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After Acquiring Frontier, Republic Airways could be target for Southwest Airlines : Small Cap Stock Analysis : Small Cap Stocks and Penny Stocks For Big Returns - SmallCap Network

After Acquiring Frontier, Republic Airways could be target for Southwest Airlines

By Jonathan Yates
Published: May 12, 2011 4:38:11 AM PDT

Now that Republic Airways (NASDAQ: RJET) has acquired Frontier Airlines, it becomes an acquisition candidate for Southwest Airlines (NYSE: LUV). Following its tradition of expansion that is low in cost and high in effectiveness, Southwest Airlines bid $113.6 million for bankrupt Frontier Airlines when it went into an economic tailspin. But
Republic Jet bested Southwest Airlines, adding Frontier to its fleet.
In December 2008, Southwest Airlines bought the landing slots at LaGuardia Airport in New York City from ATA Airlines. Recently, Southwest Airlines fully assimilated AirTran into its company. Southwest Airlines is now the largest carrier in the country in terms of passengers flown. Southwest Airlines only uses the Boeing 737, which minimizes maintenance and upkeep costs. There is a very customer service oriented culture at Southwest Arlines with no change fees, free drinks and snacks, no baggage charges, and an easy to operate website with a generous frequent flyer program.
With the Great Recession dampening air travel and higher fuel costs, Republic Airways is trading near its year low. The present earnings per share figure is a loss of 44 cents. Income growth is down over 134.90 percent for Republic Airways. There is a very high percentage of institutional ownership. This ownership structure would like nothing more than to have their investment maximized in Republic Airways through an acquisition by a stronger partner, such as Southwest Airlines.
Southwest Airlines has long expanded on a strategy that acquires assets from failed airlines at a low cost. Delta Airlines has spent about $2.35 for every dollar of shareholder value acquired through mergers and acquisitions. For Southwest, Airlines, the tab has only been three cents. The recent purchase of assets from ATA Airlines and AirTran are two such examples. This results in a significant competititve advantage for Southwest Airlines. For these reasons, Southwest Airlines has been the only profitable carrier in the United States for over 35 consecutive years.

goaround2000

A target via elimination maybe! I simply don't see SWA chasing anyone else any time soon, seeing as they're preoccupied with the Airtran merger.

acl65pilot

RJET wants to be a target. They will do whatever they can to get swallowed up by UAL, DAL or LUV. It will come down to whether or not it is just cheaper to put em out business and avoid the labor issues or buy them and deal with the labor issues.

gloopy

I also doubt this will happen, but it would be very interesting to see Kelly nuke the SWA culture by risking a massive land grab for SWA seniority numbers by a cut throat low bid regional.

Rolf

Jonathan Yates must own RJET stock or maybe he smokes funny stuff.

toomanyrjs

Southwest has already beaten RAH. They just need to wait for the bankruptcy filing. Why on Gods green earth would SWA want to buy [Mod Edit: delete unflattering flamebait] What assets could RAH have that would even warrant a second glance from SWA?

hockeypilot44

Southwest is not going to buy Republic. Republic has too many aircraft types and too many small aircraft. That's the very simple explanation.

sticky

.....I bet you build model airplanes on your days off, dont you?

Anyway...of course its highly...HIGHLY...unlikely SWA would actually purchase RAH...but the reasons are not why you think.

Investors know why RAH is floundering.. [Mod Edit: delete] Investors know its the management that is failing the company. RAH is not the blockbuster of the airlines, which fundamentally cannot continue or compete in future, but instead has some very strong advantages that simply need to be organized better.

RAH shouldn't and probably will not continue under its current strategy....but maybe someone else will correct the issues..

AtlCSIP

SWA is not in the habit of acquiring anything that they can't control, and being a subcontractor subject to the whims of a mainline partner is too far out of their control. Also, they have spent 40 years building a corporate culture that is nothing like the one at RAH, which would have extremely detrimental effects on the entire SWA operation. Without Divine Intervention, SWA will not take make a bid for RAH.

Panama Jones

If SWA was at all interested, it would not acquire Republic but instead just the Frontier unit. Plain and simple. However, I think the author of the article had too much free time on his hands and decided to make something up.