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Originally Posted by AK26
(Post 4001457)
Nope, the CC income is a continuous income source that is part of/deeply integrated into their airline operations. SLBs are a non-operating revenue source that will go away once the order is fulfilled...SLBs are not a strategy for an airline, and cannot be capitalized -- they are valued separately as a limited-time cash flow stream.
Just for context on the SLBs, the revenue that is booked is the gain on sale, not the price of the sale: lets say they purchased each plane at an average price of $35M at the market lows during COVID, and the market value for each now averages $50M...they can book $15M in revenue. However, lease rates are tied to current market values, so Frontier's leasing costs go up...lessors are financials businesses and they are generally not buying planes (even in a competitive SLB market) if they don't see a good return on them. The proper way to account for SLB revenue is to separate them from the airline operations business, and to value them as a one-time stream of cash flows. At a high level, with rough numbers and assumptions, let's say you believe the average airline should be worth 6x their profits (lets use EBITDAR in this case), and that Frontier is no different than the average airline in terms of what it should be worth as a business. If Frontier's EBITDAR in a normalized scenario is $700M, then the company should be worth $4.2B. Let's say you spread the cash flows from the SLBs and come up with a value of about $1B for the SLBs...now you have the company as worth $5.2B. To get to the equity value you subtract the debt (including leases), let's say approximately $5B...you get just $200M left for the equity. Instead, if you don't separate out the SLBs and treat them as normal earnings...you would be adding ~$300M to revenue with little to no costs, which you would then be capitalizing at 6x, as if it is recurring the same way your normal airline profits are. That would leave you with $1B in EBITDAR, giving you a $6B value and $1B for the equity... To put it in another way, imagine you own a small manufacturing business that generates $100k in profits every year. 10 years ago you purchased a factory for $1M, and now that factory is on prime real estate for data centers, and you get an offer to sell that factory for $11M. You sell and book the gain-on-sale profit of $10M (ignoring depreciation). Do you think that your business should be valued like a business generating $100k in profits per year or $10.1M in profits per year? Yes the Q2 & Q3 results were highly concerning. Q4 is in the right direction but looks to be an operational loss still without the SLB. Unsustainable. A business model the depends on high utilization without being high utilization has a major problem. This is also with pilots being paid substantially less so even more concerning. I believe the enterprise value lies more in the fleet itself. New planes and engines are still a premium. We have an average age under 5yrs and, so far, a very large order book over the next 5 years. If you need to ramp us size quickly we are a way to do that. I did find it interesting that spirit had some of their 320 CEOs for sale for a while and couldn’t move them. Yes they were still being financed but I found that surprising nonetheless. I’m not sure if JetBlues goldie oldies are as valuable as we presume anymore. |
What is the best case scenario for Frontier?
Seems to me that a right-sizing of the airline and multiple years of flat YoY after is likely. This business is not sustainable and won’t be growing for a long time. I feel for the pilot group and wish we could all just get up and leave but I know that’s not exactly easy. It’s a bummer. I once was so excited to come here and had such pride to work here. |
Originally Posted by RStrawberry
(Post 4001552)
What is the best case scenario for Frontier?
Seems to me that a right-sizing of the airline and multiple years of flat YoY after is likely. This business is not sustainable and won’t be growing for a long time. I feel for the pilot group and wish we could all just get up and leave but I know that’s not exactly easy. It’s a bummer. I once was so excited to come here and had such pride to work here. |
Originally Posted by shrsailplanes
(Post 4001555)
new hire classes postponed until further notice
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Originally Posted by CGLimits
(Post 4001561)
Is this true?
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Originally Posted by CGLimits
(Post 4001561)
Is this true?
I am assuming we are losing a lot, but also that they want to bring back more T/W flying and high utilization. We will hear on the earnings call |
Originally Posted by shrsailplanes
(Post 4001586)
The COLA bid just came out.
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Originally Posted by RStrawberry
(Post 4001592)
troll. Lol
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Originally Posted by RStrawberry
(Post 4001552)
What is the best case scenario for Frontier?
Seems to me that a right-sizing of the airline and multiple years of flat YoY after is likely. This business is not sustainable and won’t be growing for a long time. I feel for the pilot group and wish we could all just get up and leave but I know that’s not exactly easy. It’s a bummer. I once was so excited to come here and had such pride to work here. It's so sad but what makes a good company is SO dependent on what makes a good leader. Barry wanted to MARKET a way to success w/ gimmicks and silly ads. What we need now is an actual decent product that's on time, that provides exemplary customer service and that people want to patronize because they know that if/when something goes wrong, they'll be taken care of and not be hassled or even further disappointed. Honestly, w/ our size, it really shouldn't be that hard. It WILL take some monetary investment (which I dont think Indigo is down with). So far, I haven't heard one thing about us changing mentalities, about hiring better gate agents and ticket counter personnel, of changing the network and configuring time between flights/layovers that don't create automatic conflicts or anything of the sort. But I have heard about another silly marketing campaign that seems poised to convert very few (if any) people to loyal customer land. |
Originally Posted by dracir1
(Post 4001748)
Not being cliche but . . . IT ALL DEPENDS. Is Dempsey a good/innovative CEO or is he another Barry? Or worse?
What we need now is an actual decent product that's on time, that provides exemplary customer service and that people want to patronize because they know that if/when something goes wrong, they'll be taken care of and not be hassled or even further disappointed.. this is the ONLY thing that will save the glitter coated turd that is F9! AND treat your employees like VALUED workers…. ie: industry contract |
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