David Rosenthal: belief

Transcript context

…The pressure from Delta on the home front. What if they don’t expand? Yup. I think to give some credit to Alaska, I feel like we’ve been taking potshots of this deal, we’re in a tough position I think. Doing well in the moment but facing this pressure from Delta, this consolidation across the whole industry and they had developed a really, really nice niche here in Seattle as by far the best routes and customer service for people who live in Seattle and flying in and out of Sea-Tac with great business routes. But they had nowhere to go. They were getting pressure from Delta here. It was super hard for them. What are they going to do, expand internationally? Are they going to go to other cities? And that’s what they did with this. They said, “We need to grow. It’s going to be super hard to do organically. We have a great balance sheet and for an airline, a lot of cash. We know we’re relative to the industry pretty well run. Here’s an opportunity to buy Virgin and basically double our size and run the same playbook again.” Or they could have just stayed in a steady state where they are. Well, it’s funny. You would hope that they double their market size because the acquisition is so expensive, but when you look at the numbers of what Alaska is doing and what Virgin is doing, Alaska has 32 million total passengers a year, Virgin has 7. Alaska has a thousand departures a day, Virgin has 200. There’s 112 destinations served by Alaska, Virgin has 24. Pre-tax profit from Alaska is at $1.3 billion, Virgin $200 million. So, that is an expensive purchase for a much, much smaller operation.…

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