Republic Wins the Right to Buy Frontier – Now What?

I certainly didn’t see this one coming. Thanks to a greatly increased bid and Southwest’s unwillingness to do a deal without labor’s buy-in (read BNET for more on this), Republic is the one walking away with Frontier. But Frontier Tails Happy to SurviveI don’t want to talk about the deal. Let’s talk about what this will mean for Frontier and Southwest.

First of all, it means the animals live. Frontier will keep flying under its own name for now. I suppose it’s possible at some point that Republic will decide to merge Midwest and Frontier under one name, but my guess is that won’t happen.

See, Republic is a pro at flying airplanes under all different kinds of brands. So it wouldn’t surprise me to see them merge the operational side of the house along with back office functions while still keeping separate brands. Why bother? Well, Midwest still has some fleeting value in Milwaukee while we know Frontier has value in Denver.

Republic’s chief Bryan Bedford has already signaled that airplanes will start moving around. At the very end of an article talking about job losses that will hit Midwest because of the merger (100 out of the 1,000 left in Milwaukee will go), there was this nugget.

Also, Republic on Thursday emerged as the winning bidder in a bankruptcy auction for Denver-based Frontier Airlines. Bedford said some of the 138-seat Airbus A319 jets used by Republic will likely be shifted into service for Midwest flights to West Coast destinations.

So, Chautauqua flies Embraer regional jets for Midwest, Republic flies larger Embraer jets for Midwest, Midwest still flies some 717s for itself but that’s ending, and now Frontier will be flying A319s for Midwest (which have 136, not 138 seats, by the way)? I guess so. There’s no reason to change certificates here – they can use Frontier as their Airbus operator and have it operate for anyone they feel like. So we’ll see if that’s the plan.

Meanwhile, what does this mean for Southwest? Well they have to be pretty bummed right now. They had a cheap and easy way to test out international flying and a regional operation. Plus they were going to make Denver a profitable place. Now none of that is likely to happen. I’m really interested to see what will happen with Denver. Now that Frontier doesn’t look to be going anywhere, it isn’t looking good for Southwest’s operation there. Even if United fails, I would bet that a legacy would step in to pick up the pieces. So Southwest has to make some hard decisions now. Will they want to keep flying a large unprofitable operation in Denver?

There are a lot of interesting questions to answer now that the bidding is done.

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26 Comments on "Republic Wins the Right to Buy Frontier – Now What?"

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JM
Guest

And I can almost hear the sighs of relief from the Delta HQ from here…

Bet Airtran is also glad that that those Texans are staying out of ATL for now, too.

Jim Carmignani
Guest

You keep saying Southwest is unprofitable in Denver – my experience has been that most of the flights I’ve been on through there have been 90% full….how do you know that it’s not holdng it’s own?

Paul
Guest

I keep going back and forth with the names and whether they’ll migrate to a single name, and I agree they’ll likely keep both. Besides, it works for Alaska / Horizon. They might have a bit of a different setup since Horizon is regional aircraft only and Alaska is mainline, but really if Alaska Air Group can make a dual brand work, I’m sure Republic can too.

Ben
Guest

@ Jim Carmignani: Jim, a high load factor doesn’t mean they are making money. There are other factors involved in making an operation profitable.

A
Guest
I’m not surprised that labor was the sitcking point that killed the deal with WN. Still from the outside I scratch my head. Southwest is one of the most stable airlines in this country…at a not so stable time. Meanwhile Frontier, although profitable right now, was in bankruptcy. I’d bet dollars to donuts that Frontier is unprofitable again soon as oil spikes again or the economy takes another turn downwards. And how much does Republic really have to keep dumping into it’s subsidaries? Long run I see WN weathering downturns much better, and in this day and age I would… Read more »
Oliver
Member

Southwest will find another way to beef up competition.

They certainly kept us all on our toes and surprised with every one of their moves…

It’s not over yet!

