David Rosenthal: belief

Transcript context

…It’s true. Actually, those are two of my favorite airlines to fly. But Virgin is notoriously different and better and feels premium, and that had to be factored in to their market cap. When you think about what they are going to be used for, I mean, Alaska announced that by 2018 they hope to be fully rebranded as Alaska. Hopefully, they can learn some things from Virgin, and they’ve been watching them very carefully. But if they obliterate that brand, what was the point of paying a markup on a markup for capacity? Yup. It’s a great point. The Alaska brand, again, it was very good especially in the airline industry on its own. I think really was kind of like very professional. They had either the best in the industry or the best on the West Coast on time percentage, lots of great… very, very business commuter-friendly. Virgin was, like we joked earlier, like a nightclub on a plane. It was the favorite airline of all of my classmates when we were in business school. We can leave it at that. So then one other thing that I want to bring up in that realm is payback period. So Alaska cites that they’ll have $225 million of total net synergies at full integration. So what we can pull from that is that there will be $225 million of cost savings after they’re fully integrated, so let’s call that 2018-ish, and that means that there’s probably other value that they can create on top of that like ability to create more revenue because they have these economies of scale, new things just on top of that. But that means that they have on this, if we look at the $4 billion as the figure, that’s a 17-year payback period on this acquisition just on the synergies.…

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