Fri, Apr 20, 2007
First Talk Of Assigned Seating, Now This...
Is Southwest Airlines poised to become the latest airline in
play for a leveraged buyout? One analyst believes the time -- and
Southwest -- is ripe for the picking.
Reuters reports CreditSights analyst Roger King projects a
possible market value of $15 billion for the low-cost airline,
which is currently the largest American airline by market
share.
That price works out to about $20 per share, roughly $4.50
higher than its stock closed at Wednesday... in a scenario King
calls "a no-brainer in the current financial market.
"Airlines are in play all over the place," King adds. He cites
Southwest's "a multiyear fuel hedge portfolio, billions in
unencumbered aircraft values, a significant 737 order book,
excellent long-term operational and financial trends, industry
tailwinds and upside potential as temptations" as reasons the
carrier is an attractive merger candidate.
Admittedly, King concedes, there's one fly in the ointment: such
a buyout flies in the face of the airline's corporate culture.
"[Southwest Chairman] Herb Kelleher does not even have a grave
to spin in yet," he said.
Southwest CEO Gary Kelly agrees. "I don't think it makes any
sense to leverage $9 billion of additional debt on an airline like
Southwest," he said in an interview Thursday on the CNBC financial
news channel.
Still, stranger things have happened... after all, who would
have thought some other airlines would ever post profits again?
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