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Discussion in 'Alaska Airlines | Mileage Plan' started by MX, Jul 9, 2014.
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Appearance of competition in air travel is unacceptable, and must be stamped out.
High profitability and Excellent Service make it a takeover target. But who would take it over? AA or Delta. AA is still working on merging with USAir. Delta doesn't have the service out there yet. United doesn't really seem interested. Virgin America? Doubt it.
It might be an attractive takeover target but not really anyone to take it over.
Delta. Trashing a competitor is a good indicator of takeover interest. Recall Whole Foods & Wild Oats, US Air & AA, and tons of other examples.
It is a 100x better strategic buy for USdbaAA. They have no west coast coverage. Not a single flight to MT. One each in WY and ID. Two in WA. Three in OR. One Or none to AK.
USdbaAA need AS badly. DL with SLC and now SEA doesn't need AS, but they will buy them
Turning MP points into SkyPesos will be one hell of a devaluation.
I suppose the ALK dividend, industry-leading return on invested capital and record profits have had nothing to do with that.
AS meets exactly zero of these characteristics. So much for methodology. Sounds like they're pulling this one out of their nether regions for clickbait.
If I had a nickel for every "AS is gonna merge" thread on a.net I've seen, I could start my own airline. The writing in this article is at about the same level of sophomoric triviality and thumbsucking- now, if the authors had committed some actual journalism, to the extent of a scoop (maybe a major institutional investor says "time to explore a merger", maybe finding some backsliding on AS management's desire to stay independent) I wouldn't be like this, but this is the same sort of mindless speculation we've seen for decades. And AS keeps ticking.
The whole thing is an exercise in bad enough to give me a sprain in my eyes and a headache.
I would definitely agree with the click worthiness of nether regions.
If ALK stock had been cheaper, DAL would have bought them instead of building a competitive hub in SEA. But ALK was unaffordable and as long as ALK's stock stays high, no one will be able to buy them at a justifiable price.
If ALK stock drops enough, then all bets are off. Interesting times in SEA.
Good stuff and fun to speculate. I could see DL or another carrier going after Alaska or Frontier. UA is still trying to recover from the whole Continental merger and I'm sure US and AA are still working on that mess. I doubt UA would be all that interested but you never know. That leaves on outside non airline investor group or someone like Southwest which wouldn't be a bad fit for them as they would obtain a profitable airline in AS and would help them continue expansion beyond 48 states. They could even start some good routes like Dallas to Hawaii or help connect Dallas and the Northwest better.
I agree it's "clickbait". Here, let me start some TMZ style "clickbait" I officially speculate that Air France will buy Cape Air so they can expand their reach into Northern Missouri and Arkansas and help fill the gap in service from Kirksville to Paris
Sure, and if my grandma had wheels, she'd be a wagon.
They've been a well-run company for a long time. So what is the assumption on how they would screw up so badly that ALK would tank but the rest of the industry (especially DAL) wouldn't? Do you see any evidence than AS management is making serious errors in how they run the business?
I would imagine it's pretty hard for Delta to recover from a merger they never made, since it was United that merged with Continental...
Does that include swimming once the jet runs out of fuel? AS's and WN's 737s can't fly Dallas-Hawaii nonstop. Also, you do know WN is still in the middle of a merger of it's own, right (Airtran/FL)?
I'm honestly sick of the investment community thinking they can force something to happen just because they say so.
Alaska has been and is a well run company and they are here to stay!
A million times, yes, though IMO I'm pretty sure that ALK investors are part of the community, and they are perfectly fine with how their investment is being managed. (Disclaimer: I am one of those investors, though I'm a flea compared to the big investment firms.)
Bigger is not always better. I think WN+FL and UA+CO is proof of that these days- we all hear the wailing and gnashing of teeth about COdbaUA, but WN's on time percentage these days is something like the low 70's, which is even more shocking to me, for the airline that used to do the 20 minute turn.
Excuse me, but I didn't make any prediction. I said, if it were to happen, all bets are off.
And yes, the scenario does exist whereby DAL trashes ALK's financial performance without impacting its own too much. The reasons for that have to do with relative size and markets. DAL's international service and other hubs aren't really affected by what happens at SEA, and the domestic SEA operation is only a small fraction of DAL's revenues and profits. They could afford to flood the SEA market with capacity and discount prices in a way that materially reduces ALK's profits without impact DAL too much. Eventually that would be reflected in the stock prices. There's probably risk of legal action, and they'd need to take care that they can justify all their moves simply for building their own SEA hub.
I'm not saying that's going to happen, but the scenario is there. There isn't really much that ALK management can do about it, nor does it require making any errors. They've been looking for other places to expand. I don't think the California-Hawaii flying is doing great. They are trying new routes at SAN. I don't know if they are serious about adding more service at SLC. Clearly the most reliable flying for ALK has been Alaska routes and SEA/PDX. I guess they can add some capacity at PDX since DL is not targeting that.
But not reason to get all huffy because you don't like the possible scenario. I'm not attacking AS or ALK management. Just calling it as I see it.
Predatory pricing to crash the stock price of a competitor and then "Hey, DOJ Antitrust Enforcement, it was all totally innocent, we swear, so now can we totally lock up a monopoly on some markets that didn't have them before and get approval for a merger?"
