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More details of what really went on during the F9 auction.

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stratus72

Well-known member
Joined
Dec 30, 2005
Posts
289
This might have been posted already; notheless, intersting. For those of you naive enough to think the deal didn't go down because of the pilots union, think again...SWA was ill prepared from the onset. Also, the word we're getting is that the airbus fleet will grow and we (F9)will fly all of them. Unfortunately, midwest is the one shrinking and being replaced by E190's. Hang in there Midwest, I hope something works out...this is all just prelim right now.


Frontier says Southwest's bid was hurt by more than just the pilot troubles

12:01 AM CDT on Saturday, August 15, 2009

By ERIC TORBENSON / The Dallas Morning News
[email protected]

A pilot labor deal for Southwest Airlines Co. might not have made a winning difference in its bid for the assets of bankrupt Frontier Airlines.

It's true that Southwest's pilots couldn't broker an agreement with Frontier's union, causing the Dallas-based airline to withdraw its $174 million bid late Thursday. That made Republic Airways Group Inc. the default winner.
But pilot opposition was only one of several reasons the deal fell apart in the 11th hour. Frontier management and creditors had other problems with Southwest's offer. And there were things they liked more about Republic.

Frontier officials talked publicly Friday about the two offers and their decision process. Southwest officials wouldn't comment beyond a statement issued Thursday evening.

Frontier executives said they liked Republic's ability to close its deal quickly and its commitment to expand Frontier's fleet of Airbus planes. The fact that Republic sweetened its offer at the last minute also helped, Frontier managers said Friday. It had originally bid $108.8 million, but Frontier didn't release the amount of the winning offer.

"I think both parties had a substantial chance of winning," said Sean Menke, Frontier's chief executive, in a conference call. However, Republic's ability to get Frontier out of bankruptcy protection by next month and its vision to keep Frontier as its own airline were significant factors, he said.

Southwest's offer probably would have triggered antitrust concerns from the Department of Justice, and a full competitive review could have taken four to six months, Menke said. Republic has already received antitrust approval to buy Frontier.

Also, Southwest's plan to drop 11 Airbus planes from Frontier's fleet of 51 would have delayed the bankruptcy case and added extra costs that Republic's bid avoids.

Not apples to apples

Among the biggest misconceptions of the auction process was the price tag. Southwest's $174 million offer – some details of which were not made public until Friday – included merger-related costs that never would have found their way to Frontier's creditors. It included a series of extra charges to pay off aircraft lessors and other creditors as well as money for Republic's claim against the Frontier bankruptcy and a termination fee for Republic, an Indianapolis-based airline holding company.

"These were not apples-to-apples comparisons," said Ted Christie, Frontier's chief financial officer.

Indeed, the bids were just a few million dollars apart in total value initially, despite the different totals. Southwest's bid would have paid creditors at a rate of 12 cents on the dollar; Republic's at 9 cents.

But Republic sweetened its offer late in the game, effectively pushing the amount of money creditors received to 19 cents on the dollar by agreeing to accept less money for its claims.

Southwest 'naive'

Critics who watched the process closely said Southwest's bid wasn't ready for prime time. Southwest executives "seemed not to understand the dynamics of the process or the obvious bottlenecks and complexities involved," said industry consultant Mo Garfinkle of Arlington, Va. Southwest "was naive and it didn't know it. It underestimated Republic and its talented management team, and it overestimated the reception to a Southwest bid, especially by the Frontier stakeholders."

Southwest withdrew its bid Thursday evening when the pilots' unions of the two airlines could not reach agreements before the auction process, as was required by Southwest's offer. The offer would have given pilots more pay, but kept them at the bottom of the seniority list.

In a note to members Friday, Carl Kuwitzky, president of Southwest's pilots' union, said he applauded Southwest chairman Gary Kelly for sticking to a promise to have the labor settlement a condition of the bid. "I called Gary last night to personally thank him, and he shared a closing thought that I agree with – 'It was not meant to be.' "

Kuwitzky said his team had 3 ½ hours Wednesday to negotiate an agreement that typically would take months. He had his doubts that Frontier pilots "had any intention of ever reaching an agreement" with Southwest and said Frontier's union never responded to calls for more talks Thursday.

