USA TODAY: Southwest Beating Republic to Frontier

[buscap]

In a press release just out from Southwest Airlines, the carrier says:
"Southwest Airlines confirmed today that the carrier is preparing a bid to acquire Denver-based Frontier Airlines, which will be sold at auction in bankruptcy court next month. The carrier has submitted a nonbinding proposal in accordance with the bidding procedures established in the U.S. Bankruptcy Court for the Southern District of New York. The bid is worth a minimum of $113.6 million, which is in excess of the bid currently filed by Republic Airways. Submission of a nonbinding 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."
In the release, Southwest CEO Gary Kelly says: "We are excited about the opportunity to submit a bid. We see a strong fit between our Company cultures, a mutual commitment to high quality Customer Service, and similar entrepreneurial roots."
The Southwest press release adds that "a successful acquisition of Frontier Airlines will allow Southwest to expand its network with its legendary low fares, add jobs into Southwest, and boost competition in Denver and other cities. Southwest is a qualified investor and is still preparing its proposal; therefore, it is premature to comment on the specifics at this point."
Southwest has a Q&A on the subject posted on its corporate blog. The Q&A is with Ron Ricks, Executive Vice President Corporate Services and Corporate Secretary.
In that Q&A, Ricks says: "Frontier has been in bankruptcy since April 2008, and we’ve been considering a bid for some time, independent of any action Republic took with its bid proposal. In the past month, we began an intensive study of the airline and expressed that interest to Frontier."
More details later today.


Sounds like the republic pilots better get back those corvette down payments.!!!

 

[rf285]

For the sake of Frontier, I hope that SWA wins the bid.

 

[WSurf]

For the sake of Frontier, I hope that SWA wins the bid.

Didn't Southwest buy up ATA? What happened there...

 

[TOOL CRIB]

darn SWA trying to undercut Republic!

 

[donkeykong]

Sounds like the republic pilots better get back those corvette down payments.!!!

you mean the remote control ones, right?

 

[Anonymous2]

In the interest of the great employees of Frontier Airlines, which carrier (between SW & RAH) gives them a better chance of job stability??

 

[buscap]

Southwest is just trying to prevent a viable competitor from developing.

The Airtran guys most likely think this is cool. They would love to get bought by Southwest. Even the senior guys would love it.

 

[inflightboi175]

Dont forget Frontier Airlines has a codeshare agreement with Midwest Airlines now. i wonder how this will effect the agreement with midwest/republic?

 

[samballs]

darn SWA trying to undercut Republic!

Actually overcut. They would have to offer more. Republic only undercuts

 

[Speedtape]

In the interest of the great employees of Frontier Airlines, which carrier (between SW & RAH) gives them a better chance of job stability??

'

Southwest is simply buying out their competition in Denver. The following numbers reflect current traffic pct. of total Denver traffic:

Southwest 13.7% plus Frontier 21.2% for a total of 34.9%.

United carried 34.2%.

Should Southwest succeed, they will immediately control Denver traffic with Frontier's Gates. This would not be good news in Denver for UAL, as Southwest could control pricing and greatly impact UAL.

One only has to look at Southwest's acquisitions in the past to predict what will happen with Frontier. In the past, they bought out Muse Air, MD-80 operator which competed with them in Dallas. They eliminated the aircraft to stay with one type, acquired some of the employees, and reduced their competition. In the purchase of Morse Air, they gained gates in SLC, eliminated 737-200's, acquired some of the employees as new hires, and reduced their competition. The whole investment in ATA, was to eventually gain valuable gate space in Midway, preventing Air Tran from growing that market. They hired no one from ATA.

According other news sources, CEO Kelley states if the acquisition is successful, for a time, Southwest will operate each company separately. As Southwest grows, they may hire Frontier employees to support the growth. This is an indication that Southwest will slowly grow their operation while shrinking Frontier. Based on past practice, they will eliminate the incompatible Airbus, hire some employees as new hires, and effectively gain market share by eliminating a competitor. Over time, Southwest will grow internally, by initially growing externally.

Frontier employees will be eliminated under this plan, but some will be hired as new hires at Southwest. However, UAL will feel the competitive effect, as soon as the acquisition is approved, because Southwest, by gaining an equal market share with prime gates, will quickly erode UAL's market share through aggressive pricing. Southwest will win and air travellers in Denver as well as air travellers across the country will benefit from lower fares. "Ding-Ding, You can now get up and move around the country!"

In summary, Frontier employees, including pilots will not fare well under this acquisition. Some will be offered jobs as new hires. That follows past practice.