It looks like there some silver linings for all parties in this deal. Frontier gets to remain Frontier, at least for the time being. Republic pics up a great airline with renowned customer service which is now showing signs of profitability. Southwest got to poke around the books of another airline and learn lessons about Denver, international markets and regional jets (Lynx). And the biggest winner of all is United who won't have to face a stronger Southwest out of Denver.
If Southwest leadership decided that they liked enough of what they saw in the 10ish days of being able to look under the covers at Frontier, the game may not be over. Republic's market cap is just under $207 Million and they have around $100 million in cash / credit. Plus, they are providing Frontier with $40 million in operating capital so they can function tying up a large percentage of their assets. Southwest has a $6.85 Billion market cap and access to several Billion in cash / credit. They could easily just buy Republic and get Frontier, the regional jets and eliminate even more competition and not deal with binding arbitration of unions in bankruptcy court.
My guess is that things are not as cut and dry as they might seem.....
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I don't understand why Frontier employees feel confident that they will keep their jobs with Republic.
"Pilot labor expert and airline consultant Robert W. Mann said Southwest’s executives can’t be blamed for thinking that Frontier pilots would see the prospect of higher pay and potentially greater job security in the Southwest bid as attractive.
“Frontier pilots need to look at the facts,” he said. Republic has said it would operate Frontier separately from its other regional jet operations, but Republic replaced all the pilots and planes at Midwest Airlines when it bought Midwest this year and could do the same to Frontier’s operations down the road, Mann said. "
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(KERA) - Southwest Airlines CEO Gary Kelly says one issue could break the deal Southwest has proposed for bankrupt Frontier Airlines, of Denver. A winning bidder could be announced this week. KERA's Bill Zeeble has more:
Assuming Southwest's hundred-70 million dollar takeover bid for Frontier beats competitor Republic, Kelly says he'll stop the deal cold if Southwest and Frontier employees are in conflict.
Kelly: I won't go forward unless we have an agreement with their labor. And you see examples around the country where airlines have acquired other airlines and then left it up to unions over years to fight it out over a period of years. We're not going to do that.
When Fort Worth's American Airlines bought TWA, union groups from both carriers remained in conflict for a long time.
Kelly says Southwest employees and the corporate culture are too important to upend. He says he respects Frontier's workers but says if they end up working for Southwest, their pay would rise significantly.
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For the employees of Frontier, I am sure this is a scary moment. But trust me, Southwest knows how to take care of its employees. As a consultant who has worked for dozens of "household name" companies and recently did work at Southwest, I can honestly say I have never seen a culture as unique, friendly, fun and caring as I witnessed at Southwest. There is a reason they are consistently rated as the one of the top places to work!
I think many of the posters are missing the big picture here. Yes, WN would be taking out a competitor but F9 and WN only seriously compete in the Denver market - its just one city of many and not going to drastically affect WN's bottom line as F9 is only about 1/10th the size of Southwest. In fact, F9 and WN together still don't equal the foothold that United has in Denver.
Instead, for just over $100 million, Southwest will be acquiring gates in many key cities where it doesn't already have a presence, including ATL and several international cities.
They would also be able to leap into the international market - not just with flights but with systems based on the SABRE platform that support international travel. Implementing this at Southwest would be a huge effort and would probably cost more than half of the cost of the merger alone.
Plus, F9 has code sharing and marketing relationships with other airlines that Southwest may be able to inherit.
Sure, change is scary and in this economy, everyone is and should be worried about their jobs. However, the airline that should be worried is United and its dominance in Denver, not F9 and the employees that would be cared for and nurtured under Southwest's wing. Plus, the unions will not let any employee be taken advantage of.
Remember, the predicament that F9 is in was not initiated by WN. F9 put itself into bankruptcy and put itself up for sale. It's in the best interest for every employee and stakeholder at F9 to have competition in the sale.
My two cents.....and congrats to WN if they actually make it through the many hurdles that will exist in this process.
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