Italianflyer
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WN Downgraded by Stifle based on aquisition speculation

Mon Oct 21, 2019 8:46 pm

The DBJ says that WN has been downgraded from 'buy' to 'hold'' by Stifel analysts saying that MAX problems may force them into another aquisition.

I see allot of flawed logic here but whatever.

https://www.bizjournals.com/dallas/news ... ition.html

"Southwest Airlines was downgraded from "buy" to "hold" by an investment bank based on speculation that it might look to solve its 737 Max issue through an acquisition.

Southwest Airlines Co. (NYSE: LUV) has hundreds of 737 Max planes on order through Boeing Co. (NYSE: BA). The aircraft has been grounded since March after it crashed twice during a five-month period."
 
seat1a
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 8:50 pm

A CNBC report mentioned JetBlue and Southwest as a combination that might solve the MAX issue.
 
737MAX7
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 8:51 pm

And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.
 
737MAX7
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 8:52 pm

seat1a wrote:
A CNBC report mentioned JetBlue and Southwest as a combination that might solve the MAX issue.

Would the government even allow that?
 
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OzarkD9S
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 8:54 pm

They speculate on AS and B6 being possible targets. AS? No way, too much overlap and they have their own MAX issues. B6? Maybe. Much less overlap, no MAX issues. Of course there's NK and F9 but they would just be for the planes, can't see much of their respective networks surviving a Southwest takeover.
"True, I talk of dreams,
Which are the children of an idle brain." -Mercutio
 
oschkosch
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 8:54 pm

737MAX7 wrote:
And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.
Think away from the max. They need an acquisition of an Airbus airline!

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cledaybuck
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 8:55 pm

Acquiring another airline to account for an aircraft shortage is the most Wall Street idea ever.
As we celebrate mediocrity, all the boys upstairs want to see, how much you'll pay for what you used to get for free.
 
seat1a
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:01 pm

737MAX7 wrote:
seat1a wrote:
A CNBC report mentioned JetBlue and Southwest as a combination that might solve the MAX issue.

Would the government even allow that?


Not sure. Would the government find anti-competitive features to a merger between the two? My first take is it would not. However, would the government prefer Southwest be 'saved' so to speak but a combination with another carrier like JetBlue?

Stifel suggested that Southwest was nearing a 'tipping point' where the MAX grounding is driving a consideration among merger/acquisition. It went on to say that Southwest's CEO said it would take years to diversity it's fleet. The revenue hit must be a widening gap, but the cost of merger/acquisition would appear to far offset the loss in the short term of MAX flying and generating revenue.

Usually mergers are about complementing and/or diversifying the network and choices, etc. Is there synergy?
 
JBLUA320
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:04 pm

By the time M&A was handled, done, and on the books, the MAX issue would be long, long, long resolved. Tying M&A activity to the MAX doesn't make sense on a single level unless this analyst knows something extreme that we don't, i.e., the MAX is never ever flying again (lol).
 
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EA CO AS
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:10 pm

cledaybuck wrote:
Acquiring another airline to account for an aircraft shortage is the most Wall Street idea ever.


This.

When coming up with this ludicrous idea, someone at Stifel thought it'd be fun to roll a hand grenade into a room and run like hell.
"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan

Comments made here are my own and are not intended to represent the official position of Alaska Air Group
 
LightChop2Chop
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:20 pm

Lets for a wild moment assume that this happens, a WN B6 merger or buyout would nicely fix FLL for WN, probably put a halt to B6 transatlantic aspirations, immediately give Kelly those some 50+ extra destinations he has spoken of (mostly in Caribbean and Latin), strengthen eastern corridor for WN, among many other things. It would be pricey but it solves some other WN problems.

I would expect another carrier to immediate go after AS too. AA maybe?
 
airplaneboy
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:24 pm

737MAX7 wrote:
seat1a wrote:
A CNBC report mentioned JetBlue and Southwest as a combination that might solve the MAX issue.

Would the government even allow that?


