Southwest In Play? It's a Possibility

Southwest Airlines Co. is ripe for a leveraged buyout, with its high profit, unencumbered assets and low debt, one airline industry observer said Wednesday.

Analyst Roger King of CreditSights projected a possible market value of $15 billion, or $19 to $20 a share, for Southwest. Its shares, which have traded between $14.50 and $18.20 over the past year, closed up 46 cents Wednesday at $15.66.

In a report, Mr. King called a leveraged buyout of Dallas-based Southwest "a no-brainer in the current financial market. Airlines are in play all over the place."

Southwest "in particular has a multiyear fuel hedge portfolio, billions in unencumbered aircraft values, a significant [Boeing] 737 order book, excellent long-term operational and financial trends, industry tailwinds and upside potential as temptations," Mr. King said.

He cited one possible roadblock, saying the company would have to turn its philosophy 180 degrees to accept a buyout.

"Herb Kelleher [chairman since 1978] does not even have a grave to spin in yet," he said.

A Southwest spokeswoman declined to comment, but she noted a similar rumor circulated in February.

Speaking on CNBC, Mr. King said the Southwest speculation was "not a joke, and I'm not crazy."

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