Who's next to fold?

[prechilill]

Aloha had filed for bankruptcy in Chapter 11, (reorg) a couple of days before converting to Chapter 7 (liquidation). Therefore, when you are dealing with an airline without enough capital to survive without 100% funding from the credit card company, which has been in discussions for several months according to an article in the Denver Businesss Journal, First Data had no choice but to cut funding down to limit the amount of money they would be exposed to when Frontier folds as they would become an unsecured creditor. Frontier does not have the financial funding and the fact is the company knows that. Furthermore, a bankruptcy filing is not something that you say on Wednesday you are not going to file, and then on Thursday you file. This has been in works for several days. Kudos for keeping it so close to the vest for Frontier.



So, lets do some math.....if they are now only funded at 45%, that means that First Data has reduced their exposure to a complete shutdown to 55% of future sales as of May 1st, not April 11th as Frontier claims. Cash/Cash Equivalents for FYE2007, (March 31, 2007) was 202,981,000. This means that if all cash represents future bookings, then First Data was floating to Frontier 202,981,000 and if Frontier was to close down they would be on the hook to their customers 202,9810,000. But, if they are now only going to supply Frontier 45% of that amount, then Frontier only stands to have cash of 91,341,450. That is dramatic. However, after reading through their financial report for 2007, if I was First Data I wouldn't float even the 45% on a going forward basis. I've never read such a gloom and doom financial report.

Now as for the eighteen months to reorganize under chapter 11, lets take their fleet size of 72 aircraft, 2 subsidaries and compare that to the three years for United Airlines with IIRC 28 subsidaries and 494 fleet size. Hmm, seems like somebody is looking to ride out the recession in bankruptcy. This leads me to think, and considering the filing in New York corts that JetBlue has to be doing some serious soul searching on how much money they need to buy them out of bankruptcy. Remove all senior managers, remove all duplicate managers at various stations and now you have a good foundation for the two to build together. JMO.


[topic="0"]http://denver.bizjournals.com/denver/stories/2008/04/07/daily72.html?ana=yfcpc[/topic]

Excellent post. Frontier was never any different from Western Pacific back in the 90's- the only difference being Frontier was smart enough to turn to the city of Denver and the courts to keep the big bully on the block from beating them to death. UA backed off and Frontier started turning profits for a while. Well, now that Southwest is in town, is anyone surprised with how things ended up with Frontier? They couldn't compete with UAL so who can be surprised they can't compete against WN?
Midwest is next on the list, probably followed by Mesa and maybe Spirit. Oil and gold are going higher.

 

[eolesen]

Mesa's at the top of my list. Their market cap evaporated over the course of a couple days, and that tells me there's little to no chance of them being able to come up with enough cash for the convertible option that comes due in June.

Last week when news came out on the convertible, Mesa's stock was trading at $1.23/share, and they were looking at 30 million shares to raise the necessary cash.

Friday, it closed at $0.67, and they'd need to issue 56 million shares to raise enough cash. Essentially tripling the amount of outstanding stock....

By the time the shareholder vote comes around, Mesa will have been given a notice of delisting by Nasdaq. There won't be enough confidence either on the part of bondholders to ride out the convertible beyond the June call date, and I'd be shocked if the institutional shareholders vote in approval to dilute their stock on a 3:1 basis...


Airtran and Spirit might be in trouble, but they're not in as much trouble as Mesa.

Midwest? Dunno. Their fate hinges on Delta-Northwest. If that deal goes thru, I don't see how DOJ will allow it to go forward as long as NWA remains even a passive investor. The worst-case scenario would be Midwest shutting down, and the almost worst-case scenario would be TPG giving Airtran another shot at Midwest. But I don't think they've got the cash right now. TPG paid $450M in cash for MEH last August, and Airtran said they only have $250M in cash as of the end of March.

 

[desertfox]

Mesa's at the top of my list. Their market cap evaporated over the course of a couple days, and that tells me there's little to no chance of them being able to come up with enough cash for the convertible option that comes due in June.

Last week when news came out on the convertible, Mesa's stock was trading at $1.23/share, and they were looking at 30 million shares to raise the necessary cash.

Friday, it closed at $0.67, and they'd need to issue 56 million shares to raise enough cash. Essentially tripling the amount of outstanding stock....

By the time the shareholder vote comes around, Mesa will have been given a notice of delisting by Nasdaq. There won't be enough confidence either on the part of bondholders to ride out the convertible beyond the June call date, and I'd be shocked if the institutional shareholders vote in approval to dilute their stock on a 3:1 basis...