Picking the winner was up to Menke, his executives and Frontier's board of directors after they consulted with Frontier's creditors committee. Their obligation was to keep the bidders informed about their status and to work with the trailing bidder to raise their offer. "The whole process was very cordial," he said. "Southwest was very professional."

For Frontier, the focus turns to growing its fleet and emerging from bankruptcy protection, which it said is possible by Sept. 17. Frontier was forced into bankruptcy in April 2008, when its credit card processor changed the terms on ticket sales and tied up substantial amounts of its cash.

Battle for Denver

The Denver air market is no more appealing for three airlines than when Frontier filed for Chapter 11; Southwest continues to add to its presence, though analysts say the carrier is losing money on its fast-growing Denver operations, an assessment Menke agrees with. "They're having some difficulty here," he said, adding that he believes incumbent carrier United is also losing money in Denver and will cede more market share.

Frontier said its lower costs and brand loyalty will help it survive in Denver. Frontier believes its operating costs are lower than Southwest's and substantially lower than United's. "We will continue to compete very, very vigorously," Menke said.

Airline financial analysts such as Vaughn Cordle of AirlineForecasts LLC expect a brutal war of attrition in Denver. Republic-controlled Frontier is unlikely to win unless Republic replaces some of Frontier's Airbus aircraft with its own regional jets flown by pilots making substantially less than what Frontier pilots are paid.

He estimates that Frontier's pilots cost the carrier $170 an hour in wages and benefits, compared with $99 an hour for Republic's regional jet pilots; Southwest's pilots cost $290 an hour, he estimates.

Cordle said that although Southwest pilots make more, the carrier can absorb deep losses in Denver that Frontier cannot.

Cutting pilot costs "is the only way Republic's Frontier survives," he said Friday, noting that Republic is in the process of switching out bigger planes for smaller ones with Midwest Airlines, the Milwaukee-based carrier that Republic officially bought July 31.

Investors had bid up Southwest's shares 20 percent since July 30, when the airline announced its intention to bid on Frontier. Southwest shares fell 19 cents to $9.08 Friday, while Republic's shares rose 60 cents to $6.60.

NOTE - Before anybody freaks out about Cordle's comments - he called FAPA trying to peddle his wears as help with the SWA bid. After conducting our due diligence we decided to run, not walk, in the other direction. Once again - it's the block hour cost not the rate!


Posted on: Yesterday 6:24:19

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If you for one second think that SWA was unprepared I feel verry sory for you. You have to ask yourself why a company with billions of dollars in cash decided not to up their bid or bypass a group of pilots that would have complained for a week and then moved on with life. My guess is our CEO saw something he didn't like and this was an easy out.

Good Luck!
 
If you for one second think that SWA was unprepared I feel verry sory for you. You have to ask yourself why a company with billions of dollars in cash decided not to up their bid or bypass a group of pilots that would have complained for a week and then moved on with life. My guess is our CEO saw something he didn't like and this was an easy out.

Good Luck!

It's amazing how many of you think SWA $hit doesn't stink. Yeah, I'm not only wrong but so are all the insiders, court documents, creditors board, etc... everyone is just making this stuff up. Meanwhile, SWA won't return any calls to these writers who want a comment on the outcome. SWA just acknowledges it wasn't meant to be. This backfired in their face and I don't believe for a second they are happy about it. They had all the inside information for almost a week before they had to either enter the auction or pull out. They went into this thinking they had it in the bag...and their dated arrogance didn't work. Yeah, the saw the light arlight. They saw that despite the union stand off, the board and everyone else wasn't impressed with their offer. Ooops, try to safe face now...let's just say we pulled out because of the unions. NOT! Many more aspect to this deal. Times are changing...get over it. Cling on to your fantasy world...SWA is likely approaching furloughs in the next 12-16 months...you guys never thought that would happen. You choked on your TA and now you're playing catch up. Hell, I know Republic isn't a sure thing....atleastI can admit that.
 
