My head is still spinning from all the news that came out yesterday. JetBlue’s relaunch of its TrueBlue program is going to have to wait, because the news that Southwest was putting in a bid for Frontier certainly takes top billing. Let’s talk about what this will mean for customers if it’s successful.
Southwest has put out a non-binding bid for Frontier that was about $5 million more than Republic’s current bid of $108 million. Final bids are due on August 10 and an auction will happen during the following week. Southwest can still back out easily if they don’t like what they see, but I doubt that’ll happen. If we assume that Southwest does, in fact, win this fight (they keep saying they’re “in it to win it” so that’s a good bet), then here’s what would happen.
Initially, Frontier would operate as a separate subsidiary until Southwest could start to work its magic. Southwest said that it has no interest in the Airbus aircraft, so it would get rid of those as soon as it had enough 737s to take over. Frontier employees would slowly be brought over to Southwest, if they were up to the Southwest standards. In the end, Frontier would cease to exist and Southwest would just look bigger in Denver and have one less competitor.
From a route perspective, there are some cities where Frontier flies that Southwest currently does not. Here’s my handy dandy map:
Let’s talk about the red cities first, because those are the ones that are currently flown by mainline Frontier. If I were a betting man, I’d expect to see Dayton, Akron/Canton, and Anchorage disappear. I think there’s very little doubt that Atlanta would keep service, and they’ll be happy to scoop up a few more LaGuardia slots. I also imagine that Southwest would want to keep flying to Washington/National, but I don’t know that they have that choice.
Frontier has slots at National that allow them to fly beyond the 1,250 mile perimeter. When American bought TWA out of bankruptcy, they weren’t allowed to keep the Washington/National – LAX flight that TWA had flown, so I don’t see why this would be any different. If they can keep them, however, then I’m sure they’d be happy to jump in.
The rest of the mainline cities are in Mexico, and Southwest said on a call today that they would be interested in exploring those Mexico operations. It’s still unclear if they would do it – they still need to solve their IT issues before they could really ponder doing international flying.
The most interesting piece to me is Lynx, the regional airline that is owned by Frontier that operates Q400 aircraft. I said when ExpressJet launched their branded service that it could have been successful were it Southwest Express. Just think about all the markets Southwest could penetrate by adding Q400s to the mix. It would give them real growth opportunity, and I think it could be smart.
On a media call yesterday, Southwest said that they would have dismissed that thought outright before, but now that’s something they’ll actually consider. All is on the table, or so they say. To be honest, I wouldn’t keep my hopes up for that at all, but I would really like to see it.
Ultimately, however, I think this is just about one thing. Southwest can eliminate a competitor for just over $100 million. They must believe that they can benefit by more than that by simply getting rid of Frontier. I get into this in more detail over at BNET today. There really isn’t much room for three carriers over in Denver, and this is a cheap way to fix that problem.
42 comments on “Southwest Wants to Buy Frontier and Make it Disappear”
When i heard the news yesterday, I could not belive it… All i see that WN benefits is being bigger in Denver… But as you said, a cheap way to overtake UA.
*In DEN
GREAT move by Southwest! RP was proving to be threat-worthy in Denver and this may have just stopped Southwest’s next competitor dead in it’s tracks.
I agree with you about a Q400 Southwest-connect, but I strongly doubt it will happen. The number of markets that would open up to them with this airframe is spectacular, but I just don’t see the folks in DAL making that kind of leap.
The big question I have is surrounding Volaris. Will Southwest continue the Volaris codeshare to the original extent if they already have the Mexico rights?
Dirk – Yes, they said that their codesharing would be unaffected. It’s not an issue of rights. They could get rights to fly Mexico routes today if they so chose, but it’s all the infrastructure that’s been problematic for them.
