Southwest's Bid for Frontier Airlines: Update and Timeline

[pberg]

Last week, Southwest Airlines confirmed that it was preparing a bid to acquire Denver-based Frontier Airlines, which will be sold at auction in bankruptcy court next month. Yesterday, August 3, was the deadline for any interested party to file a nonbinding proposal to bid on Frontier Airlines in bankruptcy court.  As of yesterday, Southwest Airlines and Republic Airways are both qualified bidders.  Below is an updated timeline of the process:

August 3:  Deadline to file nonbinding bid.  For the next seven days, Southwest Airlines will continue our due diligence in order to submit a binding proposal to the bankruptcy court. 

August 10:  Deadline to file binding proposal with the bankruptcy court in New York. 

August 11 - 17:  Bankruptcy court will conduct an auction to determine the winning bidder for Frontier's assets.

***We will do our best to update our site as more news becomes available. 

[Anonymous1836]

Good Morning Paula, Here are just a few question that I have: Are Republic and Southwest ( Qualified Bidders) the only ones who will be able to bid for Frontier's assets? Would it be it correct to say that only Qualified bidders are able to look at Frontiers' books to determine a value for their bids? With the auction process, can a Qualified bidder only bid for what they want or would they have to purchase Frontier as a whole? So, what is the auction process? Who decides on the the winning bid? Will the final result be announced by the 17th of this month? Could you please explain the bankruptcy process in more detail? Thanks in advance

[Ben1]

Wow. I didn't know SWA was going after Frontier. Is it because of their gates? I'm seeing the synergies with this purchase? I was hoping Republic would by Frontier. That looks like a better complement with their purchase of Midwest Airlines.

[pberg]

Confused about the Process - all good questions. Please standby while I gather answers.

[Anonymous2634]

I Think it would be a great asset for Southwest to buy Frontier Airlines. The people that work for Frontier (those that love their jobs) will now feel secured that they can continue working. In these hard times, Its great to see company's helping eachother out in a way that might save many jobs for those that might be out. I don;'t know how Southwest will handle that, But I am hoping that SWA gets it. Perhaps more gates, more flights and MORE HAPPY PEOPLE IN THE AIR.

[Paul_Schafer]

Kind of curious... I know that Southwest has a standardized Boeing fleet. Their business has thrived in part because of uniform equipment, service, policies/procedures that have remained consistent over the years. Yet Frontier's fleet is all Airbus. So I wonder, if the acquisition is completed and the Frontier fleet absorbed into Southwest, will that add operational challenges and increased costs to the business?

[t_j]

So will the owning of f9 mean that southwest will code share with only them and drop west jet and the other mexican carrier,?

[Anonymous2275]

We have tickets to fly Aug 17h to Denver. Paid for in advance - what do we do now?

[Anonymous2249]

so Frontier flies from DFW to Denver. Would Southwest fly that route until able to fly out of Love?

[Anonymous3268]

>>I Think it would be a great asset for Southwest to buy Frontier Airlines. The people that work for Frontier (those that love their jobs) will now feel secured that they can continue working. In these hard times, Its great to see company's helping eachother out in a way that might save many jobs for those that might be out. I don;'t know how Southwest will handle that, But I am hoping that SWA gets it. Perhaps more gates, more flights and MORE HAPPY PEOPLE IN THE AIR.<< Southwest has already said that Frontier employees will be given the ability to RE-APPLY for their jobs within Southwest should they find a need to increase staffing. As noted elsewhere, Southwest is already overstaffed some and has plenty of cushion to absorb them. They will get more gates in DEN and other airports, but the Frontier fleet goes away, and they'll likely absorb most of the traffic with their existing network or with a few more legs added to some routes. There will also likely be a handful of cities cut because of this. >>>Kind of curious... I know that Southwest has a standardized Boeing fleet. Their business has thrived in part because of uniform equipment, service, policies/procedures that have remained consistent over the years. Yet Frontier's fleet is all Airbus. So I wonder, if the acquisition is completed and the Frontier fleet absorbed into Southwest, will that add operational challenges and increased costs to the business?<<< Paul - the Frontier fleet will be grounded with in 1-2 years it sounds like. Southwest has a glut of 737s on order, they've even had to park some recently, so they'll be replaced pretty quickly.

[Anonymous3268]

>>>Wow. I didn't know SWA was going after Frontier. Is it because of their gates? I'm seeing the synergies with this purchase? I was hoping Republic would by Frontier. That looks like a better complement with their purchase of Midwest Airlines.<<< Southwest and the new boss wants to be the major playing in Denver - BADLY. They have been unable to be the cost/fare leader in this market (Frontier continues to control fares), and has hurt yields and loads. This is a cheap way to acquire a competitor, remove them from the market, and gain market share and also pricing control of the market. Fares will likely go up in most cases, especially in the advanced booking windows. However, this does get Southwest more gates/slots in DEN and other key airports like LGA. Look back to the asset acquisition of ATA that Southwest did. ATA provided good competition out of MDW, but got throw into Chapter 11 when their military charter contracts got cancelled by FedEx (who controlled the one ATA was attached too). Southwest took advantage of the great opportunity to get more gates in Chicago, but also eliminate a competitor. AirTran was the other bidder for ATA, but Southwest beat them out. It will be interesting to see how the battle in Milwaukee plays out with Southwest going in there now to hit on a weakened Midwest (now part of Republic) and AirTran.

