Republic Airways wins Frontier bid

Republic Airways won its bid to buy bankrupt Frontier Airlines for USD$108.75 million after a day-long auction in bankruptcy court late on Thursday.

Republic beat heavy favourite Southwest Airlines who waded into the mix in late July and ultimately submitted a binding offer of USD$170 million.

Union issues between pilots' unions at Southwest and Frontier played a part in bogging down a deal. An agreement between the two parties was a necessary condition of the Southwest bid.

"It was a long process that's not quite over but I'm happy with the outcome," said John Stemmler, president of the Frontier Airlines Pilots' Association, of Republic's win.

"It happens to be aligned with keeping more jobs and we're very pleased with that."

Republic improved upon its bid by agreeing to waive recovery rights on its USD$150 million general unsecured claim, a move expected to boost the distribution to Frontier's unsecured creditors by 94 percent, Frontier said in a release.

Indianapolis-based Republic was Frontier's largest unsecured creditor.

"Republic submitted the highest and best bid, which included substantial improvements from its original investment proposal," Frontier said in its statement.

Industry experts had by and large expected Southwest to win the auction, a move that would have grown its presence in Denver and allowed it to explore international routes.

Southwest said a key reason its bid wasn't chosen was because it chose not to remove a requirement calling for pilot unions at its company and Frontier to reach agreement.

Pilots for Southwest and Frontier were in talks until nearly midnight Wednesday, but seniority remained a major sticking point between the two groups.

Stemmler said FAPA and Republic's pilots have not yet discussed seniority terms.

Republic, which runs regional flights with large airline partners, first reached a deal to buy Frontier earlier this summer.

Its plan provides for Frontier and its subsidiary Lynx Aviation to operate as subsidiaries of the overall company.

"As the regional airline industry feels the pain of their network airline customers' challenges, many will watch the "New Republic" closely to see if this is the new model for the industry," said Oliver Wyman consultant Andrew Watterson.

(Reuters)