Frontier Airlines EarlyReturns - Is Frontier For Sale, In Trouble?

Is Frontier for sale, in trouble? Over Thanksgiving, I was talking to a relative who is a SWA pilot. According to him, he claims Frontier is for sale. They are for sale and are losing money hand over fist. When I asked about bankruptcy options like AA filed today, he replies Frontier most likely will not go into bankruptcy but just shut down at the last minute. He adds, Frontier is owned by Republic Airlines which is a large regional airline that makes their money feeding Delta and other larger airlines. He believes they don't have much experience running a regular airline and can't make money doing it. Regarding my Frontier miles, he advises cashing in and using your miles ASAP. I asked show soon they could shut down, and he replies within 6 months.

Granted he's is a pilot for a different airline, and I don't know how he knows what he knows, but I must admit I was not happy to hear any of this, and was surprised as I had not been aware of any problems that Frontier might have. Is what he states true?

http://www.flyertalk.com/forum/frontier-airlines-earlyreturns/1277892-frontier-block-rjet-wants-out.html

Search is your friend.

Keep in mind that Southwest is Frontier's arch-rival in DEN and MKE, with the purchase of AirTran. They would just, uh, LUV F9 to go down in a ball of fire at this point so they could raise fares in both places.

All that said, Frontier will be split off from RJET sooner rather than later. That way Republic can do what it does best (regional flying for all of the Big Four) and Frontier can make or break itself on its own. What's interesting is that F9 has been able to eke out a profit in DEN despite competing against Southwest on many of its routes, and they've been upping service in Kansas City despite Southwest's heavy presence there. The big reason for this is F9's cost structure is much lower than Southwest's on labor, which helps to counteract WN's massive economies of scale on pretty much everything.

The result: WN can't drive F9 out of business. In order to undercut Frontier's fares Southwest would have to lose a significant amount of money in DEN for an extended period...not gonna happen.

All that said, Frontier will be split off from RJET sooner rather than later.

How soon do you think? Should I be concerned about flights already booked in March, or needing to cash in miles?

How soon do you think? Should I be concerned about flights already booked in March, or needing to cash in miles?

Not that soon. A completely uneducated guess would be sometime in 2012.

If you've used a credit card, your purchase is protected.

I'm not sure Republic is spinning off Frontier for sale. They actually need them since the regional flying contracts are under great financial pressure. I think they're separating F9 because contract flying is a totally different business from branded flying and Republic has done a pretty poor job of managing the branded business. F9 needs its own, experienced, management team to get it on the right track.

A couple of things to keep in mind:

(1) Customers get stuck when an airline shuts down, and that's nearly always when things have spun so out of control that assets are seized by creditors.

(2) Republic, the holding company, is and continues to be profitable. As such, it us unlikely they will lose control as described in point #1.

(3) Although Republic clearly will not abide ongoing losses at Frontier a whole lot longer, it is fully in their best interest to have Frontier be a valuable entity so they can reap profits, sell a partial stake, or sell it outright.

(4) Likely the worst thing for Republic is to have Frontier shut down. So they will do (and are doing) what they can to make Frontier have saleable value.

Most airlines which have shut down in the past decade or two (and keep in mind that it usually takes nearly forever for an airline to shut down) have not had a profitable parent company like Republic -- they have been on their own. Again, I'm not saying that Republic is a sugar daddy who is happily funneling money Frontier's way for the long haul. But if Republic lets Frontier spiral and shut down it's a worthless asset and their investment is lost. So they are very unlikely to let that happn.

On top of all this...Frontier seems to be turning a corner financially by slashing money-losing sectors. That's no promise that they will continue to post profits every quarter going forward, of course. But the outlook for Frontier's results is notable better than, say, last winter.

So...Frontier seems to be on improving finanicial footing, and on top of that Republic has every interest in making sure Frontier survives as a saleable asset with some value...which it won't have if they let it shut down.

This is not the same as saying everying is perfect, they are as well run as they should be, etc. etc. But people have a way of extrapolating way beyond what's reasonable. Ever if everything the SWA pilot says is accurate, none of that has anything directly to do with what makes an airline shut down.

Finally...and no offense to anyone in these work groups...but front-line employees often have really strong opinions based on the grist of the rumor mill. And in my experience it seems especially true of pilots because they travel and (generally without intent or malice) spread information in a viral manner from flight crew to flight crew, base to base, and station to station. That's not a value judgement but just the nature of the work. And by the nature of their personalities and positions, pilots are sometimes the most confident in those really strong opinions based on the grist of the rumor mill. Those are big generalizations on my part, of course, and I don't mean to offend. But I usually take a grain of salt right along with opinions like these.

Bottom line on all this....I really don't think there's any reasonable worry Frontier will shut down and leave customers high and dry any time soon.

Great information knope2001, thanks!

Great information knope2001, thanks!

I hope you sleep better tonight.

Update and what a sale could mean to DEN...from Denver Post:

http://www.denverpost.com/business/ci_21968293/move-frontier?IADID=Search-www.denverpost.com-www.denverpost.com