[Anonymous987]

>>>We have tickets to fly Aug 17h to Denver. Paid for in advance - what do we do now? 1. Show up at DFW on Aug 17th. 2. Flight on your booked DFW-DEN flight. 3. Have a great time! 4. Repeat steps 1-3 for your DEN-DFW return flight, whenever it is.

[Anonymous1239]

ATA had to sell their gates at MDW for the cash to keep operating. SWA outbid AirTran for those gates. FFWD a few years and FedEx unexpectedly cancelled the military contract they had with ATA forcing them to liquidate. ATA was able to operate a few more years with the cash that they received from the sale of their MDW gates to SWA. If AirTran had purchased the MDW gates for $90 million, who would you be blaming their demise on now? Probably no one as it would have happened in 2005 or 2006 instead of 2008. Some people are trying really hard to put the demise of ATA on SWA. As a disgruntled ex-ATA'er you should take aim at their management and maybe Global Aero Logistics as they were the parent company and if they cared about their employees would have tried a little harder to move them into positions within their other airlines... North American Airlines and World Airways.

[pberg]

To "confused about the process" – I know this doesn’t answer all of your questions, but it is my understanding that the two companies will be the only bidders. The bidders can submit binding proposals for Frontier's assets, either in part or as a whole - it's up to the bidder to determine what assets they want to submit a bid for. If there is more than one qualified bidder, an auction will be held beginning August 11, 2009, during which the debtors will determine, in consultation with the Unsecured Creditors Committee, which bid to accept and present to the bankruptcy court for approval. My understanding is an auction will be help beginning Aug. 11, 2009, to be complete by Aug. 17, 2009.

[A_Customer_of_B]

To "confused about the process" – I know this doesn’t answer all of your questions, but it is my understanding that the two companies will be the only bidders. The bidders can submit binding proposals for Frontier's assets, either in part or as a whole - it's up to the bidder to determine what assets they want to submit a bid for. If there is more than one qualified bidder, an auction will be held beginning August 11, 2009, during which the debtors will determine, in consultation with the Unsecured Creditors Committee, which bid to accept and present to the bankruptcy court for approval. My understanding is an auction will be help beginning Aug. 11, 2009, to be complete by Aug. 17, 2009. Paula Berg — Wed, 08/05/2009 - 19:37 ----------------------------------------------------- Thanks. Although I did not ask these questions, it has greatly enhanced my understanding of what is going on and I appreciate you taking the time to find this stuff out and tell us 🙂

[A_Customer_of_B]

Why not a Muse Air type merger like where the airline remained a stand alone subsidiary indefinitely as opposed to a Morris Air type where it was completely absorbed and that particular brand eliminated? What about the former experience made you all decide to take the latter approach for future purchases, especially when the product being purchased is so radically different from what you already have? Will you keep Frontier's seat-back entertainment and food options and integrate those into SW like Airtran proposed doing with Midwest's cookies? Just curious.

[A_Customer_of_B]

Paula- Any chance there could be a special 737 that you paint all of the animals on so that they could be preserved sort of like how US Airways has done for PSA and the smiley face?

[Chris-A_BNA_Fly]

I think that you ought to seriously consider keeping Lynx and growing it in your network. It has one aircraft type which happens to be much greener, fuel efficient, and cost efficient than the regional jets. Nashville's Concourse D or the B end gates that were previously used for American Eagle turboprops could accomodate them and allow you to further right size and maybe even expand into some markets from here that you couldn't formerly serve. BWI also has many open regional gates on their Pier D extension from US Airways that AirTran can't use which would allow for some additional East Coast expansion as well. There are also some intrastate markets in FL and CA and some smaller TX markets that could benefit from these as well. The opportunities are endless. Hope you keep them around. Maybe they could retain a special animal livery to please the Frontier folks.

[A_Customer_of_B]

http://www.usatoday.com/travel/flights/item.aspx?type=blog&ak=68496411.blog Great article for Frontier!

[Anonymous928]

Make no mistakes. Southwest is the predator here. They will kill Frontier. Denver and the traveling public will be the worse for it. I hope the process of digesting F9 cripples WN. Southwest is a cancer on the airline industry.

