jerryleber

Gangwal is a 72 year olf billionaire on the LUV BOD. Raja is 47 coming off a significant marketing failure. Raja might catch a management job, but no airline is looking to put him on their BOD.

FriendlyPilot

The idea that NK and F9 are unprofitable because they aren't big enough is a myth. Both F9 and NK were profitable from 2012-2019 when both airlines were smaller. Allegiant is smaller than both airlines and they were profitable in 2023.

American only had a 2.1% profit margin in 2023. Southwest was 2.4%. If size was the main driver of profits these airlines would be wildly profitable, but they aren't. Neither NK nor F9 will ever get to this scale.

The reason that NK and F9 are not profitble has nothing to do with size. Its a failure to pivot away from a business model that doesn't work anymore.

This is 100% accurate. The only way either survives is to figure out a way to charge people more money to get on their planes. This will get harder as the legacies keep adding seats into their network with a minimal marginal cost because of upgauging their fleets and replacing RJs with mainline planes.

Alexjones

Surely if F9 and NK merge they essentially eliminate competition between LCCs and can charge a lower fare that is still profitable

BKbigfish

Being larger by itself does not equate to profitably. However, part of the reason that the legacies offer a more compelling product is the size of their network and frequency. So NK/F9 have two choices here. Option 1: Throw up the white flag and permanently relegate themselves to being a small boutique ULCC. Option 2: Shift to offering more premium products and scale to compete.

FriendlyPilot

F9 would have to take NKs $3.3B in debt, including a $1.1B secured debt payment due in less than a year plus another $500M due in 2026. F9 has about $650M cash on hand according to their last 10Q filing. The combined entity would have $7.4B of debt which makes it even more leveraged than American, compared to total revenue. Spirit only has cash on hand because it sold planes this year. NKs debt is rated as "junk" so refinancing it would be at very high interest rates, probably higher than a combined F9/NK profit margin.

If F9 acquired NK as an operating airline it has to cover NKs operating cash outflow problem as well and would likely run out of cash before any merger synergies can be attained.

The best thing F9 can do is see if they can purchase assets in BK at a discount rather than taking on any of that debt. Unfortunately they will have to compete with other airlines that have far more cash for those gates and planes.

CincoDeMayo

Yeah, but this isn’t accurate. Frontier cash on hand is not what will be securing any deal with NK. That’s not how it worked, just like JBLU wasn’t using its cash on hand to purchase NK last year.

redhot

isn't it funny when pilots try to be investment bankers and proudly say how it's impossible for a deal to happen based upon XYZ. If the lenders/investors think the best way forward is a sale/merger with Frontier, it will happen... Do I know how they will structure the deal? uhhh no, not even close. What I do know is we will find out by the end of the week on Spirits fate. My money is with a merger/sale to Frontier.

CincoDeMayo

Bingo!




filler

hercretired

F9 and NK are not merging

APCHCLIMB

ask most spirit or F9 pilots what their engine failure memory items are. That should tell you all you need to know about their investment banking knowledge.