This is amazing news for Southwest. I really hope that Southwest can utilize the Q400 and go to smaller markets to grow as well. I agree with you Cranky…if Southwest could start a “Southwest Express” subsidiary, more growth for the company can happen. Southwest is built on growth, and this can be the way to go. As for the Frontier employees, perhaps some mainline Frontier employees could be shifted to the Q400 ops while other Frontier employees will be folded into Southwest’s mainline ops. This way, Frontier employees don’t get totally screwed over.
I did think it was funny that Southwest said that this bid would “increase competition”. Bids like this shrink companies…i don’t really see how competition would increase.
I wouldn’t be surprised if Southwest could ink a deal with Volaris to sell the Frontier Airbus jets to them as their codeshare can grow. BUT! It would be really interesting if Southwest flew to those Mexico cities themselves. I’m not holding my breath on that though…Southwest seems to be committed on the US domestic market primarily.
All these moves are continued progress by Southwest to eat away at United. They are certainly going to feel the pinch.
It’s interesting the talk about Southwest purchasing Frontier just to get rid of them (not from you of course). That’s a bit of hyperbole isn’t it? Who would pay $113m to literally make something go away without utilizing the assets to a maximum extent?
However, when you look at it from the standpoint of of growth for Southwest, then it really makes sense. For Southwest to add all of those airplanes and routes, additional staff, etc would cost more than $113m. They will be gaining the airplanes that Frontier owns as an asset, and can probably make a great deal with Boeing to replace the leased ones. I think this is really more about exploiting an expansion opportunity than getting rid of competition, although that’s a nice bonus. I think this is more analogous to the first Midway expansion. Midway Airlines stopped flying on day, and Southwest staked claims on the gates and ticket counters the next morning.
This also seems timed well to purchase an airline with international operations that could be integrated as Southwest’s upgraded reservation system comes online next year. Perhaps a large part of this is the opportunity to fly international or start an international unit. The IT upgrade gives them the reservations system, the Frontier purchase gives them the people, policies, procedures and infrastructure to go international.
It seems that WN is all about breaking paradigms this year, so nothing would surprise me at this point. Yes, the Q400s could bring an interesting mix of destinations into the fold: but if they already said they are going to dump the Airbii ASAP, why would they want to keep the Q’s (or Lynx) around?
Also I do not see this as a shot at UAL, as much as the realization that they cannot compete DEN against a recapitalized Frontier.
Does anyone know what IT platform F9 uses btw? Could the integrated technology “solve” WN’s tech shortcomings when it comes to international flying?
I’ve also heard some reasonable speculation that this move by WN will help them in ORD/MKE. It would keep a Republic/Midwest hybrid from taking a stronger root and give WN more foot holds in the upper midwest. Makes sense when considering the NW/DL situation. It could give WN more strength to compete against the DL/NW plans for the upper midwest. Just a thought.
Wishing WN well in picking up Frontier. Nothing WN does surprises me and it would seem almost unpatriotic not to allow WN into DCA. Just the “Wright” thing to do!
I’m no Southwest expert, but why on earth would WN want to go up against Delta and Airtran in Atlanta?
Frontier is nothing but a bit player in the ATL market and is almost completely unknown here.
I know that the Southwest guys aren’t cowards, but DL and F9 ran JetBlue out of Atlanta in a hurry a few years back (JetBlue’s corny Gone With the Wind-inspired ads didn’t help!).
Further, WN already has a huge investment and foothold already in the Birmingham, AL airport, which is about an hour’s drive from Atlanta’s western suburbs. Some locals refer to BHM as “Hartsfield West”.
On the other hand, it would be a great barroom brawl to watch, though.
Yeeehaw!
I’m a bit torn on this issue. I dislike WN because of the lack of assigned seats, their boarding process, the wannabe-comedien staff, and having to deal with the infrequent flyers that “LUV” their cheap fares. However, from a business perspective you can’t help but give WN a round of applause for how they have handled the operations and finances of the airline. At the same time F9 is nice for the TV’s, the international flying, and I thought the animal tails were great (emotional reason I know), but they didn’t run a tight financial ship and reaped what they sowed with the Ch 11 filing.
