If there was some way Alaska could acquire American and their management call the shots yeah, but I don't think ALK has the money. Even though American's market cap is a joke the real value of the assets (even with high debt) is close to that of Delta's and United's.

 

US and AA?

 

But you don't actually have to pay for the value of the assets... you only have to pay for 50% of the shares plus one share.

Worth noting that the market caps reflects not only debt and assets, but also perceived profit potential. So you could own a lot of assets with low debt, but still have low market cap if the market thinks you don't know how to make money with your expensive toys. Especially with a large airline where you can't just auction off the parts for cash... .gov will have an opinion on the matter if you try to part out a too-big-to-fail airline in 2026.

In reality you won't get a company for exactly 50% of the market cap though... in order to actually get enough shareholders to sell all at once you need to offer an acquisition premium which is sometimes north of 50% of market price. Possible exception if one entity holds 51% and wants to get rid of it (not likely for airlines)..

 

Then why do you think it was that Alaska was never bought out? Just looking at market cap there were several years where Alaska’s cash in hand practically could have paid for company.

I experienced the acquisition premium firsthand when a company I had private shares in was acquired by much larger company. It was roughly 3x book value.

 

Is 50% really needed? or just a controlling interest? Companies are often controlled by one rather large shareholder even if that shareholder doesn't own 50%.

 

Yes, you could do M&A if there is a very small number of other large shareholders who are very firmly in your camp and can be relied on to vote accordingly. Typically institutional investors like pension funds, or private equity, but could in theory be a rich-guy individual shareholder.

But if you're buying shares on the open market to acquire a large minority position, you will still have to a pay a premium so it would be risky business to rely on other votes, unless you're very certain.

Elliot did not do M&A with SWA, but they did a big management shakeup from a minority position, by recruiting other shareholders (not too hard, they were already annoyed at management).

I think generally when acquiring another airline for purposes of integrating into your operation (that's the norm due to scope) you would absolutely want a controlling interest so that you have complete freedom of action to make any and all changes. Don't want to risk other investor groups possibly vetoing certain parts of your integration plan.

Also the controlling interest threshold in some cases can be higher than 50% for purposes of approving major muscle movements. Depends on state law and also the way the company is structured... just because you *own* 51% doesn't always give you the right to dictate to the other 49%.

 

That's a good question, and I think the answer is complicated.

I think AS has some ties with Boeing. It is opaque to us peons what the exact nature of that it is, but I think other airline managers have a better idea.

There are corporate raiders who buy up unbalanced companies just to liquidate and sell off the parts. But that's not something you can do with any large airline in this era... too big to fail is also too big to get severely disrupted. So while AS might have a pile of cash, that's not really going to be of any value to raiders... they would need the cash to operate the airline, which is something they don't know how to do and don't want to do.

Airlines are quasi-public utilities in this era... you can own it but there limits as to what you can do with it.

When another airline buys an airline, it always seems to be pre-coordinated with large investors and BoD. You're not likely to be buying retail shares on the open market, you just get some larger investors to sell enough large blocks to shift control. That will normally still be at a premium, but it's negotiated in advance, not a bidding frenzy on the NYSE.

Trying to do an uncoordinated hostile takeover doesn't seem to be common with airlines in this era.

 

Whoever AS merges with in the future (B6, AA, WN) then it will be the AS team leading the combined carrier. Perfect opportunity for the AS C-suite to really grow to a much larger carrier. Personally I think it will be AS+AA.

 

It would absolutely be the strong preference of the AS team that they be the ones to keep their jobs.

But that probably precludes AA. Although Doug pulled it off. I don't know if the AS team would be willing to move to Dallas... they're pretty marinated in their SEA/PNW lifestyle and culture. Look at the resumes of the leaders, where they've worked, where they went to school. Definitely the SEA home team.

Although Boeing might approve of an AA acquisition.

 

No thanks. Most legacies are (mostly) doing just fine and a merger certainly won't help any of their pilot groups.