Stifel analyst Joseph DeNardi argued in a research note that if Sprint (S) and T-Mobile (TMUS) merger gets a green light from the Trump administration, there would likely be a “bidding war” unseen before in the airline industry as the “Big 4” would have significant interest in acquiring Alaska Air (ALK) or JetBlue (JBLU) if they think they could. ‘BIDDING WAR’ IN AIRLINES: In a research note to investors, Stifel’s DeNardi argued that the Sprint/T-Mobile merger announcement and approval process was the first major test of the Trump administration’s view on consolidation. The airline industry is one that wants to consolidate further but views the likelihood of a Department of Justice approval as low so has largely written off the idea in recent years, the analyst contended. However, DeNardi pointed out that if the “Big 4” airlines, namely Delta Air Lines (DAL), Southwest (LUV), American Airlines (AAL) and United Continental (UAL), were to believe that they could receive approval in the acquisition of certain smaller airlines, there would be bidding wars for both Alaska and JetBlue. While he believes the current consensus in the industry is that Alaska will serve as buyer and consolidator within its segment, should the “Big 4” believe that they could be permitted to be buyers, the M&A outlook would likely change. Overall, DeNardi sees Delta and Southwest as the best fit for Alaska, but thinks American and United are in a better position to get approval. Based on the Department of Justice’s analysis of Alaska’s acquisition of Virgin, it would appear the primary factor considered is the change in the number of airlines per route, he contended, adding that a combined American + Alaska or United + Alaska would have a negligible impact on routes per airline. Nonetheless, the analyst pointed out that he has no knowledge of any active M&A discussions. PRICE ACTION: In late morning trading, shares of Alaska and JetBlue have each dropped about 1% to $62.65 and $19.16, respectively.
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