The government did allow the AA/US, DL/NW, and UA/CO mergers- creating 3 mega carriers (one of which is now the world’s largest airline). Also, Delta (one of those 3 mega carriers) enjoys several joint ventures with foreign carriers while also holding stakes in several of their international partners (which creates less competition- if one tries to look at the lack of benefit for the consumer). If WN were allowed to acquire another airline, there might be a requirement to divest gates/slots where there is significant overlap. But I don’t think it’s a far fetched possibility.
 
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usdcaguy
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:25 pm

LightChop2Chop wrote:
Lets for a wild moment assume that this happens, a WN B6 merger or buyout would nicely fix FLL for WN, probably put a halt to B6 transatlantic aspirations, immediately give Kelly those some 50+ extra destinations he has spoken of (mostly in Caribbean and Latin), strengthen eastern corridor for WN, among many other things. It would be pricey but it solves some other WN problems.

I would expect another carrier to immediate go after AS too. AA maybe?


Could definitely see a merger with B6 being very good for WN, though it would not be good for the public, as competitive fares would rise in a number of markets. That said, AA buying AS would be a great move. They would just need to get past the AS board, which has always pushed back against a merger.
 
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southwest1675
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:30 pm

Whatever happens, Herb wouldn’t approve. I have a bad feeling that his legacy will be trashed in a few years. It’s already kinda diminished.
Herb Kelleher 1931-2019
 
DarthLobster
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:41 pm

southwest1675 wrote:
Whatever happens, Herb wouldn’t approve. I have a bad feeling that his legacy will be trashed in a few years. It’s already kinda diminished.


His legacy went out the window as soon as WN instituted the Animal Farm-style boarding zone system they currently employ.

The entire notion is all crap anyway. By the time a merger was announced, approved, and executed, the MAX will have been back in the air for several months or more, even if expected delays and production changes go through. This was clearly a rumor put forth by someone who doesn’t have a damn clue about how the industry works.
Last edited by DarthLobster on Mon Oct 21, 2019 9:47 pm, edited 1 time in total.
 
UWPAviation
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:41 pm

By this time next year the MAX will be long flying again and the majority of the non-aviation geek community while have forgotten about it. This is just another click bait article about the MAX and WN.
 
flyby519
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:45 pm

JBLUA320 wrote:
By the time M&A was handled, done, and on the books, the MAX issue would be long, long, long resolved. Tying M&A activity to the MAX doesn't make sense on a single level unless this analyst knows something extreme that we don't, i.e., the MAX is never ever flying again (lol).


Agreed, but just like WN leaving EWR and using the MAX as an excuse they could merge with B6 and use the MAX as a convenient excuse again. Cry to the DOJ/DOT about how they want to expand but the MAX has caused them to lose share and they need to find a way to spread their low fares through the country to help the poor poor consumers who are being taken advantage of! :liar:

https://www.cnbc.com/video/2019/10/21/s ... tblue.html
Last edited by flyby519 on Mon Oct 21, 2019 9:56 pm, edited 1 time in total.
 
Brickell305
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:53 pm

LightChop2Chop wrote:
Lets for a wild moment assume that this happens, a WN B6 merger or buyout would nicely fix FLL for WN, probably put a halt to B6 transatlantic aspirations, immediately give Kelly those some 50+ extra destinations he has spoken of (mostly in Caribbean and Latin), strengthen eastern corridor for WN, among many other things. It would be pricey but it solves some other WN problems.

I would expect another carrier to immediate go after AS too. AA maybe?

I think a B6/WN tie up would just be about eliminating a competitor for WN. WN has shown next to zero interest in international VFR routes which is B6’s bread and butter. They would likely drop or pull back significantly in places like SDQ, STI, KIN, POS, GND, BGI, BOG, GYE, etc. WN likely has no plans to do transatlantic. The only benefit to WN would be domestic from BOS and JFK. They are already sizable in FLL, LGB and MCO.
 
ScottB
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 9:58 pm

seat1a wrote:
Stifel suggested that Southwest was nearing a 'tipping point' where the MAX grounding is driving a consideration among merger/acquisition. It went on to say that Southwest's CEO said it would take years to diversity it's fleet. The revenue hit must be a widening gap, but the cost of merger/acquisition would appear to far offset the loss in the short term of MAX flying and generating revenue.

Usually mergers are about complementing and/or diversifying the network and choices, etc. Is there synergy?


