ASA/expressjet & skywest

[FL990]

Can someone explain why Express Jet was sold for the paultry cost of $133 million, with close to $100 million in the bank that would make the cost of over 200 50 seaters and over 2000 pilots for $33 million, the cost of 1 seventy seater. I'm confused as to why so cheap????

Its not exactly that simple. You have to look at several things as it is not just a matter of how much cash is on hand. You have to look at all assets and liabilities (as someone else pointed out) as well as net income (or loss) generated by those assets. In the case of XJT, they have not generated net profit for quite some time, so the company is devalued.

To give a simplistic example, lets say a person has 2 trucks that are used in a privately owned moving company. The trucks have a current value of, say $100,000 (combined) and he owes $50,000. Also, he has various other tools, office, and assets, which combined, are worth $40,000 and his liabilities (debt) on them are $10,000. The business also has $10,000 in cash. Now, the assets to liablilities would be $150,000 (assets) to $60,000 (debt) netting out at +$90,000. Problem is, the company is losing money, so he wants to sell. Now, put yourself in the BUYERS shoes. You see the books and see that all those assets are generating an annual loss, which if you purchase, you will either inherit or perhaps combine them with your current profitable moving business to expand, turning loss generating assets into profit generating assets, partly through economies of scale, and also through renegotiating contracts that the seller already has. Thus, the value of the business is subjective, both to you and the seller. Now, it comes down to what they are willing to accept to get out from under the burden of owning the assets (which again, create a loss) verses what you, the buyer, who can generate income from the assets, are willing to pay. Because the need to sell is greater than the need to buy, generally the seller is willing to sell at a discount in order to relieve themselve of this burden. This is especially true when there is not a "line out the door" to buy.

Ok, so after reading this example, its a bit less "simplistic" than I intended, but still much more so than the object of comparison.

 

[rumorhasit]

In my opinion, this was set up along time ago during the first attempt. CAL used skywest as a whipsaw against XJT. Skywest was the killer but CAL was the accomplice. Skywest managent does not consider Unions and all it intails to protect against managements whims. XJT MUST hold strong to their contract or they will never have the quality of life and pay they deserve. XJT ALPA must get the best legal team and challenge this purchase if there are questions.

I worked there(non-flying) for almost 10 years and I knew things would get bad when the first 70 aircraft left the property. It was a great company run by good management who was pretty fair trying to go it alone. I wish all my previous coworkers from the crosstrained agent (who did three jobs to CALs one) to the guys and gals in SOCC to the pilots and flight attendants who kept things going. Good luck guys!!!!

 

[Tarzan]

XJT MUST hold strong to their contract or they will never have the quality of life and pay they deserve. XJT ALPA must get the best legal team and challenge this purchase if there are questions.
!

News Flash!!!!!! None of get what we believe we should! They won't have to work very hard to blow it up either. I suspect Jerry will pull the plug if XJT guys ask for something he isn't willing to do like merge all three companies. Chest thumping with Inc in this situation benefits no one! Merge the two groups, realize the merger synergy savings and get as big a piece of it as we can.

To make this work out in our best interest, we need to achieve some ironclad scope. The company can of course do whatever they choose in regards to this but if the language is right, we can win any arbitration. JA sees some big money signs here. We may be holding some extra leverage here between our two groups to get some very good protections from being whipsawed against the apathetic OO pilots.

 

[rumorhasit]

I agree with your post completely and I understand this will be worked out by others that know the contract language and it's interpolation better than I. I was only voicing frustration of seeing things end up like this. It kindda like growing up in a childhood home and having fond memories and then coming back several years later and you find out it's a strip club or something. (not that emp of express are, just trying to make a point).

 

[outtahere]

We may be holding some extra leverage here between our two groups to get some very good protections from being whipsawed against the apathetic OO pilots.[/QUOTE]

One correction here, skywest pilots are just pathetic, not apathetic.

 

[wms]

And there's no whip-sawing.

Also, XJet is an excellent company that may not have been run well the last few years. I think SKYW,Inc knows they can make it very profitable with some corporate changes. Knowing SKYW,Inc I'm sure they did their homework and also dicussed the deal with UAL to be sure there would be future opportunities. It's not like JA to throw the dice and cross his fingers. He doesn't make a move unless he knows where he will end up and is sure it will work out.

 

[Whydoitry]

Atkin the messiah, all knowing and never wrong.