Frontier Airlines EarlyReturns (Pre-Alignment) - Frontier Confirms That Southwest Airlines Developing a Bid for the Airline-effects UA

Frontier Airlines Holdings, Inc. (OTCBB: FRNTQ) today announced that Southwest Airlines Co. (NYSE: LUV) has submitted an initial non-binding proposal to acquire Frontier under the auction procedures established in Frontier’s Chapter 11 bankruptcy cases and approved by the U.S. Bankruptcy Court.

As previously announced, on July 13 the judge presiding over Frontier’s Chapter 11 bankruptcy cases in the U.S. Bankruptcy Court for the Southern District of New York approved a proposed investment agreement between Frontier and Republic Airways Holdings, Inc. (NASDAQ: RJET). Pursuant to the investment agreement, Republic agreed to purchase 100% of the stock of Frontier Holdings upon its emergence from bankruptcy for $108.75 million, so long as certain conditions are met. Frontier Airlines Holdings would become a wholly-owned subsidiary of Republic, an airline holding company that owns Chautauqua Airlines, Republic Airlines and Shuttle America.

The Republic investment agreement provides for an auction period, during which Frontier may seek higher or otherwise better competing bids. If Frontier identifies such a bid, it can terminate the Republic investment agreement and accept the other offer. Under the auction procedures approved by the Court, interested bidders must submit an initial proposal by Aug. 3, 2009, and a final proposal by Aug. 10, 2009. Frontier and its advisors, in consultation with the Unsecured Creditors’ Committee appointed in Frontier’s Chapter 11 cases, will conduct an auction, if necessary, on Aug. 11, 2009, to consider all qualified proposals and determine the highest or otherwise best proposal.

Frontier currently expects to emerge from Chapter 11 this autumn.

I got really excited at first because I thought you were saying WN was buying UA. Big letdown upon reading the full post.

WN buying UA?

Not in a trillion years. WN has exactly the flexibility of business that is required these days and buying UA would kill it.

I got really excited at first because I thought you were saying WN was buying UA. Big letdown upon reading the full post.

Yea I bet most people on this board want to sit in E- forever.

And this effects UA how?

This would have some effect for UA at DEN especially, where Frontier was based and where WN has been building up a presence now for a couple years at least.

A WN cash infusion would be great for UA. No reason to expect WN to turn UA into a super-size WN; instead, turn UA into a competitive international carrier that WN could feed. WN win.

What I find interesting is IIRC when Frontier was essentially forced into Ch11 by their CC processor they claimed they were AOK and but not for the CC processor wouldn't need BK at all and only opted for Ch11 due to the CC holdbacks, it would seem that since then things have changed for them and not for the better.

Tick-tock Tick-tock goes the UA clock in Denver...

Should be interesting as Denver is the one UA hub where WN actually stands a formidable chance of eclipsing UA (I don't consider LAX a 'hub' really)

Tick-tock Tick-tock goes the UA clock in Denver...

Should be interesting as Denver is the one UA hub where WN actually stands a formidable chance of eclipsing UA (I don't consider LAX a 'hub' really)

And they are doing pretty well against UA in the Chicago and intra Calf markets

Would this put WN back above DL/NW for largest carrier in terms of passengers flown?

I hope people here remember how it worked out for ATA when Southwest came in with a clever bid to beat out AirTran in MDW. IF Southwest wins the bid you can bet that it will mark the beginning of the end for Frontier. They will suffer the same fate ATA did. And as planned Southwest will get all those DEN gates from the airline and their toughest competitor will be gone. They will without a doubt break out the ATA/MDW playbook.

If you believe otherwise you are likely operating under the influence of wishful thinking :-)

If you believe Southwest will keep the airline around ask yourself this question... why?

Each and every Frontier employee should feel some pride in that their main competitor can't beat them - so they're going to try and buy them and force them out of business. Despite what all those supposed know-it-all analysts say, Frontier is hurting Southwest in Denver. If that wasn't the case, why would Southwest we bidding for an airline it has nothing in common with?

And as for the press release saying better competition...please. What airline merger has resulted in that? United has a lot to gain if this goes through. UA would just compete with WN and the local favorite airline, Frontier, would be gone.

And as for the press release saying better competition...please. What airline merger has resulted in that? United has a lot to gain if this goes through. UA would just compete with WN and the local favorite airline, Frontier, would be gone.

Agree, DEN is big enough for two hub carriers (and different business models at that), but not three. WN is bleeding badly in DEN, but they have the financial flexibility to buy out their main competitor. If the merger succeeds both WN and UA win.

Each and every Frontier employee should feel some pride in that their main competitor can't beat them
:confused: Is their "main competitor " also in Bankruptcy? No, they aren't.

Not only CAN their main competitor beat them, but they are.

