Not that cheap...

A federal judge on Monday approved Frontier Airlines' plan to exit bankruptcy with a sale to Republic Airways Holdings, setting up an auction process that will last through Aug. 11.

Under a plan announced June 22, Indianapolis-based Republic Airways (NASDAQ: RJET) would pay $109 million to buy Denver-based Frontier’s equity. Frontier would become a wholly-owned subsidiary of Republic.

In March of this year, Frontier received a commitment for $40 million in post-petition debtor-in-possession (DIP) financing from Republic Airways Holdings to support its working additional capital needs. As part of that agreement, Frontier agreed to allow Republic’s damage claim in the amount of $150 million.

Monday’s approved reorganization plan calls for Frontier’s general unsecured creditors to receive $28.75 million in cash, with an additional $40 million of the sale proceeds applied as repayment of the outstanding DIP loan. If approved, the company’s current equity would be extinguished and holders of that equity would not receive any recovery.

“This agreement represents a major milestone in our ongoing efforts to position Frontier to emerge from bankruptcy as a competitive, sustainable airline,” Frontier President and CEO Sean Menke said last month.