Value of skywest to increase so dramatically even if limited

Reference no: EM13182280

SkyWest, a regional airline, negotiated a financial arrangement with Delta and United Airlines to provide regional jet service. SkyWest agreed to paint its jets the colors of Delta Connection and United Express and to fly routes specified by the two airlines. In return, Delta and United agreed to pay SkyWest a predetermined profit margin and to cover most of the regional airline's costs. While the deal limited the amount of profit SkyWest could earn, it also insulated the smaller airline from volatility in earnings since the major airlines covered SkyWest's fuel costs, increased its percentage of seats occupied and managed its ticket prices.

Wall Street responded by increasing SkyWest's market valuation from $143 million to $1.1 billion after the arrangement was made. Explain, in economic terms, how this arrangement with Delta and United could have caused the value of SkyWest to increase so dramatically even though it limited the amount of profit the company could earn.

Reference no: EM13182280

Questions Cloud

Predict what the next generation of hris functionality : Predict what the next generation of HRIS functionality will be and how likely it will generate comparable reductions in cost as compared to the functionality that was developed due to Y2K.

Which are must haves for a student to chosen profession : 1. Discuss your top three resources which are "must haves" for a student in your chosen profession (do not forget to provide the proper references for your classmates' benefit). 2. Why are they important to you as both a student and a professional?

State pure acid phosphatase : A 0.1mL Pure Acid phosphatase (0.5mg/ml) hydrolyzes 0.2mmol of pnPP wall in 5 min. what is the specific activity?

Explain why the income of farms falls : Agricultural commodities are known to have a price-inelastic demand and the be necessities, How can this information allow us to explain why the income of farms falls (a) after a good harvest? (b) In relation to the incomes in other sectors of the..

Value of skywest to increase so dramatically even if limited : Wall Street responded by increasing SkyWest's market valuation from $143 million to $1.1 billion after the arrangement was made. Explain, in economic terms, how this arrangement with Delta and United could have caused the value of SkyWest to incre..

Decisions regarding the acquisition of human capital : Discuss the type of metrics and analytics that could provide an organization with the information it needs to make better decisions regarding the acquisition of human capital.

What is strategic trade policy : With the help of an example discuss the characteristics of globalization. What are the factors that contribute to the attractiveness of a country as a market or investment site? What are the implications of cultural differences for international busi..

Summarizing the main points presented : Write one paragraph about each source, summarizing the main points presented.

Difference between short-term and long-term memory : What is the difference between short-term and long-term memory? What did Donald Broadbent mean when he referenced attention filters, as related to encoding into short-term memory?

User Account

All Pages