If the Milwaukee Journal Sentinel article is correct, Republic intends to shift some of Frontier's A319s to MKE. Any rumors as to whether these would be flown under the Frontier brand or perhaps even the Republic or Midwest label? I hope the new "T/A" will protect F9 pilots and their Airbus fence at domiciles other than DEN otherwise it could be a disappointment to see no growth in house as the new A320s just become replacements for those aircraft BB diverted from DEN.

Geez, this is a complex business!

 

Holy crap - the FO wasn't making it up. This portends BIG things. I'm sure that more details will follow over the next month or so.

 

There is simply no way the F9 pilots will be better off at Republic. Republic is a house of smoke and mirrors designed to get around labor contracts and scope clauses. Its a mine field for labor long term.
I love the posts about SWA furloughs. SWA has never furloughed a employee in their history. They put in writing that every F9 pilot would go on their seniority list. Any furlough at SWA would have been a massive shift in company policy and would have been highly unlikey. They value labor to much. Republic considers labor a evil they are stuck with. They will deal with labor but never partner with it like SWA.

 

Can't you see by now that what it was isn't what Bedford, Heller & Co. intend for it to always be?

 

If this were true, then it would have taken 2 secs to agree to put furlough protection on paper.

 

True. . .but we all know "never say never".

If (as so many people seem to wish for) SWA gets caught up in a financial mess, they may have to furlough people in the future, so they know that they can't give that kind of protection.

I think it is more telling that the FAPA folks wouldn't even talk to the SWAPA folks late Wednesday and Thursday. Sounds to me that they just weren't very interested in working it all out, they had made up their minds.

It's over, time will tell whether the direction chosen works for them. It will be interesting to see what F9 looks like 12 and 24 months form now.

 

Why are WN people so concerned what F9 and RAH are doing? Afterall some have posted how WN is gonna flood the DEN market and use their leverage to overcome this small setback. Worry about your own house!

Even if the F9 and WN pilots had come to terms, the RAH deal would have won out because it offered the creditors more money. The pilots had nothing to do with who ended up with F9.

 

.... What the heck do you think you're doing??? Don't ever try to insert facts into an emotional argument!

 

The differences in the cash amount was small. Remember RAH was going to forgo a claim that was going to pay like 8 cents on the dollar which means the other creditors might now get 15 cents. SWA I am sure would have put a higher offer in if they had a labor agreement.

 

That would require paying RAH their claim. The claim was only waived for the RAH bid.

By ERIC TORBENSON / The Dallas Morning News
[email protected]
A pilot labor deal for Southwest Airlines Co. might not have made a winning difference in its bid for the assets of bankrupt Frontier Airlines.

It's true that Southwest's pilots couldn't broker an agreement with Frontier's union, causing the Dallas-based airline to withdraw its $174 million bid late Thursday. That made Republic Airways Group Inc. the default winner.