Delta is making money. Alaska Airlines is making money. Alaska has a lot of coverage where Delta is light. With AA+USAIR becoming #1, would this be a good growth option for Delta?

This piece in the Motley Fool seems to think so.

“Even though Alaska shares trade near all-time highs, the company is still valued at only eight times forward (2014) earnings. Given Alaska’s modest debt levels and strong pretax margin, the company is a relatively safe investment when compared to other airline stocks. Furthermore, Alaska has continued growth opportunities, and is returning cash to shareholders. Lastly, Alaska’s strong position in Seattle could make it an attractive takeover target, particularly for Delta Air Lines” – Adam Levine-Weinberg – The Motley Fool

Aircraft wise it seems like a good fit to me with the current generation of planes Delta has other than the Bombardier Q400′s.

Many are thinking about changing their earnings of Skymiles over to Alaska once 2014 MQD begins. MVP GOLD only takes 50k of Delta flight credited to Alaska and gives you similar benefits to Delta GOLD without the spend requirements.

So what do you think? Is Alaska on Delta’s radar for a buyout? Would be it a good idea for Delta to snap them up? I would love to know what you think! – René

 

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Posted by rene | 27 Comments

27 Responses to “Will Delta & Alaska Air buyout be the next big airline news?”

  1. MileValue says:

    I am definitely rooting for less rather than more consolidation.

  2. JGfromOC says:

    Not a bad idea really. Not sure how important of a hub Seattle would be for DL though, but it a good gateway in to Asia – obviously a place DL wants to expand aggressively.

  3. Ted says:

    I do not trust the Motley Fool as reputable financial reporting or engaging in sound financial analysis.

  4. Geoff says:

    Isn’t DAL already large in SLC and LAX?

  5. Ken Y. says:

    Similar benefits? Where’s international lounge access ?

  6. Tim says:

    1. The Motley Fool is a poor source of insight.
    2. AS likes being independent.
    3. AA has had a relationship with AS since 1982.
    4. If AS ever is in play, AA and UA will be bidders.

  7. Greg G says:

    I would consider another suitor—maybe even Southwest. Southwest and Alaska fly identical aircraft, both have great employees and company culture and SW pulled back on Seattle flights last year and my hunch was to make way for an Alaska Air purchase. Personally, I would love to see Delta get more presence on the West Coast and have always been a fan of both airlines.

  8. Scott says:

    God, I hope not!

  9. thrashsoundly says:

    I sure hope not either. I like the competition for prices etc.

  10. Bob says:

    I hope not!

  11. Glenn (The Military Frequent Flyer) says:

    That would be a good way to ruin a good airline (AS). I see no incentive for AS to agree and DL does not have the resources to make a hostile bid.

    If AS were to take over DL – that would be a big improvement!

  12. Rocky says:

    There as been speculation for YEARS that someone or some company would buy AS out. However when most airline stocks were trading below $15 dollars a stock over the last 2-3 years alaska was on an upward ride to over $40, Making AS WAY to expensive to take over/buy out. Also Alaska has some how figured out to make money in some of the world’s toughest markets, i.e. Alaska. In the 80s and 90s when most major airlines pulled out of the state of Alaska, Alaska Air plunged feet first. They figured out how to make money where no one else could and still continue to do so today! Bill Ayer (former CEO) was VERY much against a merger and to this day Alaska is 100% NO to a merger. They like their position, and each year, slowly but surely the airline conintues to grow in Seattle, Portland, and Ancorage. Not to mention AS continues their growth in San Diego (http://upgrd.com/doublewidesfly/and-the-new-routes-from-san-diego-are.html). With such a strong west coast presence, sure they would be a great takeover opportunity for Delta, United, or AA, but it won’t happen! Alaska has been profitable when no other airline has, they have the most loyal frequent flyers in the industry AND more importantly the stock holders and board does not want it. Unless something major happens and AS starts loosing money rapidly and declares bankruptcy, there’s no way a takeover/merger/buyout will happen. ANd lets be real, AS made it through the post 9/11 era without filing bankruptcy so why would they now? (http://seattletimes.com/html/businesstechnology/2015064635_alaska16.html) Anway, this post was clearly just to ruffle some feathers, because talking about an AS merger is so far in Left field you might as well as talk about Delta and United merging!

