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Virgin Australia Holdings Limited (ASX: VAH) is a part of the Virgin Group, one of the highly respected global brands at the present time. The company belongs to the aviation sector and has a wide fleet of aircrafts for domestic and international journey.
On 30th April 2019, the company announced that it has entered into an agreement with Boeing to restructure its Boeing 737 MAX aircraft deliveries. The decision for the restructuring of the aircraft, came after the company restructured its order book.
The decision would reflect in the postponement of the delivery of its maiden Boeing 737 MAX aircraft from the previously scheduled November 2019 to July 2021. It would also result in the conversion of an additional 15 of its 737 MAX 8 aircraft on order to 737 MAX 10s.
According to the agreement, the company will receive the delivery of its initial 737 MAX 10 aircraft in 2021, with the first 737 MAX 8 planned to arrive in 2025. Further, the restructure would help the company to delay the current capital expenditure and provide an access to the superior economic benefits of the MAX 10 aircraft.
CEO and Managing Directorâs statement
Mr Paul Scurrah, CEO and Managing Director of Virgin Australia stated, that he was happy with the company reaching towards the deal with Boeing. It would be able to convert a further 15 of its Boeing 737 MAX 8 aircraft to MAX 10s and postpone the delivery of its order until July 2021.
He further stated that for the company, safety was always the number one priority. The company would not introduce any new aircraft, before the complete satisfaction concerning the safety of the aircraft has been obtained. Further, the company has shown confidence in Boeingâs commitment to returning the 737 MAX to service in a safe manner.
The revised timings will lead to the positive commercial benefits for the company, which includes the delay of capital expenditure by extending the use of existing aircraft, as the company contains a relatively young age of the aircraft fleet.
According to the company, 737 MAX 10 aircraft is the ideal fleet type to meet many of the companyâs commercial and market requirements. The aircraft is the largest of the entire 737 range which allows for greater capacity leading to higher operating efficiencies.
Boeing 737 recent crashes
The above-mentioned restructure of the aircraft has come after the two severe Boeing 737 MAX plane crashes (of Ethiopian Airlines and Lion Air) which killed hundreds of people in both the flights.
In October 2018, Lion Airâs Boeing 737 MAX 8 crashed and hit the water, killing 189 people onboard. Another crash was reported after a few months from Ethiopian Airlines involving Boeing 737 Max, which also killed the people onboard. The two consecutive crashes in a few months ignited a global concern regarding the manufacturing fault in the aircraft. Many aviation companies took steep measures including American Airlines, which has cancelled all Boeing 737 MAX 8 flights from June till the mid-August 2019
On 13th February 2019, the company announced 1HFY19 results in which it reported underlying PBT of $112.3 million.
Technical outlook
The market capitalisation of the company is A$1.56 billion. The 52- week high and low of the stock is A$0.25 and A$0.17 respectively. The stock last traded at a price of A$0.180, down by 2.703% compared to the previous closing of A$0.185 (as on 30th April 2019). In the last six months, the stock has delivered a negative return of 7.5%. However, in the last 5 days it has given a return of 2.78%.
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