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par13del
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:14 am

Does anyone know why Airbus turned down WN request for purchase of aircraft or how they intend to not support their aircraft if WN were to acquire a competitor who operates their a/c?
I think those are good questions as the investment analysis must have some knowledge that WN cannot purchase a/c directly from Airbus.
 
VS11
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:23 am

JetBlue isn’t cheap - market cap of $5.2b and $2.5b of debt. What problem(s) would WN be solving to justify spending so much money? Southwest isn’t exactly successful in the Northeast - they could totally retreat this market and let JetBlue cover it.Will they keep the brand - I sure hope so. As indicated by the market, there isn’t much appetite for Southwest in the Northeast. Also, JetBlue does have a growth strategy -they will have two new aircraft types to address different markets. All in all, I see a marginal case where WN buying and keeping the brand/product of JetBlue can make a sense. After all, Southwest’s biggest competitors are the three legacy carriers.
 
asteriskceo
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:25 am

par13del wrote:
Does anyone know why Airbus turned down WN request for purchase of aircraft or how they intend to not support their aircraft if WN were to acquire a competitor who operates their a/c?
I think those are good questions as the investment analysis must have some knowledge that WN cannot purchase a/c directly from Airbus.


First I’m hearing that Airbus turned down WN. Care to expand?


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DeltaConnection
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:28 am

Gulfstream500 wrote:
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!


Why would WN want an operation that is largely outsourced and is mostly leased aircraft?
 
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vatveng
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:57 am

airplaneboy wrote:
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).


Somehow I think if Southwest showed up in Toulouse with a big wad of cash, Airbus would find a way to make airplanes appear.
 
tphuang
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 2:04 am

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.


That doesn't work. Current WN model simply doesn't work out of JFK. 80 slots at LGA would be worth more to WN than 175 slots at JFK. You are not going to make any money running 8x daily to MDW/ATL/STL out of JFK. B6's current network and aircraft lineup is pretty much the result of strength of JFK. Sure, WN can continue running flights to Florida the same way B6 does now, but if it will need to do international flying, transcon, premium transcon and red-eyes if it wants to succeed at JFK. As seen on EWR-OAK/SAN, WN's current product does not translate to transcon market.

airplaneboy wrote:

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.


Actually, their problem right now is A321NEO is delayed and they don't have the aircraft needed to expand as much as they need to. They are getting more gates at BOS over the next couple of years and EI/TP will most likely move to E once E expands, so they will get to use most of those 30 gates once that happens and have plenty of E access for international flying. That will allow them to go from 175 flights a day now to 240 flights a day. That might not sound like a lot of increase, but about 15 of that will be TATL flights to Europe, which alone will take up almost half of their A321NEO deliveries from 2021 to 2024. And on top of that, they will be upgauging a lot of the E90s to A220-300 (40% gain in seats) and A320s to A321 (25% gain in seats). Those additional gates at C will allow their domestic departures to grow by about 1/3 and seat per flight grow by probably 20%. . Based on that, their domestic seat count out of BOS will probably grow close to what AA has at PHL right now. That's a lot of growth over the next 5 to 6 years.

JFK is mostly slot constrained, but they have continue to grow by converting from short range E90 flights to long range A321 flights. Going from 2 JFK-CLT flights on E90 to JFK-GYE/GEO on A321NEO is a huge growth. There is still more room for growth there and I think more slots will become available either through AA's demise at JFK and/or runway/ATC improvements.

All of the above has already slowed down FLL growth to a crawl. FLL still has a lot of growth to deep South America locations through A321XLR or A220XLR. And they are slated to get 5 more gates at FLL, which will allow them to grow from under 110 right now to 140 to 150. Domestically, there is plenty of transcon flights they can add still. Mint at FLL is generating higher margin than even JFK right now. And they need to connect a lot of dots in middle of america and upgauge certain domestic markets like RIC/RDU/MSY/CHS to A220. Again, plenty of grow left over the next 5 to 6 years.

All of which means MCO will not see the planned growth after their move to the new terminal in 2021.

