Frontier to Emerge From Bankruptcy
By CATHERINE TSAI, AP
posted: 11 HOURS AGOfiled under: BankruptciesPrintShareText SizeAAADENVER (Aug 15) - The wild animals on the tails of Frontier Airlines planes aren't going away, and for now, neither are most of their employees.
Republic won an auction to buy Frontier out of bankruptcy Thursday as the underdog with a $108.8 million bid that had been sweetened to offer creditors other than Republic about 18 cents on the dollar.
And Republic Chairman, President and CEO Bryan Bedford said Friday that Frontier's managers, including CEO Sean Menke, will run Frontier and Milwaukee-based Midwest Airlines, which Republic recently purchased. Both will be run as stand-alone carriers.
Frontier CEO Sean Menke said Friday that Southwest Airlines Co. withdrew its bid of more than $170 million after it became clear that pilot unions for both airlines wouldn't be able to agree on how their ranks would be integrated. That could have affected Southwest's ability to close any deal. "We saw that as a very big risk," Menke said.
Southwest had enough cash on hand to just write a check for Frontier.
"We had no doubt that they could put more value on buying the business than we could, and therefore spend more on it than we could," Republic's Bedford said. "We sort of thought that if they really wanted it, they were going to get it."
Bedford said the negotiations in New York reached a stalemate Thursday.
"Somebody had to move," he said, so he decided to sweeten the offer. Republic would waive its $150 million bankruptcy claim, for which it would have received about 12 cents on the dollar under Southwest's bid. That left more money for everyone else Frontier owed.
"That was going to force them to either react or withdraw," Bedford said.
Frontier, which filed for Chapter 11 bankruptcy protection on April 10, 2008, could emerge as early as Sept. 17, Menke said.
Bedford said Republic expects to cut $50 million a year in overlapping costs between the two new acquisitions and Republic. Some are nearly certain, like combining gate operations in cities such as Dayton, Ohio, where both Frontier and Midwest fly. Moves like that will be made within the next three to four months, he said.
Bedford also said he'll consider having some Frontier maintenance done by Midwest mechanics in Milwaukee.
"Although we're evaluating where various job functions within the holding company could best be performed, we're not considering an actual move of Republic's headquarters," Republic spokesman Carlo Bertolini said.
Frontier has long roots in Denver. The original Frontier Airlines operated from Denver for 40 years before it was sold in 1986. In 1993, some of its former executives gathered to launch another carrier by the same name.
Today the new Frontier has roughly 5,000 employees with service to more than 50 cities in the United States, Mexico and Costa Rica.
It's the second dominant carrier in Denver behind United Airlines .
Frontier sought bankruptcy protection after its credit card processor started withholding significant proceeds from ticket sales, which threatened a cash crunch.
Officials for unions representing Frontier pilots, mechanics and others say a Republic deal would allow those workers to keep their jobs, while a deal with Southwest could have cost them their seniority or even their paychecks.
"I'm really gratified this deal turned out the way it did," Colorado Gov. Bill Ritter said. "It allows us to keep Frontier Airlines a Colorado airline."
Ritter said the state will also try to persuade the airline to move its maintenance operations to Denver, "but we need to see what we need to put on the table to get that done."
Don Marostica, executive director of the Colorado Office of Economic Development and International Trade, said he would review options over the weekend. He said he had been nervous that Southwest might take aircraft and jobs out of Denver.
"They're from Texas. You just don't know what they would do," he quipped. "I love their cash. They know how to run an airline. But we've got to help Republic now."
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AP Business Writer Joshua Freed in Minneapolis and Associated Press Writer Steven K. Paulson contributed to this report.
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2009-08-14 20:11:08
