Originally Posted by
BenS
Well, you can't just use F9 as one example for the whole industry, you'd have to consider everybody.. but using them as a great example..
If F9 wanted, let's say, Newark gates and landing slots, and United wants them too, would F9 win such a bid? If they wanted to part in the Airbuses that we own, and say DL wanted them too, would they win that bid? If they just wanted to take over our leased planes at renegotiated rates, and the lessors can also sell to carriers in Europe, Africa, Asia.. would F9 win that bid? No.. and even just assets like pilots.. say they somehow bought every Spirit plane and wanted to "new hire" every Spirit pilot.. when AA, DL, UA, AK, and WN fight for the best pilots.. does F9 even get pilots they want if they got the planes? No..
So if the plan is to "takeover" Spirits flying or grow organically, where does that come from if they win no bids for Spirits assets? Get outbid by someone for everything?
So again, don't consider this from the view of one boardroom.. only one person can win each asset.. given the number of US airlines that may bid for, certainly our high value assets, all I've said is it creates incentive to merge instead of losing every bid for every asset.. and consider more than just one airline would have to be thinking about that right now..
Really well though out and articulated Ben.
I think what would be the driving force against a full on acquisition would be that all the assets are worth different amounts to different airlines. Just like American wanted gates in ORD, so they bought some from Spirit. American didn't want to buy the whole airline. They just wanted one thing, more ORD gates I'm sure United also wanted those gates and maybe even Delta, but American was willing to pay more. I don't know that any one thing is so valuable that the entire airline would be worth purchasing.
Bottom line is that if F9 wants EWR gates, and can't afford to outbid United for those gates, they aren't going to be willing to outbid everyone else that would then purchase the entire entity just to get access to those gates or whatever assets they want.
Also I am aware that there are people that think of the magical "363 sale" that someone else will get get everything and wipe out all the debt, but the creditors have to approve that. Given that Spirit just sold two gates at ORD to AA for $30M ($15M each) that leads me to believe if the remaining assets could be sold for say $1.5B (I'm guessing), meaning the creditors would be better off financially to just sell everything piece meal instead of letting someone else buy it cheap and allow the debt that's secured by those assets to be wiped out. The "pennies on the dollar" crowd are leaving out that a liquidation might only give them 75 cents on the dollar but a 363 asset sale only 10 cents. If you were one of the creditors would you let the assets go just to keep the entire airline going? Why would you care. You wouldn't have an ongoing interest either way. You certainly wouldn't want any Frontier stock that would get wiped out in their BK.
The ORD gate sale, which I didn't know about, seems like a canary in the coal mine. It signals that the "parts are greater than the whole" and makes it less likely that someone else would want to come in an inherit a fragmented network.