Bankruptcy isn’t turning out to be such a bad deal for Frontier Airlines.
Until late last week, it looked like only Republic Airways Holdings was interested in buying the low-cost carrier for $108.75 million. Then on Thursday, Southwest Airlines indicated it was entering the bidding war, waving $113.6 million at the New York federal bankruptcy court handling the paperwork. Now it’s a ping-pong match, with industry bystanders whipping their heads toward Republic to see if it will up its ante.
The game can continue until August 10.
Frontier draws this attention because it has done a great job of market positioning, even if that cash/profit angle didn’t pan out and it scores below average on customer satisfaction rankings. If Southwest buys it, this would open the door for passengers to move about the Northern Hemisphere instead of just the country. Mexico, Costa Rica — here we come.
“We are excited about the opportunity to submit a bid,” Southwest chairman and chief executive Gary Kelly has said in a prepared statement. “We see a strong fit between our company cultures, a mutual commitment to high quality customer service and similar entrepreneurial roots.” Definitely written by the public relations staff because real people would say, “We see an opportunity to bury a competitor who is kicking our butt at its hub in Denver.”
And that’s despite the fact Southwest sends 121 flights out of Denver daily after starting with just 13 flights in 2006. It’s the fastest accelleration in any one market in the airline’s history, and still Frontier is that market’s second choice behind United Airlines (UA: 34 percent of Denver’s traffic, Frontier 21 percent, Southwest 14).
“Frontier seems to have that Denver traffic down pretty well. What they [Southwest] pick up with Frontier is more originating traffic than they’ve ever had, and it’s all profitable traffic,” airline consultant Darryl Jenkins told the Dallas News.
On the other hand, if Republic wins, it has said it will extend the pilots’ contract by another three years — a major kiss-up move that is winning friends in the right places for its merger bid. On the other hand, even the Frontier Airline Pilots Association president John Stemmler admits Southwest has one of the highest paying policies, for those who would survive any labor force reductions and seniority arguments from the merger.
Which puts us at 10-all on August 3.