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Author: oroughy Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 580  
Subject: Why shouldn't I be buying like crazy? Date: 1/15/2008 11:20 AM
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Can somebody tell me why I shouldn't throw every available penny into FRNT now? Yes, I know FRNT is losing money and Southwest just moved into Denver. But look at these stats for FRNT (courtesy of yahoo: http://finance.yahoo.com/q/ks?s=FRNT) --

Price/Sales: 0.10

Price/Book: 0.59

Compare with American Airlines (AMR):

Price/Sales: 0.14

Price/Book: 3.92

How can it be right that FRNT's price/book is < 1? And it's not just a little under 1, it's way, way under 1. Hasn't this thing gotten beaten down too far?
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Author: Nuke68 One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 564 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 1/15/2008 8:07 PM
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I'd be real careful on FRNT. Southwest is really beefing up Denver service (up 32% year over year starting in May 2008) and probably aren't done yet. They have the extra cost of their Lynx service (not to mention another type of aircraft) and I doubt if they have the size to maintain losses too long. They also mentioned in a press release that they have weaker than expected traffic to some "sun destination markets, many of which will be eliminated by January 10, 2008" (sorry, can't find the press releases on the service reductions). They are growing their international traffic but may be cutting their domestic markets. This could hurt their international traffic if they have little feeder traffic from the domestic US. I'd love to see them succeed, but I feel they'll have a hard time at it and may go lower or have to see bankruptcy. Of course I could be wrong and they could be a good candidate to be bought out by an airline looking to get international service.

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Author: oroughy Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 565 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 1/16/2008 4:52 AM
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All good points, nuke. One thing that helps to compensate for them is that Denver is the #10 airport in the US now -- it's really been growing, which is why Southwest moved there. Could be enough room for both them and FRNT. But I'm really thinking that FRNT will be acquired if its price remains at this level or lower for a while. They've got a pretty new fleet, I think, and seem to have happy employees -- a very precious state of affairs for airlines. Those things and they're low price/book seem to make it an attractive target.

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Author: Nuke68 One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 566 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 1/16/2008 10:57 PM
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They do have good points but look at JetBlue...Lufthansa put in cash,the stock went up to around $7 and now is down to $4.48. Don't get too hooked into something that looks good. I do believe they are a tempting buyout but I don't know what the price would be if it did get bought out. It will be interesting to see what they do after earnings come out.

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Author: dalefromvail One star, 50 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 567 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 4/10/2008 12:47 AM
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Unfortunately you have gotten your answer on why not to buy it. I hope you saved some of your money. Under $2 bucks is painful. With oil over $108 I don't see a recovery. I got out at $6.00 Still wondering if they can survive. Four airline collapses in a couple of months is not encouraging. I hope Frontier can survive, they are on the right track with seating and customer service. Too bad they can't get a profit on all those months of increased revenues.

Dale

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Author: oroughy Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 568 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 4/10/2008 5:15 AM
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Alas, confirmed optimist that I am, I saw the slide below $2 as a buying opportunity and bought some. I may still buy more. My view is that high oil prices are a factor for all airlines, not just for FRNT. Besides, there is always some inelastic demand for air travel, and oil will come back down eventually. It always does. The question is whether FRNT can last long enough to be around when it does.

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Author: dalefromvail One star, 50 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 569 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 4/10/2008 10:12 AM
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I'm there for you, I don't have the brass balls to jump in again. If the new commuter service is beneficial to the bottom line, that would help. Not sure that won't be a detriment.

Dale

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Author: Nuke68 One star, 50 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 570 of 580
Subject: Re: Why shouldn't I be buying like crazy? Date: 4/10/2008 10:45 PM
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I'd probably bale out and at least save some money. I'm getting more convinced that they may not last another year. The last couple of days there has been heavy volume (over 2x normal) and the stock has been going down, so I am assuming it's on the sell side of things. Over 20% of their shares are short (way above most other airlines). At the end of Dec they only had $170M in cash.

Story on Marketwatch (link below) states that
"Among the low-cost carriers, Calyon said Frontier Airlines and AirTran Holdings could see their cash fall below 10% this year. Some analysts expect Frontier to run out of cash by as early as the end of this year.

http://www.marketwatch.com/news/story/network-carriers-face-down-liquidity/story.aspx?guid=%7B0A3B81C2%2DE7C9%2D442C%2DB330%2DFD2A290539B4%7D&siteid=yhoof

Oil is a huge problem for all carriers, but it comes down to how much they can stand to lose (American, Continental, Southwest, etc have serveral Billion dollars in cash). Unfortunately FRNT is one that didn't have a lot of cash to start the year with.


Author owns LUV, AAI and JBLU

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