Republic Airlines unit Frontier wants to look more like Spirit

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 The chief executive at Indianapolis-based Republic Airways Holdings Inc. says he's trying to make the airline's money-losing Frontier Airlines unit more like lower-cost rivals Spirit Airlines and Allegiant Travel Co.

But he's not going all the way.

Chairman and CEO Bryan Bedford says he wants to continue cutting Frontier's costs as he gets it ready to be spun-off or sold, but he's not willing to start charging lots of new fees like rivals have done.

In an interview with The Associated Press on Tuesday, Bedford said he doesn't plan to add new fees for carry-on bags, printing a boarding pass, or calling a reservation center.

Frontier collects more per-passenger revenue than Allegiant or Spirit, he said.

So "there's no reason in pursuit of efficiency and low costs we have to alienate our customers," Bedford said. "We're not reinventing the wheel; we're just changing to a different wheel."

Allegiant and Spirit promote unusually low fares — Spirit has advertised flights for $9 — but tack on fees for items that travelers on other airlines would get for free.

Republic beat Southwest Airlines Co. in bidding to acquire Frontier out of bankruptcy in 2009. Eighty percent of Frontier traffic passes through Denver, where it is the No. 3 airline behind United Continental Holdings Inc. and Southwest Airlines Co. The rest goes through Milwaukee or Kansas City, Mo. Its planes, with animals on the tails, are easy to spot on the tarmac.

Frontier has cut about $120 million in annual costs through more efficient schedules, rejiggering its fleet and cutting flights. In November, Republic announced plans to sell it or spin it off. By that point it had already lost more money than Republic paid for it two years before.

Bedford said high fuel prices were a big cause of Frontier's problems. Oil prices were 25 percent higher, on average, in January than they were when Republic bought Frontier.

Another issue? Wall Street could never figure out what to do with it. Analysts never knew how to classify the regional jet company that bought a low-cost airline, Bedford said. Investors couldn't either. The day Republic announced it would get rid of Frontier, its shares leaped more than 60 percent.

Bedford said he believes that Republic will decide what to do with Frontier by the third quarter. It's aiming to close a deal by the fourth quarter of this year. Bedford said Republic is close to hiring an adviser to start the process, and expects to decide on one by the end of this month.

"We've already received calls. We know there's interest," he said.

Bedford recently hired former US Airways CEO David Siegel to run Frontier. Siegel has moved to Denver, where Frontier is based, and is putting together a management team that will run Frontier until it separates from Republic, Bedford said.

An example of a possible move Siegel will examine is replacing Frontier workers with contractors to handle ground duties in cities where Frontier might have only two or three arrivals per day, Bedford said.

"Those are hard decisions that frankly we're going to have to take a look at," he said.

Airlines like Republic that contract their services to major carriers are suffering because higher fuel prices have made their small jets unprofitable.

Ray Neidl, an aerospace analyst for Maxim Group, wrote on Tuesday that the regional airline industry is in the process of a major restructuring, "and we only expect a few to survive. In an era of what we believe will be permanently higher fuel costs, the sector should be much smaller."

Bedford said his main focus is on separating Frontier. While he agrees that a wave of consolidation is likely for regional airlines like his, "I don't see it involving Republic in 2012," he said.


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