Anyone with interest should compare VAH to RyanAir.
Main differences IMO are Corporate Overheads running the business and the mysterious $674M of "Other Costs". From what I can see, RyanAir is probably double the size of VAH. Ryan's airport fees and fuel costs for 2019 appear to be higher than VAH. VAH staff costs are more, but it appears corporate staff costs are a high % of the $410M in corporate overheads (annualised from Dec HY2019). This must be affecting the ability of VAH to compete as it reflects in wages in comparison to Ryanair. Also comms and marketing need an overhaul if this is a $500M + cost per annum for this business.
Overall, there is no reason why VAH cant run at a 20% margin including debt servicing, (similar to Ryanair margins) provided the PAX numbers return. Anyone who takes this on is a no brainer to get rid of ineffective corporate, slash dud routes (ie. International routes that are not serviceable with 737s and clearly are not profitable), get rid of Tiger, it just dilutes the market, reduce staff costs (mainly corporate) and compete head-on with Jetstar on pricing and servicing. The business pre-COVID19 still produces good revenue domestically.
Please note this is not investment advice, do your own research.
Operational Costs
VAH (AUD)
Ryan (AUD)
E to AUD
Cost Reduction (Based on Ryan Air)
FY EST
% of Revenue
1.538462
Airport Fees
Remove ineffective Airports
1184
19.0%
2778
23.5%
1
1184
19.0%
Maintenance
No Change
244
3.9%
292
2.5%
1
244
3.9%
Fuel
No Change
1290
20.7%
3734
31.5%
1
1290
20.7%
Wages
Corporate Restructure / Reduce by 20%
1420
22.8%
1514
12.8%
0.8
1136
18.2%
Commissions and Marketing
New Strategy / More Cost Effective
502
8.1%
842
7.1%
0.9
451.8
7.2%
Aircraft Rental
Increase Leasing
4
0.1%
129
1.1%
17
68
1.1%
Non_Op Costs
0
Other Costs
What is $674M of other costs?
674
10.8%
0
0.0%
0.02
13.48
0.2%
Finance
Re-finance at 8% Convertible Loan
410
6.6%
92
0.8%
1.1
451
7.2%
Cost to Operate
5728
9382
4838.28
Profit
8.1%
20.8%
22.4%
VAH Price at posting:
8.6¢ Sentiment: None Disclosure: Not Held
