Republic Airways: Frontier Dilemma And Investment Outlook [View article]
There appears to be a disconnect between your expectations and our intention. We have indeed performed a full valuation analysis on RJET but cannot give it all away.
We occasionally post some of our findings in the more public forums when there is high interest in a given airline story. The key insight that the market assigns little or no value to Frontier was something we thought important to share.
For more information about our full valuation of RJET, Frontier, and the regional business please contact us by visiting our Ionosphere Capital web site.
US Airways (LCC) says the AMR (AAMRQ.PK) corporate name will disappear following the merger between the two companies, a reversal of previous comments from CEO Doug Parker. The companies expect the deal to be completed in Q3, although full system integration will probably take much longer than that. [View news story]
I don't think this comment is a reversal of anything. All that has been said that I've seen is that the merged airlines will use the "American" name and livery. Nothing has been said about the name of the corporate parent.
Delta's Aggressive Initiatives Are Undervalued [View article]
It's more than that temporal. Frequency can be adjusted; lower unit operating costs make different fare levels economic and alter resulting supply/demand balances; two-class service will generate more revenues. At current fuel prices and maintenance expenses 50-seaters are simply not economic in many markets where they're being flown.
Delta's Aggressive Initiatives Are Undervalued [View article]
We took more than a few looks at the refinery deal. If there were more to the story we would have commented on it. If you have additional information, please elaborate. Just because someone who helped set up the deal left...that provides no evidence that there is "something more" to the story.
AMR And US Airways: Is Labor A Poison Pill? [View article]
AA believes that current shareholders could get about 3.5% of the equity of the new company....as percentage of new market value which is currently estimated to be ~$11 billion. This value could change once the airline emerges from BK and issues new shares.
The New American Airlines: $13 Billion Potential Value [View article]
Fitch is simply using the weighted average value of the combined airlines today, which is not an estimate of what the value will be after AA emerges from BK or after the merger is completed.
The New American Airlines: $13 Billion Potential Value [View article]
It's likely that the old shares will have some value....likely in the 3.5% range...of the initial value of the company which should be in $10 billion range. Hard to know precise value yet.
The Airline Industry Needs More Consolidation [View article]
If the merged network airlines cannot control costs - especially labor - they will lose market share domestically and internationally.
Many of the international airlines (ANA, JAL, Singapore, Air France, and others) are moving to segment their business with lower-cost subsidiaries to compete, grow, and remain profitable.
The airline industry, and the individual airlines, has morphed into portfolios of business units, which include various units of capacity. The units of capacity that are not cost [and price] competitive will lose market share over time.
The airlines that do not morph into businesses that can grow and compete, will move towards failure which can include a breakup of the business and its units of capacity.
The Airline Industry Needs More Consolidation [View article]
Market share is much smaller today for the mainline-only network airlines - American, United, US Airways, and Delta.
20+ commuter airlines provide domestic feed to the network airlines. The 7 so-called low-cost airlines and commuters represent 36% of the seat capacity...up from only 10% in 2000.
United+Continental as a merged company, as an example, has slightly less seat share today (domestic and mainline-only) than United by itself 10 years ago.
Unions, especially pilots, have the power to drag down or shut down an airline. As suggested, the greater the size of the airline, the greater the impact on the national air transportation system.
However, given the inadequate earnings power of the airlines, and the fragmented nature of the industry, it's hard to imagine a labor group shutting down an airline today. And, it's likely that the NMB will not release a major airline labor group to seek self help (i.e, go on strike). Labor has enhanced negotiating leverage when the airline is profitable and wages are below peer group averages.
The Airline Industry Needs More Consolidation [View article]
We examined almost 19,000 city-pairs and 600 airports. Quality of service doesn't drive profitability, nor does it have much of an impact on growth. Costs drive price and price drives market share and growth. Most "high quality" airlines fail over time because they lack scale and scope economies.
Southwest and Jetblue were able to keep absolute and relative costs [and fares] moving down as they grew faster than the market. Virgin American is a high quality airline but loses money and Southwest - without growth and higher labor costs - earns less than United and Delta and others today.
Industry structure [i.e., concentration] drives industry profitability over time. There is a range of profitability within the industry but the weighted average is driven by industry concentration, which drives pricing power. We employ the Herfindahl methodology to quantify pricing power and examined monthly data between 1977-2011.
The Airline Industry Needs More Consolidation [View article]
AA + Reno also. I didn't include all of AA's acquisitions because the focus was on the pricing power, via increased concentration, since the recession. The concentration and mergers study included all airlines that operated during 1971-2011 Over 117 airlines were examined.
Republic Airways: Frontier Dilemma And Investment Outlook [View article]
We occasionally post some of our findings in the more public forums when there is high interest in a given airline story. The key insight that the market assigns little or no value to Frontier was something we thought important to share.
For more information about our full valuation of RJET, Frontier, and the regional business please contact us by visiting our Ionosphere Capital web site.
US Airways (LCC) says the AMR (AAMRQ.PK) corporate name will disappear following the merger between the two companies, a reversal of previous comments from CEO Doug Parker. The companies expect the deal to be completed in Q3, although full system integration will probably take much longer than that. [View news story]
Delta's Aggressive Initiatives Are Undervalued [View article]
Delta's Aggressive Initiatives Are Undervalued [View article]
AMR And US Airways: Is Labor A Poison Pill? [View article]
The New American Airlines: $13 Billion Potential Value [View article]
The New American Airlines: $13 Billion Potential Value [View article]
This short term variation has nothing to do with the longer term valuation which will be based on industry and company fundamentals.
The New American Airlines: $13 Billion Potential Value [View article]
AMR And US Airways: Is Labor A Poison Pill? [View article]
AMR And US Airways: Is Labor A Poison Pill? [View article]
AMR And US Airways: Is Labor A Poison Pill? [View article]
The Airline Industry Needs More Consolidation [View article]
Many of the international airlines (ANA, JAL, Singapore, Air France, and others) are moving to segment their business with lower-cost subsidiaries to compete, grow, and remain profitable.
The airline industry, and the individual airlines, has morphed into portfolios of business units, which include various units of capacity. The units of capacity that are not cost [and price] competitive will lose market share over time.
The airlines that do not morph into businesses that can grow and compete, will move towards failure which can include a breakup of the business and its units of capacity.
The Airline Industry Needs More Consolidation [View article]
20+ commuter airlines provide domestic feed to the network airlines. The 7 so-called low-cost airlines and commuters represent 36% of the seat capacity...up from only 10% in 2000.
United+Continental as a merged company, as an example, has slightly less seat share today (domestic and mainline-only) than United by itself 10 years ago.
Unions, especially pilots, have the power to drag down or shut down an airline. As suggested, the greater the size of the airline, the greater the impact on the national air transportation system.
However, given the inadequate earnings power of the airlines, and the fragmented nature of the industry, it's hard to imagine a labor group shutting down an airline today. And, it's likely that the NMB will not release a major airline labor group to seek self help (i.e, go on strike). Labor has enhanced negotiating leverage when the airline is profitable and wages are below peer group averages.
The Airline Industry Needs More Consolidation [View article]
Southwest and Jetblue were able to keep absolute and relative costs [and fares] moving down as they grew faster than the market. Virgin American is a high quality airline but loses money and Southwest - without growth and higher labor costs - earns less than United and Delta and others today.
Industry structure [i.e., concentration] drives industry profitability over time. There is a range of profitability within the industry but the weighted average is driven by industry concentration, which drives pricing power. We employ the Herfindahl methodology to quantify pricing power and examined monthly data between 1977-2011.
The Airline Industry Needs More Consolidation [View article]