying to ride two horses? Either be a premium network carrier, with three class aircraft, a decent FFP with stronger Au (and Ag) benefits, and connectivity (especially at the current dead ends like DXB and I would guess YVR) - or become an IT operator, two class, no need for an FFP, lease the slots at LHR out for cash, and focus on the destinations that VH want.

Very hard to do both.... One of the main reasons bmi went down was its attempt to be all things under the same roof - a regional, a full service long haul carrier, a European hub operator and a low cost.

When you chase two rabbits, you miss both...

In my view VS lost out badly by not having the imagination to work out the right bid for BMI. While I could see the difficulties for VS, buying BMI then selling half the slots and half-sizing BMI to feed VS would have been my plan. Selling slots would fund the restructuring. But what do I know - well I do know that losing BMI feed has hurt VS a lot, as has the BA / AA joint venture. Thirdly I do sense from others that VS has not really been looking after its premium passengers like other airlines have - not speaking from personal experience and my last TR was near 100% positive, but I do hear this from other people. While we do get frustrated with VS's IT and web site (another issue on the list to deal with), BA is really getting its act together and I feel hurting VS.

There's lots for Mr Kreeger to address and good luck to him, I hope he is moving things forward, not just cutting.

I have read the internal memo in question and it is quite clear that they are not cutting the front line services. Yeah, they will change some routes, but really, the memo mentioned fuel efficiency, software efficiencies and making office staff far more productive as key areas. This equates to £50m in cuts, which is only about 2% of revenue. They also plan to increase revenue by £50m, equating to £100m of 135m. Considering that the loss in cargo is about the difference, the market for cargo may be improving, plus the Delta/short haul/Skyteam deals, will probably exceed 50m in benefits.

I was pretty close to a lot of the bmi corporate takeover stuff; whilst you are correct in that bmi was really needed by VS it was never going to happen. The liabilities at the former would very likely have killed the latter, and no-one was in any hurry to fund the deal. BA got it as the 'buyer of last resort' - it took someone with critical mass to deal with that shambles, and VS just doesn't have that critical mass.

[Darren Wheeler]

Be interesting to see what the current load percentages are on all route.

I wonder how much the drop in travel around the olympics hindered them.

More interesting stat is yield - and no-one outside VS and the CAA will know those...