Tying a merger between WN and B6 to the MAX grounding seems like one of the silliest suggestions ever, although I do think WN and B6 will ultimately merge. B6 is running out of opportunities for growth and I think WN management eventually makes an offer which B6 shareholders will find compelling. But it won't be about diversifying the fleet as a driving factor.

seat1a wrote:
Usually mergers are about complementing and/or diversifying the network and choices, etc. Is there synergy?


In a nutshell, yes. The networks are almost entirely complementary. There's some overlap in FLL, but a combined carrier would control less than half of the single-airport market and still be dwarfed by the AA presence at MIA. WN has zero presence at JFK and is small at BOS. While LGB is slot-controlled, it's unlikely any other carrier would have much interest in potential divested slots. B6 has no presence at DAL, MDW , or HOU (or won't in a week) and is generally a bit player at WN's large airports.

The only real question is whether WN would continue a premium product like Mint in the longer markets.
 
flyby519
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:07 pm

ScottB wrote:
seat1a wrote:
Usually mergers are about complementing and/or diversifying the network and choices, etc. Is there synergy?


In a nutshell, yes. The networks are almost entirely complementary. There's some overlap in FLL, but a combined carrier would control less than half of the single-airport market and still be dwarfed by the AA presence at MIA. WN has zero presence at JFK and is small at BOS. While LGB is slot-controlled, it's unlikely any other carrier would have much interest in potential divested slots. B6 has no presence at DAL, MDW , or HOU (or won't in a week) and is generally a bit player at WN's large airports.

The only real question is whether WN would continue a premium product like Mint in the longer markets.


Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?

I would expect the JBLU Board of Directors has all of the above in mind when they think of future valuations, but doubt WN would want to put any value in those for a merger offer.
 
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:11 pm

JBLUA320 wrote:
By the time M&A was handled, done, and on the books, the MAX issue would be long, long, long resolved. Tying M&A activity to the MAX doesn't make sense on a single level unless this analyst knows something extreme that we don't, i.e., the MAX is never ever flying again (lol).

Sure, but in the longer term, WN would become a three fleet airline with built in options should one of the three fleets get grounded.

And so so so so many a.netters will be happy that Boeing's monopoly at WN would be broken.

Especially the A220 in WN colors part.
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Wake now, discover that you are the song that the morning brings
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ScottB
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:33 pm

flyby519 wrote:
Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?


B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.
 
airplaneboy
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:34 pm

flyby519 wrote:
ScottB wrote:
seat1a wrote:
Usually mergers are about complementing and/or diversifying the network and choices, etc. Is there synergy?


In a nutshell, yes. The networks are almost entirely complementary. There's some overlap in FLL, but a combined carrier would control less than half of the single-airport market and still be dwarfed by the AA presence at MIA. WN has zero presence at JFK and is small at BOS. While LGB is slot-controlled, it's unlikely any other carrier would have much interest in potential divested slots. B6 has no presence at DAL, MDW , or HOU (or won't in a week) and is generally a bit player at WN's large airports.

The only real question is whether WN would continue a premium product like Mint in the longer markets.


Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?

I would expect the JBLU Board of Directors has all of the above in mind when they think of future valuations, but doubt WN would want to put any value in those for a merger offer.


