Out Fox The $treet

Update - March 6 No surprise the government is looking to block the acquisition by JetBlue. The question is whether the DoJ actually has the right to block the merger. Besides, Spirit shareholders are likely better off without a deal. Regardless, the stock has fallen to the yearly and covid lows as the market apparently doesn't understand Spirit is better off without JetBlue.  Regulators are reportedly looking to block the prospective merger between JetBlue Airways ( NASDAQ: JBLU ) and Spirit Airlines ( NYSE: SAVE ), sending shares of the latter sliding. Both the Department of Transportation and Department of Justice are looking to  halt the deal on the grounds that the merger would be anti-competitive, according to Bloomberg. Per prior media reports, executives from the carriers met with the DOJ in late February  in a "last-rites" meeting  to assuage regulatory concerns on the planned merger. That meeting followed  reports earlier in February  that the dep...

  Spirit Airlines has at least 44% upside on closing the JetBlue deal. The airline deal still has a lot of questions on whether regulators will approve the merger. The stock is cheap whether the deal closes at $33.50 per share in cash or the airline and shareholders get a large breakup fee and Spirit remains a standalone airline. This idea was discussed in more depth with members of my private investing community, Out Fox The Street.  Learn More »   While long term investors should've wanted the  Frontier Group Holdings'  ( ULCC ) buyout of  Spirit Airlines  ( NYSE: SAVE ), those investors must now analyze the  JetBlue Airways  ( JBLU ) deal. The agreed  upon purchase price provides substantial upside to the stock while holding Spirit Airlines offers downside protection on a deal failure. My  investment thesis  remains ultra Bullish on the stock, though disappointed shareholders didn't approve the merger with Frontier. Read the...

Unfortunately it doesn't appear that The Street video can be embedded, but it is very interesting to see the CEO of JetBlue (JBLU) make it clear that he wants access to the Reagan National airport. Remember that the Reagan National airport slots dominated by US Airways (LLC) and American Airlines (AAMRQ) are prime reasons for the DOJ lawsuit to stop the merger. It is clear that it would be very easy to transition some airport slots away from that merged entity in favor of JetBlue and probably just about every other domestic airline. The DOJ lawsuit just doesn't hold water as any airport that becomes non-competitive will quickly attract further airlines. See the video here . Disclosure: Long LCC. Please review the disclaimer page for more details. 

The shocking announcement that the Department of Justice filed a lawsuit to block the merger of American Airlines and US Airways (NYSE: LCC ) caused most of the airlines to drop. While the blocking of the merger could have a significant impact on American Airlines, it could create opportunities for the smaller airlines to either be bought out in smaller consolidation deals or gain from the interruption and potential cutbacks at more » Disclosure: Long LCC. Please review the disclaimer page for more details. 

For those interested in the pending merger between US Airways (LCC) and American Airlines (AAMRQ) , Minyanville has an interesting interview with analyst Wayne Plucker at consultant firm Frost & Sullivan. The best part of the interview is the he discusses a bigger impact to job losses and not costs to consumers. In fact, he makes the claims that ticket prices aren't high enough. Though some of those costs are being made up for with ancillary charges, the DOJ has it wrong about higher costs to consumers. Heck, in some cases consumers need to pay higher prices and that's just the hard cold facts that airlines undercharged in the past. If the new American Airlines were to dramatically raise rates for any routes and existing rates are so attractive, other airlines will swoop in to take market share. After this consolidation, the industry is still left with Delta Air Lines (DAL) and United Airlines (UAL) as equal competitors and Southwest Airlines (LUV) , JetBlue (JBLU) , ...

As with most sectors, airline stocks generally trade in the same general direction whether up in bull markets or down in bear markets. Typically the better company in the sector outperforms, but for an investor picking the right group is the major battle. In the case of the airlines, the whole sector is gaining as historically strong profits and reduced competition from consolidation promises to continue the profits streak. In more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

All of the benefits of consolidation undertaken by the major airlines to create three behemoths could unravel if new competitive threats enter the market. After decades of losses, new airlines entering the industry don’t appear as likely a threat as some of the established, more regional players aggressively expanding to fill the voids created by the mergers. Enter Spirit Airlines (NASDAQ: SAVE ) as possibly the biggest threat to the more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Very interesting that Delta (DAL) is going forward with buying a refinery in PA. The refinery is located on the Delaware River in Trainer, PA and has a crude oil processing capacity of 185K barrels per day of light, low-sulfur crude oil. The benefit is that the refinery will provide jet fuel reaching Delta's operations throughout the NorthEast, including its hubs at LaGuardia and JFK. That is at least the theory. What could go wrong? How much do you want to bet that in 2-3 years, Delta will be paying more for jet fuel than the average airline? The concept sounds great. One of the highest expenses for airlines is jet fuel and by purchasing a refinery a airline can provide itself with stable supplies. Thats the only hitch, airlines don't have issues with supplies, bur rather costs and jet fuel costs are based on crude oil. Something that a refinery won't actually control. The part that does make sense is that this was one of the refineries being shutdown and by reop...

This is the sixth and final article in a series focusing on the plights of certain sectors since they peaked prior to the financial crisis in 2008. All of the sectors covered have struggled mightily to recover to pre-crisis levels, while other stocks and sectors have surged on to new highs. So far the series has covered  Steel Producers ,  Engineering & Construction , Women's Apparel ,  Life Insurance  and  Large-Cap Tech . This article focuses on the airline sector, and will be the first sector in which Stone Fox Capital neither owns a stock or expects to purchase a stock in the near future. Airlines have long been the suffering industry in the US market, and that doesn't appear to be changing. While several of the larger companies were able to reduce debt via bankruptcies in the 2000s, the companies still struggle with heavy competition and have a difficult time with passing on higher costs. The fear of ever higher fuel costs down the road and strong lab...

Typically buyout news can be very bullish for the industry and competitors of the firm bought. Potentially less focused competition or even a higher premium for stand alone operators can be very positive. In the case of the airlines, that usually isn't the case. As soon as one airline leaves, another usually is born to take their place. Despite being a long term losing industry, airlines seem to never lack for new entrants. Today's news that Southwest Airlines (LUV) is willing to buyout AirTran (AAI) for a roughly 69% premium is huge for shareholders of both companies and especially AAI. This deal allows LUV to more effective compete in the NorthEast not to mention to enter markets such as Atlanta. Does that make JetBlue (JBLU) or American Airlines (AMR) an attractive acquisition now that one competitor is gone? Hmm, more and stronger competition from LUV doesn't seem ideal. The headline of their press release says it all " Southwest Airlines to Acquire AirTran; Spre...