Thank you for the discussion. What you ask, I have tried. I always go back to the Baltia pro forma for Baltia estimates, but that gets harder and harder everyday with all the model changes and other variables.
The tax shelter you speak of is considerable. This kind of shelter is the reason for takeovers in many cases. Not saying that happens here. You can buy a company for their NOL's and apply them to your company. That means those are assets in freakish terms. So when I value Baltia, I actually include that as part of what is being bought in terms of value. This means any price where market cap is less than 100mm is a discount.
Turning to other parts of the. Balance sheet are 3 items which factor differently that Frontier.
1. Lack of debt - debt for all companies is a liability in both balance sheet and income(debt servicing costs). So looking at other airlines, you need to add back in debt to garner a more equivalent market cap for comparison.
2. Lack of historical costs - with no unions or employees such as pilots or stewards in a historical sense, there is no pension obligations associated with Baltia at this time. Similarly, when united bought continental, they also buy the funding deficit that is owed to the employee pension plans. Baltia does not have that yet. The reverse is true, of an airline is fully funded for pension obligations, that can actually be viewed as and asset or bonus value.
3. Plane leasing - this is new. I think that this approach will be huge in terms of impact. They will not be assets and you lose depreciation impact, but you are not saddled with impact of committing to a plane in you inventory. Leasing almost clearly allows you the flexibility to modify your fleet without the costs of moving your fleet. Everything then goes to the income statement for impact. That is much more manageable in terms of measuring you profit margin requirements.
The fact that most of what is to come is subjective due to lack of information. However I feel that this new approach will make the company more nimble in terms of growth and will be greatly underestimated by analysts. That is where our Bargain is.
Let's speculate for a second. Say they grow as planned. If you value based on buyout, would you not place a premium on shares price because of these elements? A good analyst would. That means the comparison to share price is both tricky and intriguing. There are two components to evaluate frontier activity. Market reaction and financials. I think we got a huge advantage on both
In my opinion
The tax shelter you speak of is considerable. This kind of shelter is the reason for takeovers in many cases. Not saying that happens here. You can buy a company for their NOL's and apply them to your company. That means those are assets in freakish terms. So when I value Baltia, I actually include that as part of what is being bought in terms of value. This means any price where market cap is less than 100mm is a discount.
Turning to other parts of the. Balance sheet are 3 items which factor differently that Frontier.
1. Lack of debt - debt for all companies is a liability in both balance sheet and income(debt servicing costs). So looking at other airlines, you need to add back in debt to garner a more equivalent market cap for comparison.
2. Lack of historical costs - with no unions or employees such as pilots or stewards in a historical sense, there is no pension obligations associated with Baltia at this time. Similarly, when united bought continental, they also buy the funding deficit that is owed to the employee pension plans. Baltia does not have that yet. The reverse is true, of an airline is fully funded for pension obligations, that can actually be viewed as and asset or bonus value.
3. Plane leasing - this is new. I think that this approach will be huge in terms of impact. They will not be assets and you lose depreciation impact, but you are not saddled with impact of committing to a plane in you inventory. Leasing almost clearly allows you the flexibility to modify your fleet without the costs of moving your fleet. Everything then goes to the income statement for impact. That is much more manageable in terms of measuring you profit margin requirements.
The fact that most of what is to come is subjective due to lack of information. However I feel that this new approach will make the company more nimble in terms of growth and will be greatly underestimated by analysts. That is where our Bargain is.
Let's speculate for a second. Say they grow as planned. If you value based on buyout, would you not place a premium on shares price because of these elements? A good analyst would. That means the comparison to share price is both tricky and intriguing. There are two components to evaluate frontier activity. Market reaction and financials. I think we got a huge advantage on both
In my opinion
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