I am certain all those aspects of jetBlue would be carefully examined by WN if a B6/WN tie up happened. WN has continuously evolved its business model to adapt to market changes. So has jetBlue, but with less success than WN. JetBlue’s weaknesses are that their core markets are in markets that have heavy competition. Their vision of potential growth at the moment seems focused mostly on crossing the Atlantic, and due to their smaller size and market valuation- they are an easy target for acquisition. At the end of the day, money talks and the board at jetBlue will have to put the shareholders as the their main priority. Regarding MINT- and the notion of airlines/businesses evolving: jetBlue originally commenced ops as a single class airline. MINT (which was a very high cost venture for a small airline like B6), was only created out of necessity. At the time of inception, I believe VX was flying the most desirable first class product in the NYC-west coast transcon market. Then eventually the Big 3 caught up with improving their first/business transcon product and began taking marketshare from B6. The airline realized they needed to offer a competitive product at good value in order to remain a key player in those markets. I think even the VFR markets that B6 flies holds a lot of value for WN- these VFR markets are from places like JFK and BOS, two markets that WN has little to no presence in. A combined B6 and WN would solidify the FLL market to help them become a formidable number two in S. Florida (behind AA, which controls 70% of MIA). B6’s DCA slots would help WN become a larger number 2 behind AA, and the diversified fleet (which I don’t think would be a primary driver behind this deal- as WN never intended to increase costs with a dual fleet of similar gauge) would help mitigate WN’s short term capacity growth goals. It would be silly to think the WN of today would stick to the status quo over the next several years when they have *several hundred* 737 MAX aircraft in order, and when airlines like Spirit and Delta are taking their market share due to the MAX crisis. We don’t know for certain that some of the things you mention as bringing value for B6- are things that WN would have no desire to keep (or even have at present). We don’t know what their 5-10 year growth plan is/was, but it was certainly ambitious when you consider their order book with Boeing.
Last edited by airplaneboy on Mon Oct 21, 2019 10:38 pm, edited 1 time in total.
 
Italianflyer
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:36 pm

I agree that this "analysis" is sophomoric at best. Flag #1 was calling AS a LCC.
What bothers me is this superficial nonsense may have a near term effect on their share price and market cap.
 
flyby519
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:43 pm

ScottB wrote:
flyby519 wrote:
Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?


B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.
 
metaldirtnskin
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:45 pm

EA CO AS wrote:
cledaybuck wrote:
Acquiring another airline to account for an aircraft shortage is the most Wall Street idea ever.


This.

When coming up with this ludicrous idea, someone at Stifel thought it'd be fun to roll a hand grenade into a room and run like hell.


Pretty much. It seems like, if WN thought their problems would be solved by adding (A320/A220/whatever) to the fleet mix, they would just do it.

But it would be a shame if we missed another mudslinging match between the peddlers of wild speculation and the Guardians of the Mystic Shrine of Herb.
 
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VS4ever
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 10:59 pm

flyby519 wrote:
ScottB wrote:
flyby519 wrote:
Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?


B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.


Possibly, but ultimately it’s not a BOD decision, it’s a shareholder one, BOD can state their case, but if the shareholders outvote them and believe they can unlock more value now, the deal will get done.

I truly hope to god this doesn’t happen.
That feeling when you sit at the end of a runway, brakes are released and the raw power takes over. Now that is a thing of beauty and it never gets old.
 
MIflyer12
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:01 pm

flyby519 wrote:
ScottB wrote:
flyby519 wrote:
Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?


B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.


Somebody needs a lesson in American M&A. The BOD's estimates of future valuation aren't relevant to the purchase of shares - and it's purchase of shares that gets a deal done. Google 'hostile takeover.'
 
MSPNWA
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:02 pm

To downgrade a firm based on a wild merger thought is pretty reckless. It's also a mistake to think you can diversify your way out of grounding risks. Even if WN divided up their fleet three ways, losing 33% of capacity would be crippling. You don't make fleet decisions on improbable risk.

737MAX7 wrote:
And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.


SY is moving to an owned model, but I don't know the current breakdown of the owned/leased. As time goes on, SY is more compelling as an acquisition target.
 
flyby519
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:05 pm

MIflyer12 wrote:
flyby519 wrote:
ScottB wrote:

B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.


Somebody needs a lesson in American M&A. The BOD's estimates of future valuation aren't relevant to the purchase of shares - and it's purchase of shares that gets a deal done. Google 'hostile takeover.'


Hostile takeover?!?! YGTBSM! :rotfl:
 
DDR
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:05 pm

That said, AA buying AS would be a great move. They would just need to get past the AS board, which has always pushed back against a merger.

AA buying AS would be great FOR DELTA. In 5 years AA would be down to 100 flights a day in SEA and down to nothing but flights to DFW, ORD, PHX, PHL, and CLT within 10 years. AA has a proven track record of buying airlines and then totally demolishing the previous airlines routes and fleet.
See Air Cal, Reno Air, TWA.....
 
flyby519
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:06 pm

VS4ever wrote:
flyby519 wrote:
ScottB wrote:

B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.


