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Proud Victorian!
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Virgin blues: airline could go bust

http://business.theage.com.au/virgin-blues-airline-could-go-bust-20080605-2m49.html

Virgin Blue will go bankrupt unless it can dramatically raise airfares, if fuel prices remain at current levels into the longer term, JPMorgan has warned.

Days after the broker UBS warned the airline could need a cash injection from its shareholders in 2009-10, if jet fuel prices fail to retreat, JPMorgan said a capital raising would be "pointless'' and would fail to keep the airline solvent.

"A 5% [air fare] rise is not enough to cover fuel costs. A $500 million equity injection would buy some time in hope that fuel costs fall but if fuel did not fall Virgin Blue on our analysis would eventually become insolvent despite the equity injection,'' the broker said.

If fares do not rise, JPMorgan predicted the airline's negative cash flows would result in its net debt to spiral from $1 billion to $3.2 billion by 2015.

The only way to "save the company'' JPMorgan said would be for Virgin Blue to impose a 10% fare increase.

"While we would expect Virgin Blue to survive under this scenario, its earnings profile hardly looks attractive,'' the broker said, noting the airline's profit would never reach its 2006-07 record net profit of $232 million.

Even in this situation, JPMorgan said Virgin Blue would post a meagre $30 million profit next financial year.

The main obstacle Virgin Blue has in raising fares is the likely impact of demand and its ability to fill its growing fleet.

If Virgin Blue raises fares, it could be forced to cut some aircraft out of its fleet to deal with the likely fall in demand. The airline has 33 jets on order.
 

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Champagne Socialist
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that's about the forth time you've had a bit of brain-*** when rushing to post articles. disturbing trend.
 

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Champagne Socialist
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11,953 Posts
well use your fucking brain for once and maybe I won't?

hey hey hey, clap clap for the handicap!

What's really funny though, is that you started the original thread that you should have posted this in, and I do believe that it is about the 4th time you've completely forgotten about it. Hint: you can subscribe to your own threads, go figure out how to set it up.
 
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