So unless they take more aircraft than their plan over the next 5 or 6 years, I don't see how they even get to do much at MCO.

By guess is that E90 will not go away at 2025. A small sub-fleet will remain for BOS shuttle markets A220 order will end up being a lot more than 70 and replace A320 in a lot of markets.
 
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BMWdrvr75
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 2:21 am

Southwest cannot handle another merger they couldn’t even handle a B717 everyone just stop...Southwest is way too arrogant and way too close minded to handle anything else in the industry.
We Make Flying Easy......Come fly the Silver Bird........Something Special in the Air......
 
UGA777
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 2:25 am

WN and AS would interesting. Just saying..
 
Gulfstream500
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 2:30 am

DeltaConnection wrote:
Gulfstream500 wrote:
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!


Why would WN want an operation that is largely outsourced and is mostly leased aircraft?


Many of WN's aircraft are leased, as with DL, AA, UA, etc. Having leased aircraft would allow for them to get rid of them in the future if needed. Additionally, these outsourced operations could be merged with those of WN.
So... when will the Northwest DC-9s be retired?
 
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BMWdrvr75
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 2:36 am

UGA777 wrote:
WN and AS would interesting. Just saying..

No No No....why ruin a great airline...and I mean Alaska
We Make Flying Easy......Come fly the Silver Bird........Something Special in the Air......
 
USAirKid
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 3:04 am

RyanAirB737 wrote:
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).


I was going to comment, that a WN/B6 Merger would bring out the B6 fans in droves. I'm glad I didn't have to wait. :duck:

That being said, I'd be curious to know what percentage of B6 passengers would defect to DL or another airline if the product became just like WN's.

airplaneboy wrote:
At the end of the day, money talks and the board at jetBlue will have to put the shareholders as the their main priority.


Legally this isn't the case. JetBlue can choose to put their employees or even their debtors ahead of the shareholders. Here's a book review on that invalidates the shareholder supremacy argument: https://corpgov.law.harvard.edu/2012/06 ... alue-myth/
Last edited by USAirKid on Tue Oct 22, 2019 3:11 am, edited 1 time in total.
 
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Veigar
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 3:05 am

Didn't Gary Kelly say he would only operate 737s for as long as he is CEO? That would make the only "probable" merger partners being AS and SY.. and they'd have to do something crazy about AS' Airbus'
 
Gregd75
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 3:12 am

Would Southwest be interested in Hawaiian?

They are clearly looking to enter the Islands market and this would give them presence overnight.

Just a thought...
 
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NameOmitted
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 4:03 am

If this is all about getting Southwest aircraft, why are we limiting our baseless speculation to the US? Is there no leasing group for them to take an equity stake in?

I mean, GE keeps talking about shedding non-core business...
 
Chemist
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 4:22 am

BMWdrvr75 wrote:
Southwest cannot handle another merger they couldn’t even handle a B717 everyone just stop...Southwest is way too arrogant and way too close minded to handle anything else in the industry.


Arrogant and close minded, just more long term financially successful than any other major US airline.
Perhaps arrogance and close-mindedness is a good thing.
 
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enilria
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 5:07 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."

If the DOJ allowed WN to wipe out one of the few airlines left (SY?) just to get some quick airplanes then it’s time to start becoming a fan of a different country’s air transport system. I pray to all that is holy they don’t allow such a thing.

Just take a shopping cart to Mojave and bring back some 737-300s. Btw, looking like in retrospect a terrible decision to mass retire the 737-300 a year ago.
 
Sean-SAN-
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 5:44 am

If they want 100 Airbus and easy DOJ approval they could buy allegiant. There's very little route overlap and the seating configs are fairly similar between them both. As well as a couple bases.
 
jplatts
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 10:31 am

tphuang wrote:
That doesn't work. Current WN model simply doesn't work out of JFK. 80 slots at LGA would be worth more to WN than 175 slots at JFK. You are not going to make any money running 8x daily to MDW/ATL/STL out of JFK. B6's current network and aircraft lineup is pretty much the result of strength of JFK. Sure, WN can continue running flights to Florida the same way B6 does now, but if it will need to do international flying, transcon, premium transcon and red-eyes if it wants to succeed at JFK. As seen on EWR-OAK/SAN, WN's current product does not translate to transcon market.


