Originally Posted by
Carl Spackler
10 billion in break up value is a pipe-dream in my opinion. These assets require the burning of fuel at nearly $130 a barrel, thus funding for such an adventure would be extremely difficult to find in this zero credit environment.
I think this merger is very much in the interest of DAL. Adding Pacific routes and 3.5 billion in cash is absolutely critical for DAL, but not for NWA. We are smaller yet we have equal unrestricted cash. Since our burn rate is much lower than most, NWA will be able to outlast most airlines if the game turns into one of endurance. If DALPA really wishes for the Pacific routes and cash with the fewest pilots possible, this merger is definitely NOT in the interest of NWA pilots. With the new legislation preventing unfair SLI's, American might even be a better option for NWA pilots. A lot of this will depend on the ACTIONS of DALPA going forward - we've all had enough of talking.
I think the biggest hurdle to this merger is the current DAL stock price. Since this is a no cash/stock swap deal, the lower DAL's stock price, the lower the value for NWA shareholders' investment. This could rapidly get to the point where NWA shareholders vote NO on the merger. This would require DAL to add cash to the transaction, and they simply can't afford that right now.
I think this deal is in increasing danger. Just my opinion.
Carl
Current Morgan Stanley airline position paper.
US Airways, Northwest and United topped the investment bank’s list of airlines likely to file for Chapter 11 unless market conditions improved dramatically, followed by American, JetBlue, Continental and AirTran. Delta, Alaska and Southwest, they wrote, are the least likely to be calling their lawyers anytime soon.
But wait, it gets gloomier, and Baker et al get all bearish - literally:
If it sounds as if we are panicking, it is because few managements appear to be.
Industry liquidity is admittedly abundant right now, and there’s always the possibility that fuel prices plummet. When challenged, several managements now concede that business plans rest on little more than outrunning the bear – you know, if one is hiking with a buddy then neither has to be faster than a marauding bear, only faster than his or her companion. While ‘outwit, outplay, outlast’ may provide entertaining fodder for reality-TV types, it is customarily accompanied by value destructive behavior coming at the expense of stakeholders.
To paraphrase a line from Jurassic Park, current cash balances may be met with the usual “oohs” and ”ahhs,” but later comes the running . . . and the screaming. Or so we fear