Reading the press on the QAN downgrade yesterday, you'd have to see some positives for VBA in what is a pretty bleak overall aviation picture.
Business Mix
Look like a couple of factors playing into VBAs hands here, international traffic for QAN is dragging down it's overall network profitability i.e. domestic travel holding up - VBA revenues heavily biased towards domestic and regional short haul.
Front of the plane yields are severely down - again no problem for VBA domestic and short haul regional one class service.
777's vs. 380's
V-Australia (and Delta) has pretty much slain the Pacific cash cow for QAN. It is classic Osama Bin Laden vs. USA strategy i.e. it will cost me $10 million to start a fight that will cost my enemy $10 billion to prosecute. I know I'd rather be trying to fill 777s at the moment rather than 380s or 747's and the flight to value is at play here as well. If they had their time again I bet VBA wouldn't launch V-Australia but it is definitely landing some punches at QAN and gives QAN less ammo to cross subsidise routes where they do compete. I think South Africa is the next cash cow to be slain.
VBA Price at posting:
28.7¢ Sentiment: LT Buy Disclosure: Held