WN might be able to make nonstop service to California work from JFK and BOS following a WN-B6 merger as WN already has (a) a large FF base in California, (b) focus cities at OAK, SJC, SMF, LAX, and SAN, and (c) a customer base in California who prefers to fly WN over B6.

WN might also be able to make some other nonstop routes work out of BOS such as BOS-CLE, BOS-RSW, BOS-PHX, and BOS-DCA work following a WN-B6 merger.
 
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OzarkD9S
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 10:34 am

BNAMealer wrote:

Would love to see WN acquire SY and build a base in MSP. They could finally give DL a run for their money.


Like they did in ATL?
"My soul is in the sky". -Pyramus- A Midsummer's Night Dream
 
MIflyer12
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 10:42 am

Sean-SAN- wrote:
If they want 100 Airbus and easy DOJ approval they could buy allegiant. There's very little route overlap and the seating configs are fairly similar between them both. As well as a couple bases.


'Easy' DOJ approval might allow the financial transaction to close in 6-8 months. It would take nothing more than a suit by a single city or state worried about losing Allegiant service to push that out to 15 months, however. I wouldn't take that bet. Even after the transaction closes you're looking at years to integrate and rationalize the networks. WN continued AirTran flying for, what, 41 months? Take Allegiant wages up to WN levels and you kill the profitability. It really would have to be easier and quicker to scour airlines and leasing companies worldwide to find fifty 737NGs. DL/AA/UA know how to buy used, but of course with diversified fleets it's smaller challenge.
 
Miamiairport
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 11:48 am

I don't see a WN/NK or WN/B6 acquisition. Their business models are just not complimentary not to mention route overlap and a/c differences. This is just a Wall Street analyst trying to get attention.
 
jplatts
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 11:51 am

OzarkD9S wrote:
BNAMealer wrote:

Would love to see WN acquire SY and build a base in MSP. They could finally give DL a run for their money.


Like they did in ATL?


While WN would probably drop most of SY's nonstop routes out of MSP following a WN-SY merger, WN might be able to make a few additional nonstop routes such as MSP-AUS, MSP-MSY, MSP-SMF, MSP-SAT, and MSP-SAN work following a WN-SY merger.

One big difference between ATL and MSP is that the WN-FL merger gave travelers in the ATL market 1-stop connecting service out of ATL to additional destinations not served by FL, whereas WN already has 1-stop connecting service out of MSP to most of its domestic destinations with WN already serving DEN, DAL, STL, MDW, and BWI nonstop from MSP.

Another big difference is that ATL is a much bigger WN station that is still a focus city for WN, whereas WN's nonstop service out of MSP is mostly to some of its focus cities. There are also a few destinations such as GSP and RIC that currently have daily nonstop service to ATL but not to any other WN stations on WN (even though RIC has seasonal weekend-only nonstop service to MCO and TPA on WN and WN will be resuming GSP-BWI nonstop service in less than 2 weeks from now).
 
SteelChair
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 12:09 pm

Industry darlings WN anf B6 sure seem to inspire passion.

I tend to agree with those posters who say that WN seems insular and inflexible. I can't imagine how long it would take them to integrate A320s. How long did it take them to get their ETOPS program up and running, wasn't it something like 5 years? A B6 merger seems almost impossible, it would have to run under dual operating certificates for years.
 
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par13del
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:21 pm

asteriskceo wrote:
par13del wrote:
Does anyone know why Airbus turned down WN request for purchase of aircraft or how they intend to not support their aircraft if WN were to acquire a competitor who operates their a/c?
I think those are good questions as the investment analysis must have some knowledge that WN cannot purchase a/c directly from Airbus.


First I’m hearing that Airbus turned down WN. Care to expand?


