Revisiting VX merger with AS instead of B6

Old Oct 27, 17, 8:29 am
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Revisiting VX merger with AS instead of B6

With the recent AS earning call, it made me rethink about what could have happened had B6 bought VX instead. At the time of the merger, it certainly made sense for VX to bow out since they were under increasing pressure from mint and were at an all time high valuation. They probably would have went back into red had they stayed indepedent.

At the time, it certainly made a lot of sense from route point of view for AS since this allowed them to extend their reach into all of west coast with very little route overlap. It also made a lot of sense for B6 since they needed a west coast foot hold and similar customer base to VX.

I think the beginning of AS merger certainly looked very good since they were able to leverage the additional gate space and expand network tremendously. But since then, AS has provoked a war with WN in Cali and with UA at SFO. They've also taken meaningful hit to ff program loosing AA, DL and several other partners. Huge downgrades since they now draw the eyes of the tigers. and since June, VX has faced a lot more mint pressure and have been bleeding money on those routes. At the same time, B6 is now effectively locked out of West coast, but have taken that money and been able to expand its transcon network very effectively.

Now if B6 had won the bidding war, I think it would've went like this. No more money to expand mint network for a while, so it would've relied on existing VX fleet (with some kind of cabin refresh to more efficiently utilize FC space) for non JFK/BOS-SFO/LAX transcon routes and higher yielding mid con routes. They are good for that purpose. Kept the E90s for high frequency short haul routes including ones on west coast. Use old B6 A320s and A321s for lower yielding mid con routes and north south trunk routes and leisure routes. That would've been a pretty effective fleet even if they had drawn the attention of legacy carriers. AS probably would've continue to organically grow out of PNW and into california. It had money to keep growing at SJC and SAN with some additional space at LAX. It would've been locked in, but at least the ff partnerships would've remained.
tphuang is offline  
Old Oct 27, 17, 10:39 am
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DL partnership (and DL controlled entities like AM) was done prior to acquiring VX. Maybe AA would have remained or maybe not. There hasn't been any definitive answer as to what exactly precipitated that except a lot of speculation.

Overall I do agree that B6 and VX would have been more of a cultural and service fit than AS and VX.
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Old Oct 27, 17, 12:03 pm
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I take the long view that B6 and AS will eventually merge. A combined entity will have hubs in SFO, LAX, SEA, JFK, and FLL.

I can already see the legacies chomping at the bit to stop it.
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Old Oct 27, 17, 4:27 pm
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Originally Posted by tphuang View Post
It would've been locked in
... at which point ALK stock price would have tanked just like it has now and Wall Street analysts would be asking tough questions of management, just like now, since Wall Street is valuing it based on future growth, not "stay locked in in SEA".

Trading keeping the AA partnership for no growth opportunities (which is in itself an assumption- what if AS had lost and AA had said "nah, buzz off"- recall that things are different from even five years ago as far as consolidation has gone)? Not worth it. Has lack of domestic partners killed off WN? B6? Seems to me you can't have it both ways: so lack of domestic partners is super important to AS+VX's future growth prospects but irrelevant to B6+VX's future prospects?
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Old Oct 30, 17, 12:32 pm
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My preferred outcome on the merger fight was B6 taking over the hedgies' stake in VX and basically aligning the companies (but stopping short of a merger for the time being). I've wondered what the reaction would have been on their part if B6 had simply turned around and said "We'll give you our previous offer for the company /for your stake/ and deal with any 'actual' merger later".

As to B6/VX vs. AS/VX, the problem with the latter is that it is very focused on the West Coast and just a hair too big for anyone to really want to work with them beyond the increasingly limited AA codeshares. The former is bicoastal (B6 has a decent network on the East Coast and the combined airline has one on the West Coast), so there's feeder business to be had (e.g. I can at least in theory book RIC-BOS-SEA on B6; I can't do /anything/ outside of WAS in Virginia with AS). I'm sad to say it, but I'd actually like to see AA rip up the remaining relationship and sink AS.

Personally, I think Alaska has blown this one (to riff on a recent slogan of theirs, they've added bupkis razzle to whatever apparently passed for their dazzle). Their presentations about overlapping customer bases were utterly farcical, though credit where it is due they did their best to build up some goodwill as the merger went along.

All of this being said, I'm going to have a bias against Alaska for a long, long time (ironically for the same reason that a Seattle-based friend has a bias against Delta). And yes, I'm also of the opinion that AS/B6 are destined to merge in the long run...I just hope B6 takes over AS, digests it, and craps out the existing management. With that being said, however, I think that a more plausible medium-term option would be for B6 to look at taking over Hawaiian the next time HA gets into trouble...there's likely to be a culture clash, but the networks would seem to play well with one another (and HA's long-haul J product wouldn't play horribly with Mint).
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GrayAnderson is offline  
Old Oct 30, 17, 10:59 pm
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I'm so happy to be back in BOS and having B6 as my first option, having matched to Mosaic.

AS has drained a lot of goodwill from VX flyers, even with the status matches. They have under invested in the VX experience and have not grasped what made VX a great airline.
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Old Nov 6, 17, 3:49 pm
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Agree that AS management failed to grasp what made VX attractive. While we were happy to pay for VX F on longer flights (anything over 2h), we are not willing to pay for AS F on flights of same distance.
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Buster CT1K is offline  
Old Nov 6, 17, 5:16 pm
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It's not that they failed to grasp anything, they just don't care. They want to make the entire new fleet all the same, so they're anxious to get rid of anything to remind fliers of another airline experience.
cringle is offline  
Old Nov 9, 17, 5:58 pm
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I have a slightly related question:

I am flying VX F NYC>LAX in January 2018. What are the chances I will be on AS metal?
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Old Nov 9, 17, 8:52 pm
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Originally Posted by elkue View Post
I have a slightly related question:

I am flying VX F NYC>LAX in January 2018. What are the chances I will be on AS metal?
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