Bedford assesses Southwest's bid for Frontier

FlyinPiker

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Republic Airways Holdings appears poised to compete with Southwest Airlines for the purchase of Frontier Airlines after the Dallas-based carrier on 30 July unveiled plans to submit at $113 million bid for its rival in Denver.


On 22 June Republic, which has supplied Frontier with $40 million in debtor-in-possession financing, revealed its decision to purchase Frontier for $108 million upon its exit from bankruptcy. Republic on 31 July finalised its purchase of Midwest Airlines.


During an interview with ATI the day the Midwest deal closed, Republic CEO Bryan Bedford did not directly state any plans to counter the Southwest bid, but did note: "I'm not going to tell you we put our best offer on the table first. We joke that if nobody put in a competing bid than we paid too much. There's a little validation here."
Bedford is not surprised "to see another strategic buyer step up and want to buy this business [Frontier], because it is a fundamentally sound operating company. I am a little surprised it was Southwest".
Now that it is clear Frontier is going to emerge from Chapter 11 as a viable competitor Bedford notes that Southwest "very astutely says 'what's the cost of competing with the new guy for the next three years?'
Bedford explains Southwest could be asking itself "is the better option, the more economic option for us just to buy it [Frontier]".
"In their calculus," Bedford reasons, "the value that they can obtain from eliminating the competition in the Denver market is more valuable than what we can do with it."


While Bedford does realise Southwest's ability to develop and finance a "dramatically higher offer or valuation for Frontier than we can, it will be up to the board of Frontier and the creditors to decide if the vision Southwest has for Frontier is better than vision we have".
Bidding procedures established in Republic's investment agreement with Frontier were approved by the court overseeing Frontier's reorganisation on 13 July. Characterising it as a "quick tempo" Bedford says the deadline for interested bidders is 3 August, with a deadline for best and final bids of 10 August. The bankruptcy court and unsecured creditors then have seven days to scrutinise the bids.
"I think it will be interesting to see how transparent Southwest will be with their bid economics on Monday", Bedford says. "You can look at the investment agreement and think that is says one thing. You can interpret it however you want. It will be up to the court to decide if they're following the procedures."


Bedford also defines the current process for Republic's proposed acquisition of Frontier as "a fun thing to be involved in".
 

Flying the Line

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The biggest question to remain is...What would happen to Frontier and its employees if they lose money for a couple of quarter when fuel goes up...What if, ect.
 

FlyinPiker

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I really don't know who to root for in terms of what would be a better deal for the pilots.

Both seem to have the possibilities of leaving pilots on the street.

I hate to say it, but if Bedford didn't mess with the product too much (which we know he will) I almost want to say Republic with a fenced off operation would be better for the group as a whole. More people would probably stand to keep a job out of the deal if Southwest plans on everyone re interviewing for their job. Good bunch of guys over at F9, but I personally know of a few that I don't think would make it through the standard interview process.

I have a feeling Bedford is banking on the below:

While Bedford does realise Southwest's ability to develop and finance a "dramatically higher offer or valuation for Frontier than we can, it will be up to the board of Frontier and the creditors to decide if the vision Southwest has for Frontier is better than vision we have".
 

Mach 80

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If SWA does this deal the same way they did Morris, that should be fine.

Pay protect everyone and the Frontier pilots have a 1000% better job security and a better long term future then going with Republic.
 

starchkr

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The biggest question to remain is...What would happen to Frontier and its employees if they lose money for a couple of quarter when fuel goes up...What if, ect.

We don't have the option of losing money especially for a few more quarters. We either emerge from BK by this fall or we have no jobs, cut and dry. Now which way we come out who knows. Many on here are adamant that SWA seems to be the clear winner, but do we all remember that there are still 3 days left for bidders to come forward. What happens if a better bids come in, or what happens if RAH decides that SWA's bid is not good enough and still wins although their bid would most likely be lower. We need to remember who has the greatest say on the UCC board, that's right RAH, which gives them the most say into which bid gets acepted. Personally i don't know which one at this point would be better, but i do believe that from what i have heard the RAH deal may be just a little bit better, especially with the business plan that was used during the original bid with RAH. We'll see in 12 days though.
 

Vne

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RAH wants to compete with SW by expanding the roll of F9 in DEN. SW wants to eliminate competition-F9- (ala ATA at MDW) .SW, imo, has very little interest in F9..... other then to make them go away....jmofwiw
SW's real target is UA in DEN
 

Raoul Duke

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Republic has a more pressing reason to keep F9, they have a bunch of 70 seat RJ that are not flying under contract. They will definately increase their bid
 

FlyinPiker

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Republic has a more pressing reason to keep F9, they have a bunch of 70 seat RJ that are not flying under contract. They will definately increase their bid
I agree...and as time passes and their current partners do not renew the contracts they currently have this will provide a home for them. At least Frontier & Midwest are already established. FlyI and Expressjet had to build theirs from the ground up.

He actually has quite a bit riding on this.
 

Caveman

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Wow. We're actually having a discussion about whether it would be better to be bought RAH or SWA. It's a valid question, but still disturbing.
 

N tha jungle

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If SWA does this deal the same way they did Morris, that should be fine.

Pay protect everyone and the Frontier pilots have a 1000% better job security and a better long term future then going with Republic.
If SWA does this deal the same way they did the ATA deal, you're f***ed.

No pay protection for anyone and Frontier pilots have a 3 in 45 chance of starting at the bottom again : (
 
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Saluki Dawg

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This deal wouldn't be the same as the ATA deal. For one thing, that was buying a minority stake in ATA and codesharing with them in order to gain some valuable gates at MDW. This deal looks like it will be handled similar to the Morris Air acquisition. Run F9 separately for a period of time, replace the Airbii with new 737's and staple the pilots to the bottom of our list with pay protection for the captains.
 

shootr

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No pay protection for the FO's because they'd immediately get a huge raise (with longevity).
 

Donald

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This deal wouldn't be the same as the ATA deal. For one thing, that was buying a minority stake in ATA and codesharing with them in order to gain some valuable gates at MDW. This deal looks like it will be handled similar to the Morris Air acquisition. Run F9 separately for a period of time, replace the Airbii with new 737's and staple the pilots to the bottom of our list with pay protection for the captains.
I don't think they can be stapled to the bottom. If SWA acquires more than 50%, which they or RAH will, I believe the Allegheny-Mohawk act applies. Any Allegheny-Mohawk experts out there?

No matter what happens, we all know some people are not going to be happy with the results. Lets hope its more like NWA/Delta than America West/US Air.
 

shootr

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They can be stapled to the bottom if they agree to it. I doubt a pure staple will be the final outcome but SWAPA seems to have been given a veto by the company's offer. No labor agreements, no deal. Do F9 pilots want to be stapled to the bottom of SWAPA's seniority list (or a ratio heavily in SWAPA's favor) with pay protection or get bought by Republic? Seems easy to me but I'm not in that position.

shootr
 
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