Sent from my iPhone using Tapatalk

Sure, read this thread and the article, why would a carrier the size of WN need to acquire a competitor to diversify its fleet unless an OEM refused to sell?
Do you really believe that if WN made a request to buy 100 frames that Airbus would not find early slots?
 
cschleic
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 12:28 pm

NameOmitted wrote:
If this is all about getting Southwest aircraft, why are we limiting our baseless speculation to the US? Is there no leasing group for them to take an equity stake in?

I mean, GE keeps talking about shedding non-core business...


Watching an interview with the analyst, it's not all about getting aircraft, it's about continuing overall growth. Due to the Max issue, Southwest's growth is constrained by their dependence on one aircraft type. Acquiring someone who doesn't have that constraint means its growth potential could be folded into Southwest. After all, if they acquired someone just to get a bunch of planes, what are they going to do...abandon a lot of routes so they can restore flights to MDW and MCO? There are easier ways to get planes.

Airline acquisitions are a tremendously long term proposition...legally, politically, operationally, etc. They are about increasing market share, maybe international routes, geographic areas, hubs, even eliminating a competitor, and overall scale in a consolidating industry, all while doing it more quickly that the even longer and more costly process of doing it organically. This would be a significant and transformational shift in fundamental strategy, to go the route of UA/CO, DL/NW, AA/US and AS/VX rather than organic growth. That doesn't mean that it's a good idea. Mixing that with the Max issue has a lot of holes in it.
 
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par13del
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 12:36 pm

cschleic wrote:
Watching an interview with the analyst, it's not all about getting aircraft, it's about continuing overall growth. Due to the Max issue, Southwest's growth is constrained by their dependence on one aircraft type. Acquiring someone who doesn't have that constraint means its growth potential could be folded into Southwest. After all, if they acquired someone just to get a bunch of planes, what are they going to do...abandon a lot of routes so they can restore flights to MDW and MCO? There are easier ways to get planes.

In any event it is about a/c, there is nothing preventing WN from ordering some small 787-8's or the wonderous 787-10, and as we know, when you have an order in with an OEM cancellation hurts, just ask AA or EK. Based on the length of time on the grounding of the MAX and the penalties that Boeing has to pay, I am sure that if WN wanted, they could convert some of the 737 orders to 787's with no problem. Not only would that assist with domestic growth in the short term but also allow international expansion on a large scale.
Since the article was written by a financial expert, I am sure they do not need any A.Net part time experts telling them that the contract that WN has with its pilots mandates that they fly all their a/c, so it would be more complicated to get the pilots on one contract versus just spending the financial capital to get new frames.
 
mia
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 12:45 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.


Diminished you say? Normally when you get placed six feet under you start to diminish quite rapidly, in a physical sense.
"Like all great travelers, I have seen more than I remember, and remember more than I have seen."
 
LightChop2Chop
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 12:57 pm

Here is a novel idea WN. Red eyes. Get your pilots to agree to that and that will allow for some growth while you wait out the max issue.
 
maps4ltd
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:11 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.


They can pry my free WiFi from my cold dead hands.
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DL747400
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:12 pm

Yeah, as if another merger is going to fix all of WN's problems. :roll:

Holy cow, what some people latch onto never ceases to amaze me.
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catiii
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:13 pm

Hey mods can you modify the thread title? WN we downgraded based on MAX issues. They weren’t downgraded based on M&A speculation. There’s a significant difference.
 
catiii
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:15 pm

LightChop2Chop wrote:
Here is a novel idea WN. Red eyes. Get your pilots to agree to that and that will allow for some growth while you wait out the max issue.


Stop making so much sense!
 
FixemFlyem
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:17 pm

LightChop2Chop wrote:
Here is a novel idea WN. Red eyes. Get your pilots to agree to that and that will allow for some growth while you wait out the max issue.


The pilots already agreed to red eyes in their last contract. The company evidently hasn't seen the need to operate them.
 
catiii
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:18 pm

cschleic wrote:

Watching an interview with the analyst, it's not all about getting aircraft, it's about continuing overall growth. Due to the Max issue, Southwest's growth is constrained by their dependence on one aircraft type. Acquiring someone who doesn't have that constraint means its growth potential could be folded into Southwest.