:confused: Is their "main competitor " also in Bankruptcy? No, they aren't.

Not only CAN their main competitor beat them, but they are.

Got proof?

Chapter 11 is a boon for Southwest because they can swoop in, unwelcome, and buy out their biggest competitor. If bankruptcy has anything to do with this, that's it.

Check the financials and analyst reports the past 8 months. Frontier is profitable; Southwest is likely losing money on its Denver routes.

And if you still stubbornly don't agree with me - ask yourself why then is Southwest buying an airline it has nothing in common with? Yeah, it's because Frontier is a thorn in Southwest's side.

Got proof?I think that would be found in the market share data, where UA dominates.

Chapter 11 is a boon for Southwest because they can swoop in, unwelcome, and buy out their biggest competitor. If bankruptcy has anything to do with this, that's it.I agree to the extent that they would buy out F9 with the express intention of killing it. WN runs an all Boeing fleet; F9 runs an all Airbus fleet. Just from that consideration there will be no merger, as WN is fanatical about keeping maintenance costs low.

Check the financials and analyst reports the past 8 months. Frontier is profitable; Southwest is likely losing money on its Denver routes.I'm going to guess that's it's easier to "make money" when you're protected by bankruptcy court.

And if you still stubbornly don't agree with me - ask yourself why then is Southwest buying an airline it has nothing in common with? Yeah, it's because Frontier is a thorn in Southwest's side.Perhaps not so much a thorn as an interesting opportunity. Given the auction rules, it probably made sense to WN to try to buy and kill F9 right now, when they're down.

I hope people here remember how it worked out for ATA when Southwest came in with a clever bid to beat out AirTran in MDW. IF Southwest wins the bid you can bet that it will mark the beginning of the end for Frontier. They will suffer the same fate ATA did. And as planned Southwest will get all those DEN gates from the airline and their toughest competitor will be gone. They will without a doubt break out the ATA/MDW playbook.

If you believe otherwise you are likely operating under the influence of wishful thinking :-)

If you believe Southwest will keep the airline around ask yourself this question... why?I think this analysis is spot on.

For that guy, and others, that think my analysis is full of it...read this. Interesting to say the least.

http://aviationblog.dallasnews.com/archives/2009/07/southwest-pricing-and-competit.html

I hope people here remember how it worked out for ATA when Southwest came in with a clever bid to beat out AirTran in MDW. IF Southwest wins the bid you can bet that it will mark the beginning of the end for Frontier. They will suffer the same fate ATA did. And as planned Southwest will get all those DEN gates from the airline and their toughest competitor will be gone. They will without a doubt break out the ATA/MDW playbook.

If you believe otherwise you are likely operating under the influence of wishful thinking :-)

If you believe Southwest will keep the airline around ask yourself this question... why?

Southwest has already said they intend to phase out the Frontier brand. Here's what I posted on the Southwest forum:

I'm thinking that Frontier flights would need to be relabeled Southwest sooner rather than later. Very few customers will pay market price for tickets on an airline that is known to be slowly shutting down? Why would people risk having their flights dropped from the schedule?

Southwest, as the new owner, will quickly realize that yields are unacceptably low on Frontier-branded flights. The answer will be to accelerate the switch to Southwest branding, one way or another.

For the conspiracy-minded, it is possible that Southwest sees another outcome here. Failure of negotiations with the employees (on either side, BTW) could set up a situation in which Frontier is forced to abruptly shut down and liquidate. That outcome might be more favorable to Southwest than the planned temporary continuation of Frontier operations. If so, Southwest really has nothing to worry about in the employee negotiations.

I will miss F9 after WN buys them. I liked F9 a lot better because of assigned seats, routes to Mexico and their TV program. Frequent flyer program is not really worth anything though.
I for one think WN will shut them down as fast as feasible and take over some routes or re brand those to WN. I don't know how profitable the Mexico routes are but it could be an interesting expansion for WN.
I also think though if Republic wins the bid they would eventually end up liquidating. They don't have any experience running a full fledge airline and they would compete against their largest customers. A couple years ago I saw Independence run themselves into the ground real quick.

Southwest has already said they intend to phase out the Frontier brand. Here's what I posted on the Southwest forum:

It really is a shame but that is business. My opinion is that DEN could not support UA, WN and F9 especially with the state of the economy. Something has to give. I consider myself fortunate to have taken an F9 flight 3 months ago. Great airline. Great service. They they do get phased out they will be missed.

