https://captainjetson.com/featured/alaska-airlines-joining-oneworld-as-its-newest-partner/

Maybe the AS & AA MEC Chairman should get together to prevent any Management games.

Thoughts on article?

Not unreasonable imo.

 

I still see Southwest being in the mix for taking over Alaska. I still hear chatter of them looking to acquire another airline.

 

AMR’s market cap and debt prevent them from being able to purchase ALK. Right now ALK shareholders would hold 40-45 percent equity in the merged company... what AMR shareholder could swallow that pill.

 

Agreed.... for now.

 

if i'm not mistaken, a merger is different from a purchase. A purchase could look like this, if it were done with crayons on a napkin:

ALK market cap is worth $8B. AMR buys half of it for a controlling interest with $4B in debt from a bank. Lay off redundant workers from both companies and sell off redundant or unprofitable routes / hardware / infrastructure / IT. Say that's worth $500M. ALK has $1.5 billion in cash. Pocket it. Cash basis on the loan is now $2.0B.

Next, keep the pilots, airplanes, FAs, and base personnel in the new bases, and only the other profitable aspects of the business. Renegotiate labor on both sides to reduce costs. Now AMR doesn't have to train 3000 new pilots and maintainers, also doesn't need to fight for gates / routes to expand. More money there, but for now keep the basis at $2.0B.

ALK makes $790M per year. Pay off the $2B loan in less than 3 years. Then you have an airline with 18,000 trained pilots, 1278 mainline aircraft, and SFO, SEA, PDX, ANC as bases added to AMR's list.

After ALK is paid off, use the yearly profit from that purchase and from productivity gaines to continue paying off AMR's debt. Crush Delta in SEA, crush United in SFO, former ALK pilots get to fly widebodies from both.

I'm sure an actual businessman would give me an F, I'm happy to learn where I am incorrect.

 

I'm not a businessman, but I'd give you a B

 

so in this example BT and BM are gone? A+

 

I would give you an F. If you wanted to buy 4 billion in outstanding shares of Alaska, what do you think would happen to its stock price? You think another airline wouldn’t have interest if it were that easy and that cheap. The first noise of a HTO and our stock would jump 20% in a day. How many shares of ALK are normally traded in a day? If all shares are only being purchased, what happens to the stock price? There is no stealth buy either, if someone buys more then 10%, that is all disclosed publicly. If AMR bought 10% of Alaska, our market cap would quickly blow through 10 billion. Alaska can be bought any given day on Wall Street, in this environment it would probably be north of 11.5 billion.

 

I would agree that an airline that makes $750million a year with $1.5B in bank(your #s), gate space at LAX, and hundreds of planes and crews in good shape is worth more than $4B. I’ve watched a few episodes of shark tank after all.

 

It's worth around $8B. $4B buys half. You can do a leveraged buyout for controlling interest. The board would negotiate a price and liquidate the market shareholders.

add a premium for negotiations, so say $12B. Then it takes 8 years to pay off. Same results?