Airtran and Spirit might be in trouble, but they're not in as much trouble as Mesa.

Midwest? Dunno. Their fate hinges on Delta-Northwest. If that deal goes thru, I don't see how DOJ will allow it to go forward as long as NWA remains even a passive investor. The worst-case scenario would be Midwest shutting down, and the almost worst-case scenario would be TPG giving Airtran another shot at Midwest. But I don't think they've got the cash right now. TPG paid $450M in cash for MEH last August, and Airtran said they only have $250M in cash as of the end of March.

Clipped from Yahoo finance Mesa stock bulletin board...

fail to see why ANY investor who's done his due diligence would buy Mesa Stock. There are just too many bad signs. VERY, VERY little upside. I do not own this stock, nor do I plan to. Just curious why anyone would buy this stock.
1. Issuing of more stock. They obviously need the cash. No, not a good sign.
2. Fuel prices. All the airlines now are going down. Why the heck would you buy when fuel prices are at record prices? Even solid carriers are now having a hard time.
3. Legal problems. They owe Hawaiian, and knowing how Ornstein and his CFO operated, and gave excuses/@#$% defense in the Hawaiian case, I'd say the Aloha case is pretty strong also. Not only that, but you now see even Lawmakers taking a look at Go's predatory pricing accusations. Even Congressmen are saying that it sure looks like predatory pricing. Hawaiian won, Aloha's damages are even greater. The company folded. Ornstein has had a ton of legal problems in the past. Things don't look very well.
4. Ornstein thinks that Hawaii's interisland market is good. This is not a moneymaker. Go has lost a ton of money since arriving in Hawaii. He'd run the company into the ground to keep Go afloat. They think they don't have competition with Aloha gone. Nope. Hawaiian now has Aloha's customers. Not only that, but Hawaii's people are pretty ticked that over 2000 people are now out of a job(Aloha). Hawaii people love their own. They're starting to see Mesa for what it is.
5. The Delta loss. Mesa also sounds desperate, by trying to take Delta to court. And it's not just Delta. I've heard United trying to get out of it's contract with Mesa also. I don't see Mesa getting out of this. They DO have a low completion rate. They're record is not very well, and a lot of passengers also know this. Mesa is practically built on these contracts. They lose more big contracts, and it'll be toast. The large airlines now want to cut costs. The airlines are all mostly in trouble due to fuel prices/economy.
6. The economy. Doesn't look good. Recession looming, subprime/credit crunch mess. Etc. These sort of stuff affect the airlines.
7. The stock price. You might say it's bargain prices, but heck, the stock now has a chance of being delisted. Not just that, but have you taken a look at that chart??? Take a look at the 2 year chart. THAT'S some chart. DOWN, DOWN, DOWN. Why investors haven't tried to get Ornstein out(especially after the Go! debacle) is a big question. Doesn't look to me like very much upside. That's almost straight down.
8. They're own employees hate their management or even their company. Morale is low. How can you invest in a company that their own employees dislike? Mesa has an extreme high turnover rate. The employees put up a billboard in Phoenix criticizing their own management. Their pilots hate their scheduling, and the FAA is investigating 2 of their pilots for sleeping on a Hawaii Interisland flight. If you don't believe me, go do some research on the net. You'll see Mesa employees ripping their own management. That is NOT a healthy company.

Ok maybe I'm missing something. Please tell me why anyone would buy this stock, besides the price being so low(which obviously, most investors feel, this company deserves its valuation. otherwise it wouldn't be this low). Where is the upside?? There are much better stocks to gamble with, if that's your thing.

 

[YVINTERN]

Clipped from Yahoo finance Mesa stock bulletin board...