Additionally, being based in DEN, it was nice to have 3 large-ish carriers competing for your money. It kept fares down not just among WN, F9, and UA, but all the rest of the carriers as well.
One thing that wasn’t mentioned here (or on BNET) is that Republic is F9’s biggest creditor. I would think that this might complicate the issue just a bit. I personally want to see F9 as a subsidiary of Republic. It would be sad to not see the line of animal tails trotting across the DEN tarmac. Not to mention the loss to the smaller Colorado towns that F9’s Q400s serve.
All in all, honestly, I found the entire announcement rather boring.
For $113 million they wipe out a weak player in a large market. Good.
For $113 million they get slots at LGA that would cost far more to buy direct. Good.
For $113 million they antagonize UA unlike anyone at DEN since CO operated a hub at Stapleton. Yawn.
I told some friends at AA what the real story behind this to me is and no one seems to be aware of it:
Once the Wright Amendment is rescinded at Love Field expect that operation to explode and, with a pre-built hub in DEN waiting to back fill the nonstop ASMs coming out of Dallas, American seems really to be the true or at least larger target of this move.
Not since Delta has anyone operated a spread of nonstops west from DFW backed up by a Mountain Region hub. American pretty much made short work of them although still lacking in a real connecting hub in the west themselves.
What will the landscape look like in 2014 with UA and WN fighting it out in DEN and WN opening up a serious can of Love Field-West Coast whup on top of American?
Outside of that, may the Linx lay in peace.
Cranky– what do you see happening to Early Returns points under a SW acquisition? Typically it seems the acquiring airline transfers the points to its own FF program, but with SW’s segment system it’s apples => oranges.
Traveling Optimist brings up good points. I will be expecting Cranky to wright more posts about UA’s balance sheet than F9’s Q400’s.
Traveling Optimist – there’s only one problem with your theory. There’s a restricted number of gates at DAL, and that’s not changing anytime soon. The city of Dallas agreed to forever cap the number of gates at DAL at 20 (or something like that) as a bargaining chip to get the Wright repeal passed, and if I recall correctly, WN uses all but a couple of the gates already. So while I’m sure the Love Field operation will pick up steam after 2014, I’m not sure where you’d cram in too many extra flights.
What’s an interesting sidenote is that F9 operates a few flights out of DFW (all to DEN). WN has for years insisted that they’ll never fly out of DFW, ever, due to the cost. Assuming they win this fight, it’ll be interesting to see if they maintain that stance when they suddenly own a couple of gates over there.
Wow, seems to be a cluster over at a.net. Some people don’t want to see Frontier disappear. When looking at the business case, should we even care if one specific brand survives? Well, if it’s “our” brand, I guess we would. Seems to be overly emotional over there….
….and over-emotion on a.net is new and different because of……???? lol
MeanMeosh –
Valid points, all. I don’t have the total number of flights operated by WN at Love but if they went to a 10-12 flights per day per gate in an 18 hour operating day (6am – 12M) which is about what the legacy airlines can handle, that takes those 20 gates to a potential 240 flights from Love. Not bad at all, for a start.
Now, given the other majors take up to twice as long to turn a plane, from 40-55 minutes compared to WN’s average of 20-25 and that will take the gate utilization up to 15 or better. Now we’re looking at 300 or more flights a day from Love, just in time (we all hope) for a recovering economy to really kick in and realize AA’s worst possible nightmare – LGA, LA and SFO nonstop to the heart of Dallas.
So, the 20 gates is a concern but given Southwest’s legendary tight turn schedule, not as large a near-term concern as it might be for the other airlines.
As to the DEN-DFW flight I see that moving. No reason at all for them to have one lonely flight sitting out at DFW when all the connecting traffic is 20 miles east at Love.
Even as a spoke from DEN the likelihood of it sticking around along with tandem service to DAL is slim. WN operated IAH as well as HOU before eventually pulling Intercontinental in favor of 100% Hobby service.