Strattus 72, from my perspective you make yourself look like the desperate one and not the other way around.
Who are you trying to convince? Yourself?
Who do you think the SWA folks are gonna believe, some journalist from a dallas newspaper with an outside perspective and only writes what's been fed to him/her or regular follow up's straight from the SWAPA president and their Merger committe. Do YOU have anything substantive from YOUR union to refute them with vice some "insider" info from a paid lackey from a newspaper in Dallas? If so how about some show and tell :)
 
Ok, Southwest is not a sure thing...there I said it.
 
IT'S DONE. Let it rest. This is getting ridiculous. Good luck and best wishes to Frontier in the future. We all want a job that will support our family and let us have a great QOL. You guys are now joining Republic Holdings. I do hope it all works out for you there.
 
If you for one second think that SWA was unprepared I feel verry sory for you.


SWA legal puts the following out:

The Bond-McCaskill amendment
does not require a carrier to hire
the employees of another carrier,
nor does it require a merger of the
carriers in the event of a transaction.
That means, for example, were
SWA to acquire assets of another
carrier (like the MDW operation of
ATA or AirTran’s ATL operation)
it is not required to hire those
employees. Further, if SWA acquired
another carrier, and chose (with the
Association’s consent) to operate
the carrier separately, it could do so
without having to effect a merger

Than SWA fails to acquire F9 because, according to SWA, the pilots couldn't come to an agreement on seniority after just two days. You would have thought that SWA should have known better from the start.

Let's be honest here, SWA entered into this auction thinking they could buy F9, furlough the employees, than hire some back on an as need be basis. They actually thought that, and so did several "true believers". That was total bunk from the beginning and just highlights how unprepared SWA was for this acquisition.

Great company, but they were either out on a hastily put together fishing expedition to buy out a tenacious competitor or they botched this one.

Nothing wrong with that, no organization gets it right everytime.
 
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I've heard Bedford is heading to Denver to have Town hall meetings with the Frontier employee groups. The guy sounds like a real leader.
 
Strattus 72, from my perspective you make yourself look like the desperate one and not the other way around.
Who are you trying to convince? Yourself?
Who do you think the SWA folks are gonna believe, some journalist from a dallas newspaper with an outside perspective and only writes what's been fed to him/her or regular follow up's straight from the SWAPA president and their Merger committe. Do YOU have anything substantive from YOUR union to refute them with vice some "insider" info from a paid lackey from a newspaper in Dallas? If so how about some show and tell :)

The articles writer did his research, like I've done mine and he's correct about what went down. If he was bashing F9 I'm sure you would have no problem with him. Why don't you get off your couch and do some digging...do you know how to research legal info outside of what your company tells you. Nah, I'm sure you believe every little word they throw your way. Absolutely, I have a number of court coded documents straight from the NYC court and from the creditors board (that's legal talk for actual submitted documents by F9, SWA and the reaction to the offers.) I hope to have even more when FAPA gets legal approval to release the source. You seem so damn sure that SWA is right and our guys fed us a line a crap. Show me your hard proof and I'll be happy to show you all the documents I have. Otherwise, I won't waste my time. I already emailed some of this to several SWA guys who IMed me...and they gave me some info too. They have the brain capacity to realize what I said was correct. Look, boils down to us against you in the market. BFD...let the better airline win it's market share. Guys like you always want to stir up the pot. By the way, read my previous posts and compare those to the SWA posts as of late. Tell me who's tyring to convince who? I told them the deal wouldn't go through and why. All they did is bash me and other "clueless pilots" who had no idea what SWA was capable of. Looks like I was right. Prediction, we kick your @$$ in Denver, you shrink capacity out of OUR city and you likley have fuloughs in the next year and a half. ;-) Cheers!
 

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