Analyst: Frontier an acquisition target
(Monday,01/26/2009 © Denver Post)
Frontier Airlines parent Frontier Airlines Holdings Inc. could be acquired if domestic low-cost carriers consolidate, according to an analyst's report today.
The Raymond James report, which upgraded Frontier shares to market perform from underperform, said Frontier could be an attractive geographical fit for carriers including Alaska Airlines, AirTran and JetBlue. Frontier's fleet of Airbus planes also makes it more compatible with JetBlue.
Frontier may also be an attractive acquisition for Southwest Airlines to acquire gates and eliminate a low-cost competitor at DIA, according to the report.
Frontier shares were up more than 6 percent in midday trading.
A takeover of Frontier is "not highly probable," according to the report, but "the prospect of such and its undervalued assets may put a floor on the share price over the near term."
The report also said Frontier's new regional operation, including new Q400 turboprop planes to fly to Rocky Mountain destinations and an expanded regional jet fleet, will likely enhance its profitability. Frontier aims to fly to markets with the smaller planes where it will not directly compete with Southwest.
The Airbus A319 planes that Frontier owns have a higher market value than the value on the company's balance sheet, the report said. Because the market for used Airbus aircraft is "very strong," an acquirer of Frontier could probably transition out of the Airbus aircraft over the next few years, according to Raymond James.
Staff writer Kelly Yamanouchi can be reached at 303-954-1488 or at
[email protected]