With five days to go until the latest antitrust deadline, a leading airline analyst said he sees a three out of four chance that the proposed merger between Alaska (ALK - Get Report) and Virgin America (VA) will take place as negotiated.

The revised target date for regulatory approval, set by the airlines, is Oct. 17.

 "We believe regulatory approval of the pending Alaska-Virgin America merger remains more likely than not," JPMorgan analyst Jamie Baker wrote in a note issued Tuesday.

"But it still appears possible that conditions and or carve-outs will be asked of the parties, which could prove sufficiently onerous and jeopardize deal economics," Baker said, as he raised his rating on Virgin America shares to neutral from underweight.

On Tuesday, Virgin America shares fell 30 cents to close at $52.05. Alaska has offered $57 a share.

Baker said he sees a 75% probability of outright regulatory passage with or without minor concessions, with the $57 offer intact.

He sees a 15% probability that regulators will require concessions "sufficiently onerous as to warrant a lower deal price ($50 for VA shares) and a 10% probability of an outcome where the deal ultimately breaks resulting in VA shares trading at $23.

"Manipulate as you see fit, but this arrives at an estimated fair value of $52.50," Baker wrote.

In announcing the planned merger on April 4, Alaska and Virgin America set a Sept. 30 target date for regulatory approval. On Sept. 26, the carriers extended that date, saying they would not consummate the deal before Monday, Oct. 17, unless DOJ approves it before then.

While Baker said he doesn't see any markets where Alaska/Virgin America overlap should trouble antitrust regulators, he said Alaska's codeshares with American (AAL) and Delta may have raised concerns.

An Oct. 4 report by Piper Jaffray analyst Alex Olvera noted that American and Alaska code share on eight of the 11 flights where Alaska and Virgin America both fly. As a result, Olvera said, "the risk of a DOJ suit to block the deal is high." Code shares enable airlines to sell tickets on one another's flights.

Baker said DOJ may require Alaska to drop some or all of its codeshares with American and Delta. He estimated the relationships produce revenue of about $350 million annually for Alaska, which has 257 code shares with American.

Only 13 are in markets where Alaska also flies, but if Alaska is to become a bigger airline through a merger, would it still need to have so many codeshares? "We do estimate at least 25% of codeshare revenue could be permanently forfeited," Baker wrote.

A question that overhangs any discussion of DOJ blocking the merger is whether JetBlue (JBLU - Get Report) , which previously pursued a merger with Virgin America, might step in.

Baker believes that ship has sailed.

JetBlue's "recent decision to order aircraft and expand profitable Mint flying represents its plan B," he wrote. Additionally, he said, "JetBlue-Virgin America (based on our analysis) would likely prove even more irksome to regulators."
