Indianapolis-based Republic Airways Holdings Inc. and Southwest Airlines Co. will battle it out in a bankruptcy court auction today for the rights to acquire Denver-based Frontier Airlines Holdings Inc.

And, according to a newspaper report, Denver-based business interests are hoping Republic emerges as the winner. In fact, the Metro Denver Economic Development Corp. is encouraging Republic to buy Frontier and move its headquarters from Indianapolis to Denver, the Denver Post reported this morning.

Tom Clark, executive vice president of the business group, told the newspaper that his organization has been attempting to "go after all of Republic" because the company would probably maintain and create more jobs in Denver than Dallas-based Southwest.

Frontier has an aircraft-maintenance operation at Denver International Airport, and Clark expressed concern about the future of 200-plus jobs there if Southwest took over, the newspaper reported.

Officials from Republic could not be immediately reached this morning to comment on the report.

Southwest on Monday said it offered about $170 million to take Frontier out of bankruptcy protection. Republic offered $108.8 million in May.

The difference in the bids, however, isn’t as wide as it would appear because Republic is a major secured and unsecured creditor of Frontier. A report on the thedeal.com estimated the difference is actually less than $10 million when factoring in other considerations.

Republic would benefit from Southwest's bid even if it loses at auction. It would get roughly $20 million as an unsecured creditor in Frontier's bankruptcy. It also stands to get its $40 million debtor-in-possession loan to Frontier repaid.

Frontier filed for bankruptcy protection in April 2008 after its credit-card processor moved to hold back a big chunk of the proceeds from ticket sales, raising the prospect of a cash crunch. According to court documents, a consultant hired by the airline began contacting potential buyers in January, and some met with the airline's management over the next two months.

Some prospective investors backed out, however, because of lack of available credit and the downturn in the airline industry.