Frontier Airlines to sell $80 mln convertible debentures

[F9 Driver]

West Virginia - The home of the tooth brush (anywhere else and it would have been the teeth brush) - is always at the fore front of aviation. Gen Yeager not withstanding.

 

[PCL_128]

We'll see, but I think the market smells blood in the water.

Yes, and we all know how well the market understands this industry. Remember what AMR and DAL stock sold for back in '00? Sorry, but efficient market theory is all but debunked, so saying that the market smells blood in the water is really irrelevant. Investors are morons and act on emotion rather than facts. I don't think F9 is in any real trouble at this point. Their balance sheet looks pretty good considering the industry they're in.

 

[radarlove]

Sorry, but efficient market theory is all but debunked, so saying that the market smells blood in the water is really irrelevant. Investors are morons and act on emotion rather than facts. I don't think F9 is in any real trouble at this point. Their balance sheet looks pretty good considering the industry they're in.

The effcient market theory has been debunked? That must be news to the Nobel Prize folks, since they haven't recognized this yet, apparently.

BTW, do you even know what the efficient market hypothesis is?

And, what, exactly, "looks pretty good" on the F9 balance sheet? Could you be more specific?

 

[PCL_128]

The effcient market theory has been debunked? That must be news to the Nobel Prize folks, since they haven't recognized this yet, apparently.

BTW, do you even know what the efficient market hypothesis is?

I don't need the Nobel Prize "folks" to tell me that efficient market theory is crazy. Anyone can see it. We can always continue this discussion over in Non-aviation chat if you'd like, but I think you know as well as I do that the theory is largely ignored nowdays.

And, what, exactly, "looks pretty good" on the F9 balance sheet? Could you be more specific?

A quick glance shows that revenue has been steadily growing for the past several years. The latest EPS estimates show that many analysts predict positive EPS for the next 2 years. Sales growth is estimated at 20% annually for the next 10 years. Debt is pretty much in line with the rest of their segment of the industry. Five-year average margins have been decent. Would you like me to go on? The fundaments are there for a good investment. I don't think SWA can have much of an effect on them in their home market, so the risk is low as far as I'm concerned. Everyone gets worried when SWA moves into town, but the truth is that Frontier offers a far superior product.

 

[radarlove]

I don't need the Nobel Prize "folks" to tell me that efficient market theory is crazy. Anyone can see it. We can always continue this discussion over in Non-aviation chat if you'd like, but I think you know as well as I do that the theory is largely ignored nowdays.


A quick glance shows that revenue has been steadily growing for the past several years. The latest EPS estimates show that many analysts predict positive EPS for the next 2 years. Sales growth is estimated at 20% annually for the next 10 years. Debt is pretty much in line with the rest of their segment of the industry. Five-year average margins have been decent. Would you like me to go on? The fundaments are there for a good investment. I don't think SWA can have much of an effect on them in their home market, so the risk is low as far as I'm concerned. Everyone gets worried when SWA moves into town, but the truth is that Frontier offers a far superior product.

Um, I thought you said "balance sheet". Where, exactly on the balance sheet does revenue show up? I guess I missed that special accounting course you took.

And no, the efficient market hypothesis is not "crazy", it works pretty well, almost all of the time. There are some anomalies and if you can exploit them fast enough you can build fabulous wealth. Well, not "you", since you don't know what a balance sheet is, but "one" can build wealth.

If you don't think the market is pretty good at taking new data in, analyzing it and spitting out a pretty reasonable stock price, then why ain't you rich? I mean, you're so much smarter than the efficient market and all, you have to be playing them for chumps, aren't you? Since they're all "crazy"?

 

[Lampshade]

nice work Radar!!!

 

[PCL_128]

Um, I thought you said "balance sheet". Where, exactly on the balance sheet does revenue show up? I guess I missed that special accounting course you took.

And no, the efficient market hypothesis is not "crazy", it works pretty well, almost all of the time. There are some anomalies and if you can exploit them fast enough you can build fabulous wealth. Well, not "you", since you don't know what a balance sheet is, but "one" can build wealth.

If you don't think the market is pretty good at taking new data in, analyzing it and spitting out a pretty reasonable stock price, then why ain't you rich? I mean, you're so much smarter than the efficient market and all, you have to be playing them for chumps, aren't you? Since they're all "crazy"?