Possibly, but ultimately it’s not a BOD decision, it’s a shareholder one, BOD can state their case, but if the shareholders outvote them and believe they can unlock more value now, the deal will get done.

I truly hope to god this doesn’t happen.


Ultimately the BOD is the one who receives an offer and decides if it has merit, then they would present it to shareholders.
 
airplaneboy
Posts: 684
Joined: Sat May 15, 2004 11:59 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:14 pm

flyby519 wrote:
ScottB wrote:
flyby519 wrote:
Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?


B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.


Fair assessment. But aside from transatlantic growth with the A321 LR order, what potential promise of growth does B6 have? It is my understanding that the A220s were originally ordered to replace the Embraer fleet. In B6’s two largest markets (JFK & BOS), they face heavy competition from DL and without much room to grow (gates/slots). In FLL & MCO, they face heavy competition from WN and NK (as well as F9 in MCO). Where is that organic growth for B6 going to come from, and in what form? After losing out on their bid for VX, their west coast growth opportunities significantly diminished. Real estate (gates) at most of the medium-large US markets B6 has little to no presence in are mostly occupied or leased by the competition. Unfortunately, I don’t think adding a few transatlantic routes from the east coast is going to help bring JetBlue’s market cap up to $10 billion. Their transatlantic ambitions are finitely limited in terms of potential routes, real estate, and obviously by the small unit order of A321LR aircraft (13 units converted from an existing order). I believe they currently have 60/70 A220s on order to replace the 60 E 190s, and about 70 other A321s on order. I can see potential expansion into Central/South America from Florida with the a321s (as well as using some to replace and upgauge a few older A320s), but aside from that, what’s next? They’d have to place an aircraft order soon if they plan to have solid growth post-2025 and to ensure they can receive delivery slots within the latter part of the next decade.
 
splitterz
Posts: 167
Joined: Sat Apr 09, 2011 2:40 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:14 pm

A merger is the last thing consumers need in the US. This would be similar to FL/WN; eliminate a competitor.
 
User avatar
SteveXC500
Posts: 523
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Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:15 pm

737MAX7 wrote:
And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.


SY is now owning it’s aircraft and plans to get to 50 in the next five years.
 
UA_727
Posts: 156
Joined: Sun Aug 19, 2001 7:53 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:16 pm

Oh em gee, people - they want F9!

WN won’t (for the most part) gain any value from companies who play globally, nor are they interested in anything beyond what they dub “near international.”

But DEN...(and I guess fleet diversification at this moment, which this seems to be suggesting?)...now you’re talking.

Interesting...but are we really there yet?!
"AW - I'm on Board..."
 
airplaneboy
Posts: 684
Joined: Sat May 15, 2004 11:59 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:27 pm

MSPNWA wrote:
To downgrade a firm based on a wild merger thought is pretty reckless. It's also a mistake to think you can diversify your way out of grounding risks. Even if WN divided up their fleet three ways, losing 33% of capacity would be crippling. You don't make fleet decisions on improbable risk.

737MAX7 wrote:
And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.


SY is moving to an owned model, but I don't know the current breakdown of the owned/leased. As time goes on, SY is more compelling as an acquisition target.


I don’t think fleet diversification would be a primary driver behind a hypothetical WN acquisition of B6. If that were the case, then WN would place an order with Airbus ASAP (although I understand delivery slots aren’t available within the next couple years at least). I think growth- and consequently value to WN’s shareholders, would be primary reasons behind this. All of WN’s future growth is currently contingent on the MAX returning to service. And even if/when this occurs, the logistical challenges to place the roughly 70ish odd MAX 8 aircraft already produced will take a lot of time. Not only due to WN’s own manpower, but also Boeing’s. The timeframe for all of this to occur is highly unpredictable. WNs capacity growth for 2019 and 2020 are already severely impacted as a result of this, and they are losing marketshare to their competitors. Acquiring B6 provides the best value in terms of network GROWTH (for WN) and even more potential opportunities. Acquiring Alaska on the other hand (as some have suggested), does not provide WN much value. There’s a greater amount of overlap between them, and AS really only brings SEA and PDX to the table- which are far less lucrative than JFK/BOS, as well as the increased presence WN could have in FLL/MCO/DCA/LGB with B6. Also, WN would have no need for the 90-100 regional aircraft Alaska outsources to SkyWest and Horizon.
 
catiii
Posts: 3188
Joined: Mon Mar 31, 2008 1:18 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:32 pm

Italianflyer wrote:
The DBJ says that WN has been downgraded from 'buy' to 'hold'' by Stifel analysts saying that MAX problems may force them into another aquisition.