That’s where Joe, not unsurprisingly if you ever rad any of his stuff or listen to the calls, once again didn’t do his due diligence. If he thinks that there’s a one time organic growth component to acquiring a few hundred airplanes that’s one thing. I inferred the same thing you did though, which was that Airbus is delivering airplanes. They’re not. They’re 9 months behind on NEO deliveries, they can’t get the ACF process right, the supply chain is screwed up, and the tariffs issue is a major deal.
 
MIflyer12
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:19 pm

catiii wrote:
Hey mods can you modify the thread title? WN we downgraded based on MAX issues. They weren’t downgraded based on M&A speculation. There’s a significant difference.


Here's the article title: Southwest buying another airline? Carrier downgraded on M&A speculation

I think you're trying to engage in a little selective filtering.
 
Junction
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:23 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.


Exactly. This is about as absurd as industry speculation can get by an actual analyst. It's borderline slander.
 
jplatts
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:30 pm

FixemFlyem wrote:
The pilots already agreed to red eyes in their last contract. The company evidently hasn't seen the need to operate them.


WN likely has the capability to operate redeyes from Hawaii to California that depart from Hawaii after 11:00 PM Hawaii Time as (a) WN already operates flights from some airports in the Eastern Time Zone that depart between 11:00 PM and 12:00 AM Hawaii Time (which is between 5:00 AM and 6:00 AM Eastern Time) and (b) WN already operates some flights within the contiguous U.S. that depart in the evening and arrive at the destination after 12:00 AM the next day.
 
AWACSooner
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Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 1:49 pm

BMWdrvr75 wrote:
Southwest cannot handle another merger they couldn’t even handle a B717 everyone just stop...Southwest is way too arrogant and way too close minded to handle anything else in the industry.

...says the guy with the avatar of WN's biggest detractor...

And somehow their nearly 5 decades of profitiblity and ZERO trips to Ch 11 speak otherwise...
 
AWACSooner
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Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 1:50 pm

enilria wrote:

Just take a shopping cart to Mojave and bring back some 737-300s. Btw, looking like in retrospect a terrible decision to mass retire the 737-300 a year ago.

Except they can't, per the FAA. They can't have classics, NG's, and MAX's all in their fleets simultaneously...with pilots rated to all three. Hence the mass retirements two years ago.
 
dtremit
Posts: 164
Joined: Thu Oct 21, 2004 1:08 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 2:47 pm

airplaneboy wrote:
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.


The A321 order is entirely expansion, as far as I know -- 70+ planes added to a current fleet of ~250. The A220 order is 70 planes to replace 60 E190s. That's a net increase of 80 frames to a current fleet of ~250 -- over 30%.

And that's not counting capacity increases -- each A220 seats 40% more than the E190 it's replacing. On a capacity basis, then, those 70 A220s could be seen as equivalent to almost 100 E190s.

Finally -- there's nothing preventing them from keeping the E190s around longer than they claim they will. If they need to keep some around to wait for future orders to come in, I'm sure they will.
 
dtremit
Posts: 164
Joined: Thu Oct 21, 2004 1:08 am

Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 2:47 pm

VS11 wrote:
JetBlue isn’t cheap - market cap of $5.2b and $2.5b of debt. What problem(s) would WN be solving to justify spending so much money? Southwest isn’t exactly successful in the Northeast - they could totally retreat this market and let JetBlue cover it.Will they keep the brand - I sure hope so. As indicated by the market, there isn’t much appetite for Southwest in the Northeast.


WN squandered a lot of what FL had built in the Northeast during that acquisition, and they're still pulling back on BOS routes today. I think a B6 acquisition would be a miserable failure.

