Andy

Until the last couple of years, I think that ALK's management was willing to wait until VX died, ala IndependenceAir and Skybus.

There were a couple of original investors that finally walked away from VX while Branson and Cyrus kept throwing money into a black hole known as VX. I'd have to go over all of the money Cyrus and Branson poured into VX with the multiple restructurings, but I suspect that they didn't do much better than break even on ALK's buyout.

With fuel prices being where they're at and VX taking more aircraft this last year, VX's business model was reaching critical mass where they could survive without any additional capital. ALK management made a pragmatic decision to kill competition.

BunkerF16

So what happens to the strategy of keeping JB out of the west coast if/when they buy HA and do exactly that.

Andy

What's HA's west coast presence? Gates and daily flights? How does that overlay with JBLU? Is it possible to expand operations at any overlapping airports?

How many east coast JBLU customers want to fly to HA and the Pacific? Wouldn't this cannibalize JBLU's Caribbean service?

I don't think that they'll fit together very well.

BunkerF16

JB could get instant access to WBs and future orders and redistribute them to areas they currently or hope to expand to soon.....Caribbean, Central/South America, Western Europe, etc.....

HA has gates in areas VX had (SFO, LAX) as well as many others on the west coast.......

Don't know what the cost would be, but I can see this as a very viable alternative for JB to significantly increase their west coast presence....

svergin

I agree with this completely. The other airlines benefit from the consolidation without having to foot the bill.

Andy

HA's widebody deployment is likely more profitable than the routes you're suggesting.

HA doesn't have significant west coast presence...

Andy

Every surviving airline's expected to 'take one for the team...'. It's eat or be eaten.

gooddeal

Here are your basic financials in the transaction

Alaska pays 13x of VA net worth to:

- eliminate a carrier whose pricing in common AS markets hurts their ability to fare war against DL/AA/UA.

- purchase slot controlled gate spaces at airports which would significantly delay the opportunity to gain gates organically

- transfer DC/NY/California customers who fly between markets not currently served by AS into near-term AS earnings

- prevent the merger of VA + B6 (or virtually anyone else) whose pricing could further bleed out AS earnings or be cost-prohibitive to organically creating new AS markets

- leverage the discounted cost of the new ground services operation AS announced plus the introduction of QX E-175s across a larger network in competitive markets

The fact that there is a dissimilar fleet, leased equipment, VA historical earnings, value of VA, cost comparison of any other airline transaction or any other reason you can point out is actually irrelevant. The 2016 market rate to buy out the officers and investors of an airline who could continue to undermine AS ability to compete independently was 13x VA value...which at $2.6B cash is a steal considering waiting until a larger legacy to enter a bidding war could've driven the acquisition cost to high for AS to win.

BunkerF16

Routes currently more profitable? Probably. I'm just a dumb pilot, not a route designer/analyzer. But the future WBs could be distributed elsewhere.

As far as HA and their west coast presence, is it really that much less than VX's?

webecheck

Haven't kept up on the news reports about this, but I have to assume its more for defensive reasons with JB than to truly capitalize on M&A synergies. Last thing AK needs is for another large airline with ample connections to the east coast to have west coast presence. Imo, JB doesn't lose anything, Delta is going to have a slightly larger challenge making money in the northwest now, United impact remains to be seen because I don't think AK wants all the VX airplanes anyway, and AA with no dog in the fight wins. Big loser is AK for overpaying, but they kind of had to avoid JB taking it. AK was kind of doomed after the legacy mergers. They just don't have the route network to stay relevant with Delta making the SEA push and everyone else expanding due to favorable market conditions. Buying VX isn't going to solve any problems. JB buy AK 10 years from now. Heard it here first.