Sunday, April 13, 2008

The week ahead...

After a couple of rollercoaster weeks, it looks like this coming week will be no better.

News reports coming out of ATL and MSP have a potential announcement for the DL/NW merger. Getting anti-trust approval last week didn't hurt things.

As I've said a few times, DL/NW has some serious impact potential for both Airtran and Midwest. Right after the Frontier filing, Airtran stock fell over 30%, and management had to go to the extent of issuing a press release confirming that they had no similar exposure for their credit card agreements, and that yes, they had about $250M in unrestricted cash at the end of 1Q08.

That was quickly followed up by reports from Virgin America that they'd received an additional $100M from their investors, which will certainly buy them some time.

Midwest? They announced they're pulling down capacity at MCI...

As Meatloaf sang, two out of three ain't bad...

Unfortunately, if DL/NW goes forward, Airtran's got much bigger problems. Combine NW's ruthlessness with DL's gorilla status at ATL, and things could get ugly really quickly.

And, as I've said a few times, it's yet to be determined what DOJ would say about NWA's passive investor status at Midwest.

Worst case? Midwest gets cut loose and collapses on their own.

Almost worst case? Airtran gets to take another run at Midwest, but that's unlikely given their cash position... TPG paid $450M in cash not even a year ago, and I just don't see them giving it away.

The new elephant in the room is what will UA & CO do in response to DL/NW.

Then there's Mesa...

Remember the convertible offering? And Mesa's stock price of $1.23...

Last week the stock tanked, and closed Friday at $0.67/share. That almost 30M shares that Ornstein was counting on to raise cash for the conversion is now somewhere around 50M shares. Or more, depending on what happens this week...

Now, if you're a shareholder, would you willingly allow your stock to be devalued by the issuance of almost 100% the current equity?

Probably not. That was the scenario a week ago. Now, shareholders will be asked to dilute their shares even further.

Second impact of the stock price, as mentioned before, is delisting by Nasdaq. If they spend another couple weeks, they're going to get the formal letter, and then another 90 days later, they become a pink-sheet stock.

I think they're done, but I've been wrong before...

So... what's going to happen this week? No fracking idea. But it's certain to be interesting.

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