Fundamentally I think Southwest's challenge is that their brand -- down-home, no frills, cheap over convenient -- doesn't play in a lot of coastal markets. The customers paying real money in BOS and NYC want convenience -- reserved and premium seats, shuttle frequencies, GDS booking, and nonstops. And operating here is expensive enough that you can't make it work without those spendier customers.
 
dtremit
Posts: 164
Joined: Thu Oct 21, 2004 1:08 am

Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 2:49 pm

AWACSooner wrote:
enilria wrote:

Just take a shopping cart to Mojave and bring back some 737-300s. Btw, looking like in retrospect a terrible decision to mass retire the 737-300 a year ago.

Except they can't, per the FAA. They can't have classics, NG's, and MAX's all in their fleets simultaneously...with pilots rated to all three. Hence the mass retirements two years ago.


If the MAX is grounded long enough, maintaining certification on it may cease to be a pressing concern.
 
nws2002
Posts: 933
Joined: Wed Feb 13, 2008 11:04 pm

Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 2:55 pm

AWACSooner wrote:
enilria wrote:

Just take a shopping cart to Mojave and bring back some 737-300s. Btw, looking like in retrospect a terrible decision to mass retire the 737-300 a year ago.

Except they can't, per the FAA. They can't have classics, NG's, and MAX's all in their fleets simultaneously...with pilots rated to all three. Hence the mass retirements two years ago.


No, but they can do what other carriers do (including ULCC like G4) and have pilot groups that are trained on different aircraft.
 
PartsGuy20
Posts: 47
Joined: Fri Dec 21, 2007 8:09 pm

Re: WN Downgraded by Stifle based on aquisition speculation

Tue Oct 22, 2019 4:50 pm

What about Moxy?

Perhaps WN isn't looking to "solve" the MAX issue right now, but the larger long-term issue of the lack of fleet diversification, especially in a few years when more MAXes have been received and early NGs have been retired. Moxy isn't yet a competitor with an established route network, employee seniority, etc. so the mechanics of the acquisition would be relatively smooth in that regard, and that should make the acquisition cost much lower as well.

Basically what they'd be buying would be a lot of early A220 production slots with very little else getting in the way. Not a terribly crazy idea in my book.
 
ScottB
Posts: 7225
Joined: Fri Jul 28, 2000 1:25 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 5:05 pm

MIflyer12 wrote:
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.'


WN wouldn't do a hostile takeover. History has shown that airline industry mergers are fraught with difficulty even with both pre-merger teams ostensibly pulling together toward one goal.

joeblow10 wrote:
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


SY just isn't big enough to move the needle for WN. They're maybe 3-4% of WN's size and WN takes more new planes from Boeing in an ordinary year than SY has in its entire fleet. If you're going to devote large amounts of company resources to getting an integration done, you might as well go after a larger target with more strategic value. And hubs/focus cities in NYC/BOS are definitely more strategic than MSP.

flyby519 wrote:
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.


Of course LUV would make an offer significantly above the current JBLU share price. But the point regarding market cap vs. book value is that Wall Street right now isn't seeing much tangible value in the enterprise over and above the collective value of JBLU's assets. By contrast, LUV trades for nearly 3x book value. If you're the BOD, it's probably worth taking a 50% premium on current share price rather than hoping for a higher return ten years down the road from organic growth. After all, the gains one realizes today can be invested on other ways which would ultimately generate even higher returns.

tphuang wrote:
That doesn't work. Current WN model simply doesn't work out of JFK. 80 slots at LGA would be worth more to WN than 175 slots at JFK. You are not going to make any money running 8x daily to MDW/ATL/STL out of JFK. B6's current network and aircraft lineup is pretty much the result of strength of JFK. Sure, WN can continue running flights to Florida the same way B6 does now, but if it will need to do international flying, transcon, premium transcon and red-eyes if it wants to succeed at JFK. As seen on EWR-OAK/SAN, WN's current product does not translate to transcon market.


