Southwest Attempts to Outbid Republic for Frontier Airlines

Southwest Airlines announced yesterday that it has submitted a nonbinding proposal to bid for bankrupt Frontier Airlines, which now is scheduled to be sold at auction next month.


Southwest

If it opts to present an offer, Southwest will compete with regional operator Republic Airways Holdings for the Denver-based airline. The US Bankruptcy Court approved Republic’s $108.8 million proposal two weeks ago, but Frontier reportedly continued to solicit competing bids. SWA said yesterday that its offer is worth at least $113.6 million.

“We see a strong fit between our company cultures, a mutual commitment to high-quality customer service, and similar entrepreneurial roots,” SWA Chairman, President and CEO Gary Kelly said.

On a conference call yesterday, SWA Executive VP-Corporate Services and Corporate Secretary Ron Ricks and Executive VP-Strategy and Planning Bob Jordan said that if it acquires Frontier, the “goal is to integrate Frontier’s operations into Southwest over a reasonable period of time.” That would include disposal of Frontier’s A320Family fleet and transitioning to 737s.

In a Q&A published on Southwest’s website, Ricks said Frontier would “operate as a wholly owned subsidiary, independently and separately from Southwest Airlines, for a period of time until the carrier could be combined with Southwest.” He continued: “Over time, Frontier employees would be hired into Southwest as needed to support our fleet growth and expanded operations.

Ricks said SWA is in good position to make the offer, which it has been considering for “some time.” He said SWA has “the cash, access to capital and collateral that allows us to take advantage of this existing opportunity.”