Southwest Bid To Takeover Frontier Airlines

Southwest Airlines has made a bit of $170 million on Monday to take Frontier Airlines out of Bankruptcy, well above a previous bid by Republic Airways for $108.8 million

Denver based Frontier Airlines has routes to 50 cities across the US, Mexico and Costa Rica, in direct competition with Southwest and United Airlines, which also has a base in Denver.

Purchasing Frontier would give Southwest some added routes and take out one of its major competitors in its hub city.  Southwest have about 36 percent of Denver passengers and United around 37 percent.

“This provides us a great way to grow substantially in a city that is very important to us,” said Bob Jordan, Southwest’s executive vice president for strategy and planning.

If the Republic takeover bid is approved, it would bring the airline to a new level, putting it on the same level as America’s largest carriers, and could possibly win passengers over who are fed up by big-name carriers.

Southwest has said that they would maintain all of Frontier’s current market including Atlanta, which Southwest doesn’t currently fly.  Southwest would also phase out Frontier’s primarily Airbus fleet in favour of Boeing 737 aircraft.  The bit also includes Frontier’s regional carrier Lynx.

A Republic spokesman said that the two bids are not nearly as far apart as it appears because of expenses such as aircraft lease rejections under the Southwest bid, and Republic would get roughly $5 million to $6 million more under Southwest’s bid.

Analyst with Jesup & Lamont Securities said that it is unlikely Republic could match the Southwest bid.

“I seriously doubt they have the capital to do that,” she said. “This is an all-cash bid. Southwest is going to write a check.”

Steve Snyder, Frontier spokesman, said the carrier wouldn’t have any comment until it finishes reviewing Southwest’s bid.

Both airlines would need approval from federal antitrust regulators to carry out the take over, which could prove difficult for Southwest as it would eliminate a competitor in Denver.

A judge has already approved Republic’s bid, but the bankruptcy process allows other bidders to come forward, which is what Southwest did on July 30th.

Denver based Frontier airlines have been operating under bankruptcy since April last year.

Thanks to AP for the above quotes.