[Anonymous987]

"Make no mistakes. Southwest is the predator here. They will kill Frontier. Denver and the traveling public will be the worse for it. I hope the process of digesting F9 cripples WN. Southwest is a cancer on the airline industry." I sure wish hyperbole could be refined into 87-octane unleaded, as we could easily see prices back down at $1.50/gal based on all the raw material this WN/F9 deal has created. Look, I liked Frontier v1.0 as much as anyone, and was sorry (and unhappy) to see them disappear into the airline ooze that permeated Frank Lorenzo's empire of the 1980s. I was very happy to see Frontier v2.0 rise from the ashes of their former self (with many employees from the v1.0 airline) and can without any difficulty whatsoever imagine the corporate and employee pride that feat must have produced. All that said, all the other things that the v2.0 airline has experienced since then that have left them in this shape today are not all the fault of WN, and WN isn't an interchangeable corporate anti-Christ like what's-his-name was. It's all the more amazing that some folks automatically assume that they'll somehow get a better deal with Republic. Maybe they should ask the Midwest Airlines folks how that all worked for them. Did WN hire 100% of the ex-Muse/Morris folks? Nope, but betcha they'll do better than what Republic did with Midwest. Promises? Oh, yeah. Neville Chamberlin must be chuckling... Maybe everybody can stay calm until Tuesday, or whenever, and not default to worst-case scenarios...

[A_Customer_of_B]

OK. You're censoring the blog now. I posted several links to news stories talking about Frontier's rally in Denver last week and you didn't post them. That's really pathetic.

[fan_of_swa]

It is such a shame to read all the SWA bashing that has been going on since the announcement has been made about SWA's interest in Frontier Airlines, mostly by Frontier employees who are "understandably" in fear of their jobs, but even with that being said, enough is enough, SWA provides employment for 35000+ people all over this country and did not get to this status by making irrational and uneducated decisions when it comes to what is best for SWA, if SWA wants Frontiers assets, you can bet it is in their best interest to obtain those assets and they most likely will get them as the creditors will be more interested in getting back some of the losses they have had to endure due to Frontiers bankruptcy, they are not concerned about the animals on the tails or the people that put them there, they want back as much of their investment as possible, its a business decision, thats all, no one is trying to hurt anyones feelings and it does not matter how Frontier got to be in this position, what matters is someone is interested in buying all or part of those assets and they will go to the highest bidder. To the people that keep comparing the Morris Air "buy-out" to this "auction" really need to research the facts, as i recall SWA bought Morris Air outright with SWA stock, a whole different type of deal as Morris Air was not in bankruptcy and not even on the market, but SWA saw an opportunity to acquire the assets and made a deal with the owners and stock-holders on the purchase of Morris Air (not the employees) but also agreed to interview and hire as many of Morris's employees that were willing to work for SWA, once again, it was a business decision. The majority of the Morris employees that did not get hired on at SWA were the ones that were not willing to relocate to another city and chose to seek employment elsewhere so they would not have to relocate there family's, so lets be honest here Frontier employees, are you willing to relocate? because if you are and if you have even a sub-standard employment record at Frontier, SWA will give you a chance to shine, do not bring your bad attitude or hurt feelings with you as it will be recognized easily, bring with you your luv for your airline and the class that you all are so proud of and you will be rewarded ten-fold, yes a lot of you will probably have to relocate and that is hard on anyone, especially if you have roots and family ties in denver, but your home will only be a SWA flight away and only a matter of time before you get back to denver, with this acquisition, also means a lot more SWA positions to be filled in denver and only a handful of current SWA employees willing to relocate to denver to fill them, so rest assured, Frontier is going away no matter what, Republic is not your saviour and even if SWA does not acquire Frontiers assets, Republic Airways is only a crutch for Frontier. Embrace SWA's culture as it is along the same lines as yours and when you get up in the morning to go to work, know your working for a company that has not only shown a profit for eight consecutive months, but for 34 consecutive years. Denver may not be performing to SWA's expectations right now, but with the addition of 24 more gates and the dedication of SWA current and future employees, they will be the leader in low cost airfare at denver and that is the "Southwest Effect", and if United had the money or assets to bid on Frontiers assets, they would do the same as they know what is in store for the denver market and the 'Southwest Effect" is ultimately better for all the flying public as it drives airfares to the lowest cost possible. On another note, SWA employees are the highest paid in the industry and have never had to suffer through concessions or furloughs, even after 911 when all the other airlines started laying off their employees and using that as an excuse to ask for concessions and use the "bad times" as the reason, SWA has a rule that they always adhere strictly to, which is something we have all been taught all our lives, SAVE FOR A RAINY DAY AND YOU WILL ALWAYS BE ABLE TO WEATHER THE STORM, and that is exactly why they are not just an airline but a family who takes care of each other and NO, i am not an SWA employee but i am married to a 22 year employee of SWA and would go or do whatever was needed to make SWA successful, they have always been here for my family and have provided very well for my family and Yes, they are also my family.

[A_Customer_of_B]

Yea. Your best interest and nobody else's. I hope you fail miserably with the Frontier purchase and continue to fail miserably in Denver.

[Anonymous1917]

We have round triip tickets to fly Dec 12-18 Denver to Orlando. Paid for in advance , what do we do now?