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Alaska Air stock falls sharply on difficulties with Virgin, Horizon Air

Alaska Air stock falls sharply on difficulties with Virgin, Horizon Air

Old Oct 25, 17, 5:25 pm
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Alaska Air stock falls sharply on difficulties with Virgin, Horizon Air

Seattle Times article
Alaska Air Group management acknowledged Wednesday that the ongoing challenges of integrating its big Virgin America acquisition have caused “a lot of anxiety around here… a lot of tough conversations,” and have distracted executives from other issues.

Chief executive Brad Tilden also said ongoing problems with cancelled flights at Alaska’s regional carrier Horizon Air have prompted him to move its flight operations center from Portland to Seattle.
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Old Oct 25, 17, 6:03 pm
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Wow... 13% drop.

ALK... wow. Time to buy? Or more bumps ahead...
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Old Oct 25, 17, 6:17 pm
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Originally Posted by beckoa View Post
Wow... 13% drop.

ALK... wow. Time to buy? Or more bumps ahead...
It's been a trying year for ALK. I'm not a buyer.
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Old Oct 25, 17, 6:20 pm
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Have to see which of the legacies step in to deliver the coup de grace while AS is down.
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Old Oct 25, 17, 7:29 pm
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Nevertheless, Tilden said, the quarter brought “pricing pressure, especially at our transcontinental and inter-California markets, with walk-up fare levels being well below historical norms.”

Delta and Southwest are pressing Alaska in Seattle and those carriers plus American, United and JetBlue are adding fare pressure in California.
Why would Alaska buy Virgin, then remove the only advantage it had on many of the Virgin routes just as competitors like B6, AA, United, DL are adding a lot of capacity on these same routes? On transcons, Virgin is far behind all competitors in the premium cabin and more expensive than competitors in economy.
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Old Oct 25, 17, 7:50 pm
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Originally Posted by Adelphos View Post
Why would Alaska buy Virgin, then remove the only advantage it had on many of the Virgin routes just as competitors like B6, AA, United, DL are adding a lot of capacity on these same routes? On transcons, Virgin is far behind all competitors in the premium cabin and more expensive than competitors in economy.
Then to switch to the Alaska product which takes away what little differentiation VX has while raising wages up up to AS levels just sets up a financial disaster. The conference call made it seem like management at Alaska still does not know what they spent billions of dollars on or how they are going to make the VX network profitable. After much prodding by analysts they said they would be looking at the VX network at some point in the future. They really sounded like they had no idea what they were doing.

Competition is increasing every day and the only strategy they have implemented in California is to add a bunch of new routes and hope that people pay for it and that there are enough pilots to fly them.

They are getting killed on transcons and intra California flights now and it will just get worse with the AS product and giving away premium seats. They are not going to make money as the bottom feeder carrier from California.

UA’s conference call was panned last week but the one for ALK today made the UA management team look like geniuses.
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Old Oct 25, 17, 9:25 pm
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Sure seems like they wish they could just hit the undo button on the whole deal...
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Old Oct 25, 17, 9:27 pm
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Originally Posted by spongenotbob View Post
Sure seems like they wish they could just hit the undo button on the whole deal...
You sure about that? I'm not saying that it isn't trickier than they'd hoped, especially with the QX problems happening simultaneously, but they didn't get into a bidding war with B6 on a whim.

Last edited by jinglish; Oct 25, 17 at 10:05 pm
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Old Oct 25, 17, 9:39 pm
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Originally Posted by spongenotbob View Post
Sure seems like they wish they could just hit the undo button on the whole deal...
(1) No
(2) Overall, a down market day
(3) Stock overreaction, as is common. I'd say that half of the drop was justified, and half was overreaction.
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Old Oct 25, 17, 9:47 pm
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Originally Posted by sfozrhfco View Post

They are getting killed on transcons and intra California flights now and it will just get worse with the AS product and giving away premium seats.
I'm LA based and travel mostly for leisure. I know that pricing does not equal yields, but ... VX seems awfully expensive for their transcons out of LAX, especially when compared to the likes of Delta.

If it wasn't for the BUR-SEA flight, I'd switch entirely. As it is I'm not going to requal for next year, so I guess I'll be a free agent.
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Old Oct 25, 17, 9:50 pm
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Full transcript:

https://seekingalpha.com/article/411...all-transcript

Most interesting quote (to me):

Brandon S. Pedersen - Alaska Air Group, Inc.
It's Brandon. Maybe I'll disclose – I can assure you that we are more frustrated than you about this whole thing. And there's a lot of anxiety around here. There's been a lot of tough conversations in the last few weeks about this. We've already started talking about this notion of a glide slope to get from the place we are now to the place we want to be.
Yes, I think they are having tremendous buyers' remorse...
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Old Oct 25, 17, 9:53 pm
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Originally Posted by northwesterner View Post
I'm LA based and travel mostly for leisure. I know that pricing does not equal yields, but ... VX seems awfully expensive for their transcons out of LAX, especially when compared to the likes of Delta.
My next two SFO/JFK are on DL, for $13xx/RT, on lie flat seats with lounge access on both ends.
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Old Oct 25, 17, 9:55 pm
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Originally Posted by spongenotbob View Post
Full transcript:

https://seekingalpha.com/article/411...all-transcript

Most interesting quote (to me):



Yes, I think they are having tremendous buyers' remorse...
Most interesting (generally) to me is you rarely find such candor out of a board room.
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Old Oct 25, 17, 10:53 pm
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Disappointing that there wasn't more focus on the Horizon debacle and the lasting impact that will have on Alaska's reputation. Allowing that to happen (and continue and continue) will ultimately be as or more important than many of the Virgin integration challenges. It's really tough to win back a customer treated so poorly for all these months.
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Old Oct 25, 17, 11:20 pm
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Originally Posted by spongenotbob View Post
Full transcript:

https://seekingalpha.com/article/411...all-transcript

Most interesting quote (to me):



Yes, I think they are having tremendous buyers' remorse...
If you read that in context, with the preceding statements from Brad and Ben, you'd see they're talking about the frustration of getting the integration process behind them so they can get back to doing what they do best, running an airline.

Just my $0.02 of course, but if you read the entire transaction between Hunter Keay and the senior leadership, there's nothing that would lead any reasonable person to conclude there's "buyer's remorse" of any kind.
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