F9 - Any truth to this rumor?

[Whiskey Tango]

The economy along with some poor direction is driving some big changes at Frontier. If you think this quarter is going to be bad, wait until the first quarter of 2008 ( our fiscal calendar 4th quarter 2008) when our hedges are at zero!

Merger rumors have been around for years, but I would be amazed if we were still a "whole different animal" by summer of 2008. Really great people and a great place to work compared to others in this industry, but economy of scale will force a merger or worse.

First OPEC said that the fundimentals don't support oil at $90 a barrel. OPEC didn't increase production because they are afraid of a crash. Remeber the early ninties when you could buy gas for 90 cents a gallon? Worldwide demand will probably decrease as economies slow. China has been growing like mad and can't seem to get a handle on their almost 5% inflation. I think the are in for a "correction" Many people think that crude prices are being driven mainly by specualtion and will also see a correction. You don't buy hedges at the peak.

Second I'm not sure there are many airlines out there that are in the market to aquire an airline. Everybody is also grappling with a drastic increase in their costs. I don't think it would be prudent to use up all of your cash to buy another company. You would be betting everything on oil going back down. I think it will but I wouldn't bet the farm on it. In addition banks aren't exactly anxious to lend money these days. I think that lending money to an airline would be the last thing they want to do until they can figure out exactly how much they stand to loose from the mortgage industry.

 

[FBN0223]

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Everybody is also grappling with a drastic increase in their costs. I don't think it would be prudent to use up all of your cash to buy another company. You would be betting everything on oil going back down. I think it will but I wouldn't bet the farm on it.

It's called OPM or "others people money".

 

[Whiskey Tango]

I realize that its OPM but the financial industry is in the middle of a crisis of their own. They are not willing to take any risk right now.