Airlines and Transportation, Distribution & Logistics

Southwest bids $170M for Frontier Airlines

August 10, 2009

Southwest Airlines Co. said today it's bidding $170 million to buy Frontier Airlines Holdings Inc. out of bankruptcy protection, surpassing an earlier bid of $108.8 million by Indianapolis-based Republic Airways Holdings Inc.

The bid sets up an auction for Frontier. The auction, originally slated for tomorrow, is expected to begin on Thursday.

A bankruptcy judge had already approved the sale of Frontier Airlines Holdings Inc. to Republic. But the process left the door open for other bidders. On July 30 Southwest put in a nonbinding bid of $113.6 million.

Denver-based Frontier has been operating under Chapter 11 protection since April 2008.

Republic said it would keep Frontier mostly intact and operate it under its own name.

Southwest has said it would operate Frontier as a separate, wholly-owned subsidiary for a couple of years until its operations can be combined with Southwest.

Southwest is interested in Frontier because it wants to strengthen its position in Denver and speed the low-cost carrier's expansion into new markets, such as Atlanta and resort areas in Mexico.

Southwest recently began operating in Denver, where it also competes against UAL Corp.'s United Airlines.

Mike Boyd, an airline consultant in the Denver area, said that explains Southwest's interest in Frontier.

"This is about a tactical need by Southwest to take out their major competitor in Denver," Boyd said in late July. "They've got to make Denver profitable, and if they're going to do that, they need to take out Frontier."

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.

Republic submitted its bid in May. It has extended Frontier a $40 million debtor-in-possession loan and holds a $150 million unsecured claim.

Republic Airways owns Chautauqua Airlines, Republic Airlines and Shuttle America.
Southwest Airlines Co. said today it's bidding $170 million to buy Frontier Airlines Holdings Inc. out of bankruptcy protection, surpassing an earlier bid of $108.8 million by Indianapolis-based Republic Airways Holdings Inc.

The bid sets up an auction for Frontier. The auction, originally slated for tomorrow, is expected to begin on Thursday.

A bankruptcy judge had already approved the sale of Frontier Airlines Holdings Inc. to Republic. But the process left the door open for other bidders. On July 30 Southwest put in a nonbinding bid of $113.6 million.

Denver-based Frontier has been operating under Chapter 11 protection since April 2008.

Republic said it would keep Frontier mostly intact and operate it under its own name.

Southwest has said it would operate Frontier as a separate, wholly-owned subsidiary for a couple of years until its operations can be combined with Southwest.

Southwest is interested in Frontier because it wants to strengthen its position in Denver and speed the low-cost carrier's expansion into new markets, such as Atlanta and resort areas in Mexico.

Southwest recently began operating in Denver, where it also competes against UAL Corp.'s United Airlines.

Mike Boyd, an airline consultant in the Denver area, said that explains Southwest's interest in Frontier.

"This is about a tactical need by Southwest to take out their major competitor in Denver," Boyd said in late July. "They've got to make Denver profitable, and if they're going to do that, they need to take out Frontier."

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.

Republic submitted its bid in May. It has extended Frontier a $40 million debtor-in-possession loan and holds a $150 million unsecured claim.

Republic Airways owns Chautauqua Airlines, Republic Airlines and Shuttle America.
 

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