Airlines and Republic Airways and Transportation, Distribution & Logistics

Republic, Southwest duel for Frontier

August 10, 2009

Republic Airways Holdings Inc. is nearing judgment day in its battle with Southwest Airlines Co. for ownership of Frontier Airlines Holdings Inc.

Today is the deadline to submit binding bids for Frontier, a Denver-based carrier operating under bankruptcy protection.

A judge in May approved the sale of Frontier to Indianapolis-based Republic for $108.8 million. However, Dallas-based Southwest said in late July that it had submitted a nonbinding bid of $113.6 million. Southwest spokesman Chris Mainz confirmed to The Associated Press that the airline put in a firm bid for Frontier today. He said more details will come later.

Frontier will conduct an auction tomorrow in which it and a group of investors will determine whether to accept Republic’s offer or terminate it and accept a better bid from another party.

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

Southwest 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 said it was 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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