I see allot of flawed logic here but whatever.

https://www.bizjournals.com/dallas/news ... ition.html

"Southwest Airlines was downgraded from "buy" to "hold" by an investment bank based on speculation that it might look to solve its 737 Max issue through an acquisition.

Southwest Airlines Co. (NYSE: LUV) has hundreds of 737 Max planes on order through Boeing Co. (NYSE: BA). The aircraft has been grounded since March after it crashed twice during a five-month period."


The title is somewhat inaccurate. They weren't downgraded based on acquisition speculation. They were downgraded by one analyst (Joe DiNardi at Stifel) who believes they cannot overcome their MAX issues. He, in the same note, also suggested they should participate in M&A. The downgrade was not the result of any speculation on M&A activity.
 
catiii
Posts: 3188
Joined: Mon Mar 31, 2008 1:18 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:34 pm

flyby519 wrote:
ScottB wrote:
seat1a wrote:
Usually mergers are about complementing and/or diversifying the network and choices, etc. Is there synergy?


In a nutshell, yes. The networks are almost entirely complementary. There's some overlap in FLL, but a combined carrier would control less than half of the single-airport market and still be dwarfed by the AA presence at MIA. WN has zero presence at JFK and is small at BOS. While LGB is slot-controlled, it's unlikely any other carrier would have much interest in potential divested slots. B6 has no presence at DAL, MDW , or HOU (or won't in a week) and is generally a bit player at WN's large airports.

The only real question is whether WN would continue a premium product like Mint in the longer markets.


Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?

I would expect the JBLU Board of Directors has all of the above in mind when they think of future valuations, but doubt WN would want to put any value in those for a merger offer.


Exactly. If you're making the acquisition because you need fleet diversification and because you can't grow organically this year at the rate you want, paying a premium for the JetBlue brand only to erase it doesn't make sense. An NK acquisition, or HA acquisition, makes far far more sense.
 
AWACSooner
Posts: 2479
Joined: Tue Jan 22, 2008 12:35 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:37 pm

southwest1675 wrote:
Whatever happens, Herb wouldn’t approve. I have a bad feeling that his legacy will be trashed in a few years. It’s already kinda diminished.

Herb's WN is already gone. Too much inconsistency in service, no 20 minute turns, devaluation of Rapid Rewards, introduction of ancillary fees...take your pick.
 
flyby519
Posts: 1453
Joined: Tue Jul 24, 2007 3:31 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:40 pm

airplaneboy wrote:
flyby519 wrote:
ScottB wrote:

B6 right now trades for a very small premium (~11%) over its book value. The A321LR/XLRs would likely be easy to sell off at a profit, so that's an argument for a merger. The A220s would also find willing buyers if WN were to decide not to keep them. I think the brand ultimately has little value as compared to WN's. I still question the value of Mint: B6 gives up 50 economy seats on the A321 for 16 Mint seats. They have to sell Mint seats for roughly 3x the average economy fare to make the product potentially worthwhile and I'm not convinced the additional complexity is worth it.

They might keep the transcons given that the stage lengths are similar to Hawaii and they've got the market presence in California to make a go of those markets. I believe they'd be happy to keep the Caribbean/Latin markets since those are places they'd probably want to grow absent a merger anyway.


Do you really think the JBLU BOD would even entertain an offer that was at current price? I believe they have much higher future valuations for the company and intend to grow Europe and take TATL market share from the alliances. Now whether that is a fantasy or not it doesn't matter, all that matters is what the BOD is using as an internal valuation to compare to potential merger offers. SWA offering an $8bil valuation (roughly $28/share) to JBLU BOD might not compare to the $10bil valuation they believe they can achieve organically in the coming years.