fail to see why ANY investor who's done his due diligence would buy Mesa Stock. There are just too many bad signs. VERY, VERY little upside. I do not own this stock, nor do I plan to. Just curious why anyone would buy this stock.
1. Issuing of more stock. They obviously need the cash. No, not a good sign.
2. Fuel prices. All the airlines now are going down. Why the heck would you buy when fuel prices are at record prices? Even solid carriers are now having a hard time.
3. Legal problems. They owe Hawaiian, and knowing how Ornstein and his CFO operated, and gave excuses/@#$% defense in the Hawaiian case, I'd say the Aloha case is pretty strong also. Not only that, but you now see even Lawmakers taking a look at Go's predatory pricing accusations. Even Congressmen are saying that it sure looks like predatory pricing. Hawaiian won, Aloha's damages are even greater. The company folded. Ornstein has had a ton of legal problems in the past. Things don't look very well.
4. Ornstein thinks that Hawaii's interisland market is good. This is not a moneymaker. Go has lost a ton of money since arriving in Hawaii. He'd run the company into the ground to keep Go afloat. They think they don't have competition with Aloha gone. Nope. Hawaiian now has Aloha's customers. Not only that, but Hawaii's people are pretty ticked that over 2000 people are now out of a job(Aloha). Hawaii people love their own. They're starting to see Mesa for what it is.
5. The Delta loss. Mesa also sounds desperate, by trying to take Delta to court. And it's not just Delta. I've heard United trying to get out of it's contract with Mesa also. I don't see Mesa getting out of this. They DO have a low completion rate. They're record is not very well, and a lot of passengers also know this. Mesa is practically built on these contracts. They lose more big contracts, and it'll be toast. The large airlines now want to cut costs. The airlines are all mostly in trouble due to fuel prices/economy.
6. The economy. Doesn't look good. Recession looming, subprime/credit crunch mess. Etc. These sort of stuff affect the airlines.
7. The stock price. You might say it's bargain prices, but heck, the stock now has a chance of being delisted. Not just that, but have you taken a look at that chart??? Take a look at the 2 year chart. THAT'S some chart. DOWN, DOWN, DOWN. Why investors haven't tried to get Ornstein out(especially after the Go! debacle) is a big question. Doesn't look to me like very much upside. That's almost straight down.
8. They're own employees hate their management or even their company. Morale is low. How can you invest in a company that their own employees dislike? Mesa has an extreme high turnover rate. The employees put up a billboard in Phoenix criticizing their own management. Their pilots hate their scheduling, and the FAA is investigating 2 of their pilots for sleeping on a Hawaii Interisland flight. If you don't believe me, go do some research on the net. You'll see Mesa employees ripping their own management. That is NOT a healthy company.

Ok maybe I'm missing something. Please tell me why anyone would buy this stock, besides the price being so low(which obviously, most investors feel, this company deserves its valuation. otherwise it wouldn't be this low). Where is the upside?? There are much better stocks to gamble with, if that's your thing.

You got it right...thats why I bailed out of Mesa when I had the opportunity to.

 

[scuba]

With the latest announcement from WN how will F9 find backing to continue to fly? How long till the doors shut all the way?


[post="0"]WN adds flying from DEN[/post]

 

[chucky]

how on God's given earth is this airline still flying?


Spirit Brings Low Fare Service to Trinidad

 

[Travelpro72]

I think they have weathered the storm thus far due to the fact that they do a lot of Caribbean and Latin American flying out of FLL. They don't compete with the likes of other LCC's or other major carriers locally in Florida besides American. It does amaze me thought that Ben B can run this little outfit in FLL and compete against AA but US couldn't make it work. I think it's only a matter of time for Spirit as well. Tick Tock, Tick Tock....

 

[CO738]

F9 is done. WN is there to pick up the capacity left behind. WN just announced DEN-PDX and DEN-IND - two bread and butter F9 routes. WN vs UA vs F9 doesn't work in DEN. That town is only big enough for two of 'em. WN now openly refers to their new goldmine in Colorado as their newest and fastest developing "Focus City."

 

[RideHard]

how on God's given earth is this airline still flying?


Spirit Brings Low Fare Service to Trinidad

DELTA is gonna file!!!!!!!!!!!!!!!!!

 

[chucky]

I give Spirit less than six months before they fold.

 

[Travelpro72]

Would anyone take them over since they deal with a lot of originating passengers. They do a big business out of FLL. Nothing compared to AA but they seem to hold their own and the majority of their flying is Caribbean which is technically int'l. That is where the money is at right?

 

[FWAAA]

Would anyone take them over since they deal with a lot of originating passengers. They do a big business out of FLL. Nothing compared to AA but they seem to hold their own and the majority of their flying is Caribbean which is technically int'l. That is where the money is at right?

I don't know for certain, but I've heard that Spirit is lucky if it captures the bottom of the yields in its markets. If true, then that can work if you can keep costs at rock bottom. But since everybody's gotta buy jetA, how do you keep costs down these days?

 

[chucky]

I don't know for certain, but I've heard that Spirit is lucky if it captures the bottom of the yields in its markets. If true, then that can work if you can keep costs at rock bottom. But since everybody's gotta buy jetA, how do you keep costs down these days?

I'd love to see their numbers. With Fuel where it is I'm surprised they've made it this far.
AA has allowed them to co-exist .......so far

 

[etops1]

looks like eos just went belly up.

 

[chucky]

Airline Bankruptcies: Who's Next To Fold?


How the airlines stack up according to Morningstar.com, interesting read.