Sure, sounds great. I bet Richard Anderson can do great puppy dog eyes. And nobody would EVER see through that.
So... you think it could happen by 12/2015? That is the prediction of the article.
I'm not sure it will happen at all, and it is entirely possible that DL will declare their SEA hub expansion a failure. Just don't know what will happen.
But as to whether ALK stock could suffer by end of 2015 or ALK merged? If DL stays committed to SEA and becomes more aggressive in pricing, I do think the stock could be down by the end of 2015, but a merger is unlikely to have occurred by then. So far while DL is throwing capacity, they haven't been predatory or even aggressive in pricing - they've just matched the market.
I expect there will be a lawsuit either way - whether it's a mercenary lawsuit by a class action lawyer or a derivative suit, or a suit by ALK itself, if ALK's stock becomes depressed, someone will sue. I'm sure DAL is being careful in their actions. Not so easy to determine the difference between competitively growing its own hub, even competing legally with the dominant carrier, and predatory actions. Maybe that's why we haven't seen particularly low prices. Will be interesting to see pricing this fall.
I would point out that NONE of the mergers of the last decade have involved an airline muscling into a hub, ruining the competitor, and then asking the DOJ for permission for a merger with the competitor.
It seems to me that DL would actually be trying to stay far away from SEA if they lusted after AS. Too easy for the DOJ to say 'nope, pretty obvious you engaged in predatory pricing to eliminate a competitor' otherwise, and then you depressed your profits in a capacity war for nothing... Or worse, handed your former partner to a competitor.
Maybe DL just hopes to grow organically in SEA and hopes that AS will shift its capacity elsewhere... or that ALK gets distracted with a merger of its own... like people who periodically suggest B6 or F9... I don't expect that, however, as I don't think it makes much sense.
I think DL is mostly worried about their own knitting (and finally having a TPAC hub of their own that isn't shared with the universe like LAX is).
I agree that AS and B6/F9 are like peanut butter and tuna fish: two things you really shouldn't put together...
DL never really had a TPAC hub at LAX. I think they had NRT and HNL and that's it, just like at SFO. NRT was the hub.
DL has a couple of problems at NRT. One is no alliance partner. They tried really hard to go after JL but failed. So there are limits to their onward offerings at NRT. In the medium term it is likely that premium international traffic at NRT is going to shift to HND, and NRT becomes an LCC airport. DL is going to have trouble getting the gates and slots to move their operation from NRT to HND, hence they need an alternate strategy of serving North and Mid Asia. That's where SEA came in. UA has SFO, DL never tried at LAX but as you say there is so much competition there and it is not optimally located (even SFO isn't optimal, SEA is geographically superior.) MSP and SLC cannot do it, and ATL and DTW aren't in the right place. I'm sure DL wishes SEA were bigger and that AS weren't dominant.
AA really has the same strategic problem for Asia that DL had, except they have the JL partnership. But neither DFW nor ORD are ideal hubs for Asia, both miss the western half of the USA. By moving first, DL has probably precluded AA from expanding at SEA, so probably LAX is their only option.
Even if you believed that AS would be taken over....the timeline would be completely unrealistic. Mergers of airlines don't come from nowhere to fully integrated in that short of a timeline.
Doesn't AS derive an outsize amount of their overall profit from AK flying vs the rest of the network?
Per the earlier (wsj?) news article last week avg fares to FAI and ANC from SEA have dropped in half on avg since DL arrived.
All of the other new DL SEA flights to other key domestic AS markets will eat the rest of AS high margin flying and get rid of their important SEA biz differentiator which was non stop flying to so many important domestic destinations vs the choice of connecting on another carrier.
Hate to say it but I see depressed profits next year for AS once all the announced DL routes are fully operating in late 2014. Community good will can only take AS so far. Their SLC expansion is dumb and the good moves have been expanding the network to make all top-50 MSAs available via SEA NS flights. Speaking of which please add RDU, CLT, BNA, CVG, CLE, CMH, MKE, MEM, and bring back MIA!
No. It's about 1/6th of their revenue.
So, your solution to DL adding capacity into SEA is to expand flying to a bunch of unprofitable markets that can't support a nonstop from SEA, or start directly competing with AA, the domestic partner they ARE on good terms with? That should be... entertaining.
(Hint: the reason why AS switched from MIA to FLL is that they don't generally feed into the AA hub in MIA, and FLL is a LOT cheaper for things like landing fees/gate rental, and just as good for things like cruise ship business...)
They have tried some other things out of LAX (SYD most notably). The problem is everyone and their uncle flies out of LAX.
Flying to MIA and code sharing with AA is not competition. There is no (good) solution to this situation for AS. I would like those routes for my own benefit. I predict AS will take a hit in 2015 from this DL growth. That is all.
Aren't there also some limitations on AS? Aren't they required by law to service many of the small Alaska Communities? Seems like I read somewhere that those requirements make the Wright Amendment seem like child's play. And would it also include Horizon?
I really don't see any realistic merger other than possibly Frontier. (Make the Eskimo a Polar Bear?)
But I don't see any of the majors wanting to deal with flights to Bethel or Nome or any of the dozen or so other small communities in Alaska.