F9 is undoubtedly my #2 preferred carrier behind WN. This is what I see happening:

-Southwest submits a winning bid and acquires Frontier
-As soon as administratively possible, DEN capacity is reduced on both airlines, which will lead to higher fares (that will still be competitive with UA)
-An end to AirFairs, as well as elimination of checked baggage fees, allowing 2 free (except overweight/size bags).
-Elimination of change fees
-An interim codeshare agreement which will allow allow cross selling on both websites for previously unserved connecting routes (i.e. BUR-SJD, ATL-MAF)
-Accelerated delivery schedule for B737s from Boeing, with possible delayed retirement/sale of existing B733s.
-Sale/Lease end on existing Airbus aircraft, replaced with B737
-Lynx Aviation sold, with a codeshare agreement as part of the deal
-EarlyReturns members awarded 1.0 Rapid Rewards credits for every 1,500 banked miles
-Rapid Rewards A-List Membership to Ascent/Summit members
-Companion Pass issued to those Customers who have accrued 100k miles in the past yr.
-End the existing relationship with points.com and LiveTV
-End the existing operation at DFW and DCA (due to IAD and BWI proximity) and lease the DCA slots/gates to another carrier
-Possibly end ticket sales distribution to aggregator websites, but leave ticket inventory available on Sabre and GDS
-Offer severance packages to employees who are not hired by WN
-Cross train all employees (esp flight crews) on Int'l ops/procedures
-Keep existing near-Int'l routes on F9's current route map, shift new traffic for non-served Mexico cities over to Volaris codeshare
-Begin codeshare with WestJet to Canada, using DEN as a Int'l focus city (possible shift of some F9 talent to Westjet)
-Once under one operating certificate, the combined WN operation would soon begin codeshare agreement to generate traffic from TATL codeshares

I don't intend to start the debate here which raged for months on the DL/NW boards, but I also see a shift from Pepsi to Coke.

(Cross-posted to WN board)

Comments/thoughts from the head of Frontier's independent pilots union...

http://blogs.wsj.com/deals/2009/07/31/a-frontier-air-pilots-take-on-southwest-airs-bid/

I received this in my weekly e-mail from SKYGUIDE E-ALERT:

When Denver-based Frontier Airlines agreed in June to be acquired by Republic Airways Holdings as part of Frontier's plan for Chapter 11 reorganization, the deal was subject to possible bids for Frontier coming into the bankruptcy court from other interested parties. And one interested party has now emerged: Southwest Airlines. Southwest said it plans to submit a non-binding offer of at least $113.6 million by August 3 - higher than Republic's existing bid of $109 million. "Submission of a non-binding proposal gives Southwest an opportunity to engage with Frontier in the due diligence required to determine the scope of a binding proposal, to be submitted by the court's Aug. 10, 2009 deadline," Southwest said. Republic Airways Holdings -- the parent company of regional carriers Chautauqua Airlines, Republic Airlines and Shuttle America - also has a deal in place to acquire Milwaukee-based Midwest Airlines, which it plans to link with Frontier through code-sharing.

Since Southwest started operations at Denver International Airport a few years ago, it has grown into one of the airport's largest carriers, providing formidable competition for both Frontier and United at DEN. Southwest executive vice president-corporate services Ron Ricks said on a company blog that Southwest has been "considering a bid (on Frontier) for some time, independent of any action Republic took with its bid proposal." Ricks said that in spite of the economic downturn, Southwest considers the availability of Frontier a strategic option that's too good to pass up. "We have the cash, access to capital, and collateral that allows us to take advantage of this existing opportunity and synergies between Southwest and Frontier," Ricks said. If Southwest's bid is successful, it should allow Frontier to emerge from bankruptcy. Following an acquisition, Ricks said, Southwest will "operate Frontier as a wholly-owned subsidiary, independently and separately from Southwest Airlines, for a period of time until the carrier could be combined into Southwest."

He noted that Southwest's collective bargaining agreements with its employees "have provisions for the acquisition of or merger with another carrier." If Frontier is acquired and merged into Southwest, executives will have to figure out how to combine Frontier's Airbus fleet with Southwest's all-737 operation. Also up in the air is the fate of Lynx Aviation, a Frontier subsidiary that operates a fleet of Q400 turboprops from Denver to smaller markets in the west and Midwest. "As a part of our overall due diligence, Southwest Airlines will study Lynx," Ricks said. "Until a bid is finalized, it's too early to say" if that bid would include Lynx.

I think this analysis is spot on.

Really?.. Because I don't remember it playing out that way at all. In fact I seem to remember Southwest acquiring ATA's assets only after ATA had run itself into the ground and ceasing operation.

I also remember well before any of that Southwest injecting ATA with a $100,000,000 cash loan to keep it operating and code sharing with them.

Really?.. Because I don't remember it playing out that way at all. In fact I seem to remember Southwest acquiring ATA's assets only after ATA had run itself into the ground and ceasing operation.

I also remember well before any of that Southwest injecting ATA with a $100,000,000 cash loan to keep it operating and code sharing with them.So are you saying WN plans to keep F9 as a going concern for years or decades? What exactly do you think WN's intentions are?