Fair assessment. But aside from transatlantic growth with the A321 LR order, what potential promise of growth does B6 have? It is my understanding that the A220s were originally ordered to replace the Embraer fleet. In B6’s two largest markets (JFK & BOS), they face heavy competition from DL and without much room to grow (gates/slots). In FLL & MCO, they face heavy competition from WN and NK (as well as F9 in MCO). Where is that organic growth for B6 going to come from, and in what form? After losing out on their bid for VX, their west coast growth opportunities significantly diminished. Real estate (gates) at most of the medium-large US markets B6 has little to no presence in are mostly occupied or leased by the competition. Unfortunately, I don’t think adding a few transatlantic routes from the east coast is going to help bring JetBlue’s market cap up to $10 billion. Their transatlantic ambitions are finitely limited in terms of potential routes, real estate, and obviously by the small unit order of A321LR aircraft (13 units converted from an existing order). I believe they currently have 60/70 A220s on order to replace the 60 E 190s, and about 70 other A321s on order. I can see potential expansion into Central/South America from Florida with the a321s (as well as using some to replace and upgauge a few older A320s), but aside from that, what’s next? They’d have to place an aircraft order soon if they plan to have solid growth post-2025 and to ensure they can receive delivery slots within the latter part of the next decade.


I agree they seem stuck in many ways. The BOD/management are the only ones who truly know what their plans will be.

Armchair CEO says I'd run some LRs to LON/CDG/AMS for a few seasons and prove the TATL Mint business case then go widebodies to maximize revenue for scarce slot resources. Move the XLRs to new Europe routes as pathfinders for future widebodies. Form a TATL JV with DY? EK? TP? Others? Send LRs to S.America and hook up with Azul. Get a domestic codeshare with AS and expand transcon Mint. Merge on our own terms with NK (dont forget B6 pursued VX very seriously despite years of chanting "organic growth") and grow FLL to utilize widebodies deep south. Use A220s to expand in midwest to connect to widebody flying in BOS/JFK/FLL.

Something like the above plan would keep JBLU BOD and executives in control of the company and leading the charge vs selling out to WN and exiting stage right. Self-preservation is a strong drug.
Last edited by flyby519 on Tue Oct 22, 2019 12:05 am, edited 3 times in total.
 
flyby519
Posts: 1453
Joined: Tue Jul 24, 2007 3:31 am

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:42 pm

catiii wrote:
flyby519 wrote:
ScottB wrote:


In a nutshell, yes. The networks are almost entirely complementary. There's some overlap in FLL, but a combined carrier would control less than half of the single-airport market and still be dwarfed by the AA presence at MIA. WN has zero presence at JFK and is small at BOS. While LGB is slot-controlled, it's unlikely any other carrier would have much interest in potential divested slots. B6 has no presence at DAL, MDW , or HOU (or won't in a week) and is generally a bit player at WN's large airports.

The only real question is whether WN would continue a premium product like Mint in the longer markets.


Yes but how much of JBLU's value comes from stuff WN has no desire to keep? Mint? Transcons? VFR Carib/S.Am? A321LR/XLRs? A220s? JetBlue Brand?

I would expect the JBLU Board of Directors has all of the above in mind when they think of future valuations, but doubt WN would want to put any value in those for a merger offer.


Exactly. If you're making the acquisition because you need fleet diversification and because you can't grow organically this year at the rate you want, paying a premium for the JetBlue brand only to erase it doesn't make sense. An NK acquisition, or HA acquisition, makes far far more sense.


Absolutely WN+NK makes a ton of sense if fleet diversification is the primary goal. F9 would fall in that category too.
 
m007j
Posts: 122
Joined: Mon Aug 15, 2016 3:05 pm

Re: WN Downgraded based on aquisition speculation

Mon Oct 21, 2019 11:45 pm

Italianflyer wrote:
I agree that this "analysis" is sophomoric at best. Flag #1 was calling AS a LCC.
What bothers me is this superficial nonsense may have a near term effect on their share price and market cap.


Trust me, no one who's worth a dam is seriously considering this based on a single investment bank's rating and CNBC. What this may affect is the trading volume, as all of the individual investors who still watch the joke that is CNBC start trading. Not always a bad thing for a stock
 
joeblow10
Posts: 200
Joined: Mon Jun 04, 2018 11:58 pm

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:00 am

SteveXC500 wrote:
737MAX7 wrote:
And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.


