Originally Posted by
FriendlyPilot
Thanks for the great analysis. Very succint and accurate.
I have a question about the above part from your post.
If Spirit is losing $90M per month as the OP (Halon) suggests, do you believe that anyone would want to acquire NK in its entirety and have to foot that ongoing loss, or greater losses? Do you believe that there are "synergies" that are significant enough to override such a monthly loss? To put this in perspecetive, Frontier hasn't made over $90M in an entire year since 2019, which was 6 years ago.
What advantage would it give to any other airline to acquire NK in its entirety with what's going on in the economy?
Do you believe the new owners think NK is worth more as a whole or sum of its parts?
I calculate operating synergy offset of a Frontier merger to be about 20-30 million against our cash burn, at best. Maybe 35 million in an absolutely ideal scenario.
Even if our monthly cash burn was only ~$50 million, that would be a ~$20 million deficit monthly, ~$120 million deficit in a year, which dwarfs Frontier's profit. Best case.
That being said, Frontier deal could still work with the same equity swap concept which would reduce our debt and therefore debt payments and reduce that deficit number considerably. That's why they have still made some offers. The numbers on this are super super tight though, and that's why their lowball merger offers have been rejected by our bond-holders so far.
The sentiment I'm tracking is that Frontier would rather not deal with a merger and just buy our jets at a discounted rate unless they can get a sizeable reward/discount from our bond-holders for taking the risk and headache of a merger. If our bondholders get spooked (if they are not already), they may make that move. Or they may just trigger liquidation before we burn through all of the cash they just gave us. The sooner they liquidate, the less money they lose, but then they have to sell off everything, which is not as attractive to them as it was even 12 months ago.
Originally Posted by
Alexjones
Nice information thanks ! I figured the airline wasn’t out of the woods yet.
So do you think it’s the business model that doesn’t work, or just an over saturated market place?
Broken for the oversaturated condition. Most business models aren't broken in a vacuum, but we are not in one. The carriers with stronger balance sheets will do what they can to promote a somewhat oversaturated situation during the downturn to take market share and eliminate competitors. We can't compete by trying to undercut them on price, which is why we are trying to shift away from being a ULCC. Will our business model shift work in time? I'm unsure.