Brett
Do you see a bidding war similar to the Airtran/TPG-Northwest over Midwest one? Crazy that Airtran’s original bid was just under 80m but TPG-NW eventually bought it for more than 440m. How’s Republic’s track record for sticking to something? Great post!
Oliver – Interesting thought about Volaris. Most of the airplanes are leased, so I imagine they’ll just return them when finished. (They wouldn’t have to worry about this had they gotten involved earlier in the bankruptcy process.) But for the other planes, I would think Volaris could be a potential buyer.
Shane – Well, if they can gain more from increased Denver revenue than they’ll pay in acquisition costs then it’s a good way to go. But I understand your point about maximizing the assets. They’ll probably sell what they don’t need and potentially recoup some of the acquisition costs. I don’t really see this as analogous to Midway because they already have a substantial operation at Denver and they’ll keep growing it regardless. I see it as more similar to ATA where they already had a big operation at Midway and they just took over the ATA gates and started putting more of their own footprint on the market while eliminating a competitor.
Eric – Because they have a perfectly suitable alternative to the Airbus already in their fleet but they fly nothing like a Q400. Frontier uses Sabre, but Southwest can’t just take that and flip it on. There’s a lot of work internally to get something like that connected.
flyROA – That’s a great point. Republic with Frontier and Midwest is potentially a little scary, but Republic just with Midwest is, uh, not much. This would certainly weaken Milwaukee if Southwest snatches Frontier away.
JM – For the same reason that they want to go up against other airlines in New York and other places. They may not start out competing for local traffic, but they can give Southwest loyalists a way to visit the most important city in the south without having to cross state lines on your drive in from Alabama. It’s a smart move, I think.
Jason H – The creditor issue shouldn’t complicate things. If Southwest is willing to pay more than Republic, Republic will likely receive a higher payout on its debt (though I’m not sure who is getting what at this point). So even if they lose, Republic would likely benefit.
Optimist – I think you’re overthinking this one. Looking 5 years out in this industry is like looking a century ahead in normal time. If American’s still around by then, that’s a good start. But I think Southwest is looking at this more immediately than anything else. They already have a large and growing operation in Denver. They just want it to be more profitable.
Potcake – I’m sure they’ll find a way to merge frequent flier programs. They’ll come up with some wacky conversion method, and it won’t be perfect, but I can’t imagine people would just lose their miles.
Jay – That’s airliners.net for you. It always gets emotional on topics like these.
Zack Rules – There could very well be a bidding war. It all depends on how Republic and Southwest have valued the acquisition. If Southwest wants to win, they will. The question is now . . . how far do they want to go?
I don’t understand why Southwest would abandon newer, nicer Airbuses…
Cranky – Hah! Although a Gentile I’ll still bet you a good-fun Chinese dinner on three things:
a) AA will be around in 5 years but,
b) AA will be short-sighted enough to believe in your theory of near term growth
c) WN will use the 1-2 punch of DAL-West and DEN to clobber AA
Why will I win? Cuz the entire industry only ever looked short-term when measuring WN, starting from dismissing the LCCs for having less than 20% of the national market. Uh….oops!
Optimist – I’m not really betting that American won’t be around in 5 years, but I’m just saying that 5 years in this industry is a lifetime. (By the way, I might take that bet if you said United would be around in 5 years . . .)
I honestly don’t think the Denver move has anything to do with Dallas or American. Southwest simply sees an opportunity in the best western hub that exists. Denver’s perfect location and good business traffic means it’s a very important place to be. Southwest already decided to be in Denver and ramp it up dramatically. This is just a way for them to solidify their position in that important city.
Can it impact American in the long run? Maybe, but the benefit is there regardless.
The only way this makes sense for Southwest is they drop all the capacity that Frontier flies. They are having a really hard time filling seats in Denver. With Frontier having a loyal fan base they have managed to survive even in BK and turn decent profit. The other big thing is 40% of traffic in Denver is connecting. With lot of those coming from outliers that Southwest doesn’t do and Frontier just started to do.