SY is now owning it’s aircraft and plans to get to 50 in the next five years.


Agreed - SY seems like the obvious choice everybody is overlooking. Plus - couldn’t WN just take ownership of the remainder of the leases SY still has? Would make even more sense in the interim absence of the MAX
 
User avatar
ODwyerPW
Posts: 1601
Joined: Thu Dec 09, 2004 6:30 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:02 am

these threads crack me up!

Image
learning never stops.
 
BNAMealer
Posts: 346
Joined: Sat Jul 27, 2019 8:03 pm

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:11 am

joeblow10 wrote:
SteveXC500 wrote:
737MAX7 wrote:
And who exactly would be acquire? The only airline with all 737s is Sun Country and I’ve seen it mentioned on here that their 737s are all leased and wouldn’t stay with SWA.


SY is now owning it’s aircraft and plans to get to 50 in the next five years.


Agreed - SY seems like the obvious choice everybody is overlooking. Plus - couldn’t WN just take ownership of the remainder of the leases SY still has? Would make even more sense in the interim absence of the MAX


Would love to see WN acquire SY and build a base in MSP. They could finally give DL a run for their money.
 
RyanAirB737
Posts: 68
Joined: Sat May 08, 2004 6:52 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:20 am

WN purchasing B6 would be as much of a slap in the same face to pax (I know that doesn't matter) as AS purchasing VX. I would hate to see B6 go away.

F9 and NK makes a lot more sense. I'm not familiar with their routes, but it seems like there is a lot of overlap, and the main gain from such an acquisition would be different aircraft. I wish WN would have kept the 717s from AirTran for flying into smaller airports (I *think* a B712 could make MMH, but not sure).
 
KlimaBXsst
Posts: 429
Joined: Wed Jan 23, 2019 4:14 pm

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:40 am

Call MX. We need to MEL a yaw damper. Might have to take off with a wheel missing too.

Still scraping a lot of excrement from my boots as what ever dung I stepped in got mighty deep today.
Aesthetically the A 340 got it right!
 
Italianflyer
Topic Author
Posts: 659
Joined: Sun Nov 11, 2007 3:06 pm

Re: WN Downgraded by Stifel based on aquisition speculation

Tue Oct 22, 2019 12:51 am

Italianflyer wrote:
The DBJ says that WN has been downgraded from 'buy' to 'hold'' by Stifel analysts saying that MAX problems may force them into another aquisition.

I see allot of flawed logic here but whatever.

https://www.bizjournals.com/dallas/news ... ition.html

"Southwest Airlines was downgraded from "buy" to "hold" by an investment bank based on speculation that it might look to solve its 737 Max issue through an acquisition.

Southwest Airlines Co. (NYSE: LUV) has hundreds of 737 Max planes on order through Boeing Co. (NYSE: BA). The aircraft has been grounded since March after it crashed twice during a five-month period."
 
Gulfstream500
Posts: 402
Joined: Sat Oct 20, 2018 2:30 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:55 am

Well, let’s see the merger ability of the US’s largest 10 airlines:

Delta: Too large. Government would NEVER allow it.
American: Too large. Government would NEVER allow it.
United: Too large. Government would NEVER allow it.
Alaska: This one would work. Would (barely) become larger than AA and DL, so I’d say it’s a 50/50 if proposed. But, if WN remains unwilling to take in a few airbus aircraft, then they won’t merge. But, it opens up the door to WN focus cities in SFO and SEA, along with a really big focus city in SAN.
JetBlue/Frontier/Spirit/Allegiant: :lol:
Hawaiian: Should I even bother mentioning this?
Sun Country: Best match for WN. Small, so DOJ would actually allow for this merger, given that they only have twenty-some aircraft. And, the fleet is 100% what they are looking for. (I’ve always wanted to see a WN focus city in MSP!) Oh, and did I mention, they’d get some of transavia’s airplanes in the winter!
Last edited by Gulfstream500 on Tue Oct 22, 2019 12:58 am, edited 1 time in total.
When I do not reply, chances are that I've stopped checking the thread, and I still think you're wrong!

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