So are you saying WN plans to keep F9 as a going concern for years or decades? What exactly do you think WN's intentions are?

No, I was merely remarking on the inaccuracy or the previous statement.

I'm pretty sure Southwest makes no secret about it's intentions with Frontier.

Frontier is a bankrupt airline. They are completely responsible for their own fate for putting themselves in the position that they are currently in.

This whole charade of villainizing Southwest is ignorant and immature.

Yea I bet most people on this board want to sit in E- forever.

+1

That is the most clever post in this thread. :D

No, I was merely remarking on the inaccuracy or the previous statement.

I'm pretty sure Southwest makes no secret about it's intentions with Frontier.

Frontier is a bankrupt airline. They are completely responsible for their own fate for putting themselves in the position that they are currently in.

This whole charade of villainizing Southwest is ignorant and immature.Actually, F9's credit card processing company is responsible for their fate because it was their arbitrary upping of the reserve in spring 2008 during the credit crunch that caused F9's C11 filing.

As for the other, I don't think the statement was inaccurate - larger companies have always used M&A as a mechanism for growth, and it often seems cold and callous. Evil? No. Businesses really can't be evil per se, although humans in charge of businesses can.

I can easily see how some people would put a black hat on WN for swooping in after Republic had already set up a way for F9 to continue as a going concern. But...that's life in the business world.

Brian, that is a GREAT signature. :)

Actually, F9's credit card processing company is responsible for their fate because it was their arbitrary upping of the reserve in spring 2008 during the credit crunch that caused F9's C11 filing.


- There was nothing arbitrary about First Data's actions. FDC had been out on a limb for some time with Frontier. They have a primary responsibility to their own employees and stockholders.

can easily see how some people would put a black hat on WN for swooping in after Republic had already set up a way for F9 to continue as a going concern. But...that's life in the business world.

- There is nothing to indicate that BBedford intends to run Frontier "as is" for an extended time. He stated that was his intent with Midwest, but has already started to gut it. Before the SWA offer, the FRontier pilots were in a lather about the indications that Bedford was planning to cut the AirBus fleet in half and put them on RJs.

All WN wants to do is buy F9, get it's gates, try to buy some loyalty and then shut it down. The F9 model is completely contrary to the WN model - different aircraft, hub-based, reserved seats. Months ago, WN assumed F9 would never come out of bankruptcy. Now that its tweaked its operations and become profitable WN's only interest is to eliminate a competitor. Of course, I suppose that's just the free market.

Unfortunately, to many of us, F9 is a great piece of Colorado culture - and we'll miss it (and the few thousand local jobs).

we'll miss it (and the few thousand local jobs).

Why do people keep saying things like that? It'll require the same amount of jobs to run the Southwest/Frontier operation in DEN as it always has. It just may end up being different people in those jobs, but they'll be from Denver.

Why do people keep saying things like that? It'll require the same amount of jobs to run the Southwest/Frontier operation in DEN as it always has. It just may end up being different people in those jobs, but they'll be from Denver.F9's headquarters is Denver; therefore executive offices, training, human resources, (I think) maintenance base, reservations call centers (I think), and so on are all there. When WN dismantles F9, it will maintain most of those functions in DAL, no? So there will definitely be job losses in Denver.

i kinda think wn would use the frontier's international experience and really develop that. maybe a big expansion into canada. as has been said,"the low hanging fruit has been picked". wn is now having to do different things to grow like expanding into bos, and lga. there is just a whole lot of frontier that they can use to grow. even lynx.

there is just a whole lot of frontier that they can use to grow. even lynx.

You really hit the nail on the head. I highly recommend that all readers of this thread listen to the conference call linked below. It covers every issue you can think of except FF programs. I believe that F9 fans will find it encouraging.

Here is the direct link to the press conference podcast (http://www.blogsouthwest.com/news/listen-conference-call-held-today-discuss-southwest%E2%80%99s-bid-frontier)

Bad news for United. The competition just got fiercer for DEN.

Bad news for DEN as fares will surely go up across the board.

I thought Frontier was bought out by Republic? I'm confused...

I thought Frontier was bought out by Republic? I'm confused...

I'm fairly certain your take is correct. Republic's purchase will likely result in continued competition at DEN, which is problematic for UA. This will likely be good news for DEN flyers, bad news for UA.

Luckily for UA, UA will be able to draw from newly joined CO alliance as CO previously operated a hub in DEN and still have a significant frequent flyer membership based in DEN.

Jiburi

I thought Frontier was bought out by Republic? I'm confused...

Welcome to Flyertalk sam726!

Please read the date on posts...the information was accurate at the time posted, but things have changed since Aug. 13. :)