The uncertainty of the merger is really going to hurt the stock and the financial performance. Hopefully the trial goes quickly, but what happens when the russians in congress shut the government down in a few weeks? Does the trial stop?

 

They're saying 20 days for the trial, so a potential shutdown shouldn't affect things in that regard.

 

If you think these stock prices are “priced in” that a merger will be rejected, think again. Estimates from firms have NK between $4-$5 if it fails. So this is far from how bad it can get.

But if you think market cap represents the value one pays for an airline, that’s incorrect. All airlines were rock bottom pricing in Covid, you think the legacy airlines were worth that at the time and now higher now?

You can’t just take an elementary approach to valuation, based on a number at the bottom of your Google finance feed.

 

Ok, so what’s currently going on in the market doesn’t matter at all? Got it. “Nothing to see here folks, move along.”

 

It reminds me of the big idea companies on shark tank that don’t make money and come in w high valuations and say they expect to burn $X in cash and then raise money in the future again. Some end up being quite successful and some don’t.

I feel like I can see the vision here at the merged company. Yeah it will take time, some bumps in the road, and yes more money but I think it will work.

No merger and both companies are straight F’d

 

Basically, yes. Unless you’re day trading it doesn’t matter as we march to an ultimate decision and outcome. The merger can be approved and NK stock goes to $32 overnight, did NK suddenly become profitable and problems are gone? Must be, their market cap just increased 4x. Haha. Nope.

But using your logic, NK is worth more than JBLU based on your market cap assessment.

 

Well. -sort of. It’s doubtful either company would go Chapter 7, although that’s not impossible I suppose, but both would sort of be locked in to a not-huge niche market. What woukd certainly be lost is the possibility for either of them to really get up to a scale where they could meaningfully compete against the Big Four. And that’s “compete” in the global sense, meaning not only compete for customers but compete for new hires and retention of junior people as well. What B6 would bring to a merger is organization, because they actually have one. It may not be the best and brightest but to say they would be better than NK management would be damning them with faint praise indeed. What NK brings to the table is a very young fleet, a serious near-term delivery order book, and their pilots and FAs.

Point to point flying will always be there, but it’s a niche. A lot of people need transportation that will depend upon hub connections and frequency of flights and a reliability you aren’t going to get unless there are prompt backups if something goes wrong.. H€||, pilots know that. Damn sure those of us who are commuters do.

So, are B6 and NK “straight F’d’ if this doesn’t go through? Not exactly, but they will be blighted. NK will have even greater problems competing for new hires and, as the Big Four increase their capacity, any chances for anyone else to successfully challenge their dominance will sort of go away.

it’ll be a damn Phyrrhic victory for the DOJ if they win this court case.

 

NK market cap is where it is in hopes JB does come through and grossly overpays to retire NK stock. As you said, NK valuation would be significantly less if it wasn’t for this potential windfall. Next, JB has to finance that debt at market rates which is significantly higher now than it was when JB put this deal together. Likely least of 2 evils is to cut the 400M check and run away.

 

They are showing no signs of doing that...

 

Is it time to get your houses in order yet?