DRG
Guest

When I heard that Southwest’s deal was contingent on its pilots working something out with Frontier’s pilots, I had to wonder if WN had ever actually met a pilot.

“Even if United fails?” A little surprised to see that. With the U.S. Chapter 11 industry just as intact as ever, this seems quite improbable. Nobody would ever allow United Airlines to go out of business.

greg
Member

Southwest may have been playing above their pay-grade on this one. However, if you look at the history of contested mergers, the ones where the financially weaker group emerged as the “victor” eventually fell within 12 to 18 months. Don’t be surprised if Southwest doesn’t make a run at Republic soon after they close both deals.

As important as Denver is, the Frontier computer system is just as important. Buying a functioning system is much better than starting out from scratch.

David SF eastbay
Member

Southwest has been around for a long time now and has done very well. Whatever they do will be good for WN. Just because they couldn’t buy Frontier now, doesn’t mean a year from now they won’t.

Who knows, United may one day need to start selling themselves off and start with Denver, then WN could grown then.

The Traveling Optimist
Guest

One wonders if DEN was ever really that profitable. UA and CO fought it out and was finally able to charge premiums DEN-West until Southwest came in. They hurt their own cause with Ted and now Frontier/Republic.

With sporadic history like that, and assuming UA either went under or simply pulled out/sold it off, what other legacy carrier would want to make a go of it?

jordan
Guest
I agree with A – WN never loses. So it will slash fares, and drive Frontier out! Its gonna be war! Im not sure if anyone remembers…… WN told UA to back off intra CA with U2 flights back in the 90s. UA said F U…. and WN changed from a short-medium haul carrier… and ramped up, no, exploded across the transcon routes. WN has been the bain of UA’s problems, for over a decade. So all hell (no pun intended) is gonna break out in Denver. And Denver pax, are gonna win, for the short term at least! ..until… Read more »
PF
Guest

re: Frontier Computer System –
It’s Sabre Multi Host, anyone who can write the check can be a participant. SWA could, if they so desired, host in that system without acquiring another airline.

ASFalcon13
Guest

It seems to me that eveybody’s missing the most important question of all…

…does this mean that we’ll be able to enjoy fresh baked cookies on Frontier flights as well?

SAN Greg
Guest

I don’t care if Southwest fares were $1 and Frontier $299 – I’ll be on Frontier EVERY TIME.

Nick Barnard
Member

Cranky, Isn’t there some legal repercussions with Southwest dumping fares in an attempt to run their competitor out of business? It could be argued they’re abusing their oligopoly position in Denver.

That being said, yes, I want to find out about the cookies!

RobG7aChattTN
Guest
I think WN did what it wanted to do. It either wanted Frontier cheap with no bumps or for Republic to sweeten the deal and not come out as well off. If WN didn’t go to more effort then there was a reason (and labor issues might have been enough). Still, I wouldn’t be surprised to see WN aquire most of Frontier’s assets from Republic minus the labor issues. If oil hits $120 per barrel I’ll bet Republic starts selling assets, especially if WN has started to cover all of Frontier’s most lucrative routs (they did get to see the… Read more »
Andrew
Guest
DIA is a strange place. Since moving to Colorado, I’ve only flown Frontier, despite having piles and piles of miles sitting with Delta/NWA, and Southwest’s legendary fare competitiveness. Frontier always just cheap *enough*, or happens to fly at the right time, to the right place… it’s almost uncanny how well they’ve planned their routes and times, at least for me, and I’ve heard similar anecdotal comments from others. As well, Southwest’s bid for Frontier did nothing to help their mindshare in this market — whether smart or not, there is tremendous brand loyalty toward Frontier by locals and Southwest’s surprise… Read more »
Chi Flyer
Guest

No one has mentioned what will happen to Republic’s contract with United, operating as United Express?

How about Republic now trying to raise $120 million dollars from new investors?

Chi Flyer
Guest

I believe it was in an article in the Monday printed edition of USA Today.

Chi Flyer
Guest
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