I wasn't merely referencing the balance sheet, I was pointing out their overall financial condition and prospects. If you want to limit yourself to the balance sheet, then take a look at page 30 of the 2005 annual report. You'll find that Frontier's cash position has actually grown since 9/11, and by quite a bit. Nearly $200 mil in the bank isn't too bad for an airline of Frontier's size.

If you want to believe efficient market theory, then have it. In the past couple of decades there has been copious amounts of research done by many respected universities that points away from EMH. A simple Google search will point you to many of the reports (speaking of Google, the outrageous price of Google shares is an excellent example of when EMH doesn't work by the way). The market is filled with companies whose stock isn't even close to what an efficient market would price. You call these instances "anomalies," but they are far too widespread and common to be such. Again, this conversation really should be in the Non-Aviation forum though.

 

[F9 Driver]

I think they call it "blue sky" disclosure.



http://today.reuters.com/investing/...8909_RTRIDST_0_AIRLINES-FRONTIER-UPDATE-2.XML

UPDATE 2-Frontier plans to sell debt, braces for Southwest
Tue Nov 29, 2005 4:38 PM ET

WASHINGTON, Nov 29 (Reuters) - Frontier Airlines Inc. (FRNT.O: Quote, Profile, Research) said on Tuesday it would sell debt to raise $80 million and cautioned investors about potential consequences of increased competition next year at its Denver hub.

The company noted in a Securities and Exchange Commission filing the potential drawbacks of competing with a restructured United Airlines (UALAQ.OB: Quote, Profile, Research) and Southwest Airlines (LUV.N: Quote, Profile, Research), which will start service there in January with flights to Chicago Midway, Las Vegas and Phoenix.

Frontier warned of possible low-cost fare wars, predatory pricing and competitors placing additional planes on selected routes to drive up capacity.

"The future activities of United, Southwest, and other carriers may have a material effect on our revenues and results of operations," Frontier said.

Other low-cost competitors JetBlue Airways (JBLU.O: Quote, Profile, Research), AirTran Airways (AAI.N: Quote, Profile, Research) and Alaska Airlines (ALK.N: Quote, Profile, Research) have also launched service from Denver within the past three years.

Frontier also said it is trying to acquire financing for four of 11 Airbus A319s it has committed to purchase, but could not guarantee that it will be successful. The airline also plans to lease up to four A319s.

The company said an inability to acquire the planes could have a material adverse effect on cash balances or delay aircraft deliveries that would impair its long-term growth plans.

The airline said its advisory to Wall Street was standard boilerplate language for the types of financial challenges facing airlines.

Frontier's shares closed off 68 cents, or 7.7 percent, at $8.21 in Nasdaq trading on Tuesday.

Analyst Ray Neidl of Calyon Securities said the share decline was likely due to the offering of $80 million worth of debt that can be converted to stock -- drawing concerns that outcome could dilute profits.

"They took advantage of a relatively strong airline market to raise some cash," Neidl said.

Frontier ended the second quarter with $185 million in unrestricted cash, short-term investments and working capital.

Colorado-based industry consultant Michael Boyd said Frontier is well positioned to compete with Southwest in Denver but still needs extra cash.

 

[radarlove]

You'll find that Frontier's cash position has actually grown since 9/11, and by quite a bit. Nearly $200 mil in the bank isn't too bad for an airline of Frontier's size.

Then why are they offering convertable debentures if they have a strong cash position?

And why did the stock price decrease when they did this?

The market is filled with companies whose stock isn't even close to what an efficient market would price. You call these instances "anomalies," but they are far too widespread and common to be such. Again, this conversation really should be in the Non-Aviation forum though.

Well, then, how come you aren't getting rich from these mispricings? Again, if the effcient market hypothesis is "crazy", then there should be lots of profit opportunities for smart guys like you. If there aren't that many profit opportunities, then that means the market is pretty effecient, doesn't it?

If you disbelieve Google's price, why haven't you shorted it? Again, you claim the market is wrong, but do you KNOW the market is wrong? Enough to put your money where your mouth is? You may not have enough money to short a huge number of shares, but I'm sure you can buy some Google put options and not starve. If the market is obviously wrong, why aren't you profiting from it?

Simply stepping back, crossing you arms and stating that the whole world is crazy isn't a strong enough argument for people like me. If the market is crazy, than prove it. Pretty easy to do, just open a brokerage account and take the chumps money from them.

 

[canyonblue]

Everyone gets worried when SWA moves into town, but the truth is that Frontier offers a far superior product.

Well it all starts at point A to point B, genius. After that it’s the intangibles. You should understand that by flying an RJ.