Transcon is roughly 20-25% of B6's seats out of JFK. Premium transcon is maybe 10% of that, although a higher fraction of revenue. I don't know why you think WN would abandon international flying out of JFK -- it's not as if they dropped international flying as a result of the AirTran purchase, although they did shift routes around. But honestly, it wouldn't surprise me if WN had a somewhat diminished presence at JFK post-merger. I think the key assets driving a transaction would be BOS, DCA slots, and FLL. JFK gets smaller akin to how WN reduced ATL. I do think there's a space for a WN-style product transcon -- although I certainly don't expect they'd compete for the premium market like B6. That said, it wouldn't be impossible for them to offer a Mint-like premium product in the transcon market while retaining a normal WN economy cabin -- just allow assigned seats for the premium cabin and open seating in economy as usual.

dtremit wrote:
Fundamentally I think Southwest's challenge is that their brand -- down-home, no frills, cheap over convenient -- doesn't play in a lot of coastal markets. The customers paying real money in BOS and NYC want convenience -- reserved and premium seats, shuttle frequencies, GDS booking, and nonstops. And operating here is expensive enough that you can't make it work without those spendier customers.


California isn't a coastal market? BWI isn't a coastal market? In WN's key city-pairs, they do offer shuttle-like frequencies. The problem in the Northeast has generally been a lack of gates and slots for them to enter and compete on an equal footing with the incumbents. And most passengers aren't buying premium seats, even in the Northeast.
 
CobaltScar
Posts: 793
Joined: Thu Mar 23, 2017 2:30 pm

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 5:16 pm

ScottB wrote:
MIflyer12 wrote:
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.'


WN wouldn't do a hostile takeover. History has shown that airline industry mergers are fraught with difficulty even with both pre-merger teams ostensibly pulling together toward one goal.



There will be nothing hostile about the takeover. I predict 99.99999999 percent of jetBlue employees will be forever grateful to SWA and their far superior work rules and pay. Who cares of some people at the top have to deploy their golden parachutes. Bring on the take over.
 
rbavfan
Posts: 3662
Joined: Fri Apr 17, 2015 5:53 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 5:25 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.


Yes they would. If you aquire the airline you aquire the lease & payments. Why do you think WN subleases the 717's from AirTran to Delta. They did not want them, Delta did otherwise they would have paid through the nose to drop the contract.
 
JoseSalazar
Posts: 331
Joined: Mon Oct 14, 2019 3:18 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 5:31 pm

CobaltScar wrote:
ScottB wrote:
MIflyer12 wrote:
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.'


WN wouldn't do a hostile takeover. History has shown that airline industry mergers are fraught with difficulty even with both pre-merger teams ostensibly pulling together toward one goal.



There will be nothing hostile about the takeover. I predict 99.99999999 percent of jetBlue employees will be forever grateful to SWA and their far superior work rules and pay. Who cares of some people at the top have to deploy their golden parachutes. Bring on the take over.

Most of my B6 pilot friends really don’t want a southwest merger. Thanks but no thanks. Not that any B6 pilots would have a say in things.
 
rbavfan
Posts: 3662
Joined: Fri Apr 17, 2015 5:53 am

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 5:43 pm

DarthLobster wrote:
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.


So your saying the only carrier to make money in the bad years, founded by him and using his boarding process caused his legacy to fly out the window? You win the prize for absurd comment today.
 
CaptCoolHand
Posts: 100
Joined: Mon Oct 22, 2018 12:24 pm

Re: WN Downgraded based on aquisition speculation

Tue Oct 22, 2019 8:44 pm

JoseSalazar wrote:
CobaltScar wrote:
ScottB wrote:

WN wouldn't do a hostile takeover. History has shown that airline industry mergers are fraught with difficulty even with both pre-merger teams ostensibly pulling together toward one goal.



There will be nothing hostile about the takeover. I predict 99.99999999 percent of jetBlue employees will be forever grateful to SWA and their far superior work rules and pay. Who cares of some people at the top have to deploy their golden parachutes. Bring on the take over.

Most of my B6 pilot friends really don’t want a southwest merger. Thanks but no thanks. Not that any B6 pilots would have a say in things.



Well. I’m in the 0.000000001%.
I’d also wager that cobalt is 99.9999999% wrong about JB employees As Scott said. SWA is hardly any savior and has plenty of its own shortcomings.

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