  13. Rick Koblish says:

    I thought it would be a great fit years ago after DL pulled out of Portland!

  14. Delta Points says:

    @Rocky – many said US AIR and AA joining was so far out in left field that it would never happen… and now.. well… :-)

  15. Delta Points says:

    @Ken – Yes Similar, not the Same!
    .
    merriam-webster.com
    .
    SIMILAR: having characteristics in common
    .
    SAME: resembling in every relevant respect

  16. Kirk Martin says:

    I’d think there’s a better chance Alaska would do a tuck-in purchase (maybe Hawaiian Airlines) than to be acquired. Also, the writer quoted Alaska as trading at 8x 2014 earnings (why didn’t he use Dec 2013 earnings estimates?), but using 2014 numbers, Delta trades at less than 5x; even Southwest only trades at a bit more than 10x 2014 numbers. So Alaska is not particularly cheap for an airline.

  17. Mary E says:

    Not on my radar, but I am not an expert and have no clue

  18. steve says:

    The shrinkage to a handful of airlines, banks, etc. is here. Why not go for the gold: one bank, one airline, one supermarket, one this and that. Just like in the old USSR. Gotta luv the irony of it all. And even when that happens they’ll still scream that America is the land of free enterprise. Not.

  19. Jim M says:

    After reading your other blog and I’m planning on leaving Delta Gold status next year anyway AS looks like a better choice.(was thinking about UA or AA) I’m planning on a couple South America trips and having AA or LAN are great choices. Now what to do with 700,000 Delta points , maybe use for flying positioning flights?

  20. Jim M says:

    @ Glen post 11 I would love that. AS maybe the best run airlines there is out there.

  21. Jason says:

    If it’s about route network and equipment, Virgin America would be a much cheaper target. If Delta bought VX they wouldn’t need their AS partnership as much and the feed from the rest of DL’s network would breathe life into VX. VX could back off on some of their longer routes in the east and expand on the west coast markets. However the premium for AS is their loyal following in the pacific NW. If Delta doesn’t think this can be overcome easily it may just be cheaper to bid for AS.

  22. PCB says:

    As will stay independent but will have many partners. For them that is the best of both worlds. Tie in heavily with DL but still code share with AA.There is a benefit for DL due to anti trust issues.

  23. Chris B. says:

    Delta would love it, but Alaska won’t merge. It would bea solid choice if DL could get AS, though. If the new AA disbands their partnership with AS, then DL may have a chance, but not likely.

  24. Stuart R says:

    That is something to be seen with the latest merger. I also know the United/US Air codeshare agreements will also cease here shortly. Hopefully both airlines can still partner.

  25. Andy Z says:

    Given the AA bankruptcy and USAir merger, now would be the time for Delta to move on AS if they had such aspirations. That said, such a move would almost certainly lower the quality of service for current AS customers. The only upside I can see for me personally is that with the new EQD requirements in 2014 I would no longer miss out on qualifying dollar spend for AS tickets under DL ownership.

  26. Anja Gensel says:

    Alaska Airlines provides Essential Air Services within the state of Alaska, where we lack roads to several of our cities. The state of Alaska would vigorously oppose any attempt to take over Alaska Airlines. Delta took over Western in 1986, which had extensive service in Alaska. within a few years nearly all of that service was gone. When Delta took over NW, they closed the very profitable NW Cargo hub in Anchorage, causing over 500 Alaskans to lose their jobs, and cut year-round services to MSP, causing a capacity shortage to ANC. Everyone here seems to forget that Alaska Airlines not only has the SEA market tied up….THEY ARE ALASKAN! Alaska Airlines is a CAT III rated airline as well, which is the difference between landing in Juneau during a snowstorm and overflying it like Delta did nearly 50% of the time when they served JNU the first time after absorbing Western. There are more factors at play with this takeover than just an “attractive” target.

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