I’m not sure they’d cede DAY. There are a lot of folks who hate the high fare that DL charges at CVG by virtue of being nearly a monopoly player there. So many of those people use DAY instead.
It’d give them access to a population very hungry for the fares and ease of use that WN is famous for.
Not saying they won’t dump it; just saying there may be reasons not to.
J
I can see WN pulling out of CAK after an aquisition, but I’m not so sure about DAY and ANC.
WN’s business model is evolving from what it started as (no secret there). Although Herb is out of the picture, I did read once that one of his regrets after the Morris Air purchase was discontinuing COS and ANC (Does anybody else remember reading that?). Perhaps Gary Kelly will consider that.
DAY would be a cheap way of entering the Cincinatti market without paying the exorbitant CVG fees, much to the dismay of DL. I’m not familiar with the area, though, so I could be wrong.
However, I lived in ANC for seven years, and I think that WN could probably get 5-7 dailies out of ANC to these markets: DEN (no UA, seasonal F9/AS, but definately a year-round able city pair), OAK (no competition), LAX (AS only), LAS (US pulled out, no competition), and PHX (US pulled out, no competition). Perhaps even PDX and SAN, but Cranky would be a better load predicter than me on those.
WN isn’t necesarilly looking for markets with at least 12 daily departures anymore, as evidenced by LGA. ANC is a very lucrative market, but it’s one downside is AS’ huge frequent flier base. WN may be able to beat that, though. They were going to test several markets with the ATA deal that would have made alot of industry insider’s say “holy sh*t!”, and it was rumored that ANC was going to be one of them with 757’s. Another one was an airport in the Chicago area, and it ain’t MKE or ORD.
I think this deal is going to go ahead, and I think that it is going to be a component of moderate change in the WN business model. They are definately trying to beat someone to the punch, but that’s a different discussion.
I think there are a number of things that WN is considering with this announcement – but I agree with Brett and think DEN is their primary objective. Sure extra competition with AA is nice – and so are the extra cities they serve, but ultimately its about growing DEN.
I also wouldn’t bank on ANC – I’d say yes to it if they could build in a stop somewhere, but from DEN the only logical stop I can think of would be either SLC or SEA, both easily covered by DL and AS respectively. With AS offering a cheaper non-stop flight than F9 was offering, I just can’t see many people willing to fly WN to ANC with a stop. I say there has to be a stop in there because of WN’s reluctance to fly longer legs these days – it seems like most flights are under 2-2.5 hrs long, and DEN-ANC would be 5.5 hrs long.
I’m not saying this is their primary motive and maybe not even a major secondary motive, but I’m sure it has crossed their minds: With a beefed up DEN operation – WN is competing in a fairly significant way with 3 of UA’s biggest cities – DEN, ORD via MDW and SFO via SFO/OAK/SJC/SMF. Makes me wonder if this isn’t more than just a coincidence. Perhaps UA is being targeted by WN? They are probably the weakest carrier from a financial perspective right now.
While I agree DEN is behind a lot of this, I think a more compelling reason is SWA is probably finding that they have fully expanded through their niche and now they figuring out how to continue growing.
We’ve seen evidence of this by going into DEN, LGA and restructuring fares and boarding procedures around business travelers, but there is only so much you can do.
Southwest gets two things in addition to DEN:
1. North American international ops experience and procedures. Sure they’ll have to fix their reservations system, but in the mean time they can use frontier to do those operations.
2. The Q400 operations. Don’t discount the importance of this. They’ve tapped out the domestic market that they can do with 150 seaters but there is more of the domestic market that the 74 seater will let them work their magic on. I bet they placate te emotional response by naming this Southwest Frontier and keeping the animal tails.
Oh.. And I really want to hear about CF’s take on the new true blue. It seems like its going to address many people’s concerns about FF programs.
There is too much good news flowing around right now that I haven’t been able to catch up because of flying.. (its an impromptu weekend trip.) I’m also testing a new travel industry product. Its really interesting right now, but I can’t say anything due to NDAs.. I’m sure once it comes out, and Cranky learns about it he’ll devote a full entry to the subject…
Cranky
Aren’t Akron/Canton and Dayton classic Southwest markets? They’re both underserved airports near major metro areas with local populations of around 1m [some of CAK’s 1m are mostly 30-40 minutes away]. Granted, Southwest already serves Pittsburgh and Cleveland which are both close to CAK but Airtran seems to do okay there. And it allows Southwest to enter markets where Airtran has an LCC monopoly. Anchorage could a market that Southwest would keep. Retaining seasonal service from Denver, they could later add Chicago Midway, Las Vegas and Phoenix without stepping on AS’s toes too much.
Jim – The problem with Dayton is that they already fly to Louisville, Indianapolis, and Columbus. I can see them going into Cincinnati to better serve the city, but I don’t think they need another alternate airport around there.
SmarteCart – I don’t remember Herb saying that, but it seems strange. If he really regretted it, there would have been nothing stopping him from going back in. I really think Anchorage would be bad, like Ryan says. For the most part, it’s a highly seasonal market with the possible exception of Seattle. But there’s no reason to go into Seattle with Alaska in there. For much of the year, I just don’t think there’s enough traffic up there to support more than what Alaska already offers.
I agree about the business model change, but it would seem to me that the most attractive change they could make is not serving some of the mainline cities but rather introducing the Q400 operation. I think that could be a winner.
Ryan – They very well may be targeting United cities, but they were doing that with or without the Frontier acquisition. I honestly think this move helps United by eliminating competition, but it really helps Southwest more.
Nicholas – The international experience is sort of a wildcard in my mind. I think you’re right that they’ll definitely keep the flights going, at least during the transition. Then they can evaluate how things are going and learn whether they want to bring that into the Southwest family or not. It could be a smart way to do it, now that you mention it.
Everyone knows I love the Q400 idea, but I doubt we’d see it called Southwest Frontier. Southwest doesn’t exactly like to honor its acquisitions very much. You won’t see Muse, Morris, or ATA mentioned anywhere except for the one Southwest airplane that’s named after June Morris. We might see an airplane named Larry the Lynx but I’d be surprised to see more than that.
Oh, and about TrueBlue, I’ve been working on deciphering it. It’s a very complicated program, and I’ve had to break it down into two posts. I’ll have the first up on Monday.
Zack – Akron/Canton and Dayton might have been classic Southwest markets but they probably shouldn’t be in the consideration set since they already serve the big airports in the area. Cleveland, Pittsburgh, and Columbus blanket the Akron/Canton area well, especially since AirTran already serves the local market there. In Dayton, it’s a little different since they don’t serve Cincinnati, but Indy, Louisville, and Columbus serve that market pretty well if they won’t serve the main Cincy airport.
I think Frontier has done a phenomenal job at marketing their product over the past eight years. Everyone in Colorado knows them and loves the brand, even if their focus cities have died and people outside Colorado still write “Is Frontier any good?” on various travel boards.
Many of the comments in this week’s Denver Post articles bag on Southwest with the typical “cattle call” comments and dissing their older 737s, but as stated in this article and others Southwest wouldn’t have expanded so rapidly had folks been selecting airlines based on Frontier’s “hometown pride” versus price and schedule. (Which are my primary factors.)
I’m not as concerned about “hometown pride” (Southwest has brought jobs here too,) as I am about losing the Mexico service. This will definitely be affected one way or another. Currently Frontier offers non-stop service to the big Mexican vacation cities. During high season they offer at least two flights a day. I like the selection, service, and price. I love the fact I can fly to Cancun in the morning and be in the Yucatan jungle by late afternoon. They even fly to Costa Rica.
United serves these routes too, however I’m assuming this will result in less competition and less frequency. American and Continental fly to Mexico through their respective Texas hubs, however non-stop flights are certainly preferred by me, even if the cost is a bit higher. Mexicana and Aeromexico also connect, but seem to have oddball times connecting through MEX.
What are your thoughts on Mexico service – Would Southwest find some way to incorporate it? Or would it eventually fade away? It would be sad to me to see those options dry up – and to me would be a big loss.
Actually you did answer this in Nicholas’s response:
/quote: The international experience is sort of a wildcard in my mind.
I think it’s a big part of Frontier’s picture – and it’d be nice to know right now what’s up :) I can’t see too many people booking their winter trips to Mexico with their status in limbo.
James – I imagine it’s safe to say that the international flights will stay around through the winter unless they’re horribly unprofitable. Otherwise, they’ve said that they would slowly but surely transition Frontier flying over to Southwest but everything would remain until then. I don’t see why that would change unless they find some awful flights in there that need to go. (Lynx, however, might be a different story.) Remember, Frontier actually has been turning a profit in bankruptcy, so if Southwest just continued to operate it, it’s not going to be a detriment by any means.
I’m still a bit disappointed that you guys aren’t picking up on the real story here, and that’s Bedford. What he’s trying to do is big enough to raise eyebrows in DAL and have them throw down $113.6 million to stop him. This is a major, MAJOR shift in our industry to have LCC’s fending off Regionals with cash.
AA is outside this fight, other than they’d be happy to see the thorn in their sides in Dallas throw down some cash.
DL and FL see this story as bathroom reading and little else. Because Frontier flies into ATL now means nothing. Southwest isn’t avoiding ATL because they can’t find gates. They’re avoiding ATL because of the two healthy airlines already duking it out there.
UA can’t do anything but pray they get the same kind of interest when they reenter bankruptcy in the next few months. Will it be USAirways or Continental? What happens to “the other guy” in Denver is really kinda far down on their radar, in the scheme of things.
Skywest is the hidden player in all of this. They’ll express deep interest in the Q400’s from Lynx (which I don’t care who you are, you can’t believe Southwest is going to operate them). But what Skywest now has a problem with is keeping up with the Bedfords. Bedford is where the change in the industry is coming from. Either good or bad, he represents the future of the regional-turned-ultra-LCC airline, and Skywest is going to have to respond.
If the FAA pushes through the ATP requirement for FO’s, you’re going to see cheaper 50-seaters than a 1990 2-door Honda Civic with 300,000 miles, sans muffler (right now you can still get the muffler). For those of you who aren’t aware of this proposal, it basically means regional pilots are going to be much harder to come by, therefore more expensive, therefore no longer economically viable for regional jets, therefore no longer money-making opportunities for the regionals.
The capacity purchase agreements are no longer valid business plans for the regionals. Bedford has publicly acknowledged this, and the guys in St. George are smart enough to have picked up on it too. So what do they do?
The next generation of LCC’s is the story here. So much of a story, that Southwest is willing to put up $113.6 million to stop it.
Dirk – I really don’t think this is Southwest reacting to Republic at all. I think they’re reacting to the fact that Frontier is going to survive one way or another, something they probably were betting against when they saw Frontier on the ropes. I think most of us were betting that Frontier wouldn’t find a way out of bankruptcy, but now that it’s happened, Southwest sees a choice. They can either keep competing against a new Frontier (regardless of the owner), or they can pay a very low $113 million to remove the competitor.
@ Oliver:
I work on the Q400 for frontier and we only have 11 of them and and more than 30 mechanics. There is no place for mainline workers to come over to!!
@Doug
I more so meant that the Lynx Q400 operation can be integrated to Southwest to serve the greater network as it does now for the mainline Frontier operation.
In any case, I do hope for the best for all.
@ flyROA:
Actually, if Southwest wanted Republic to be weakened, they’d want them doing the Frontier deal. Republic would be too pre-occupied with getting frontier to work and sinking a lot of resources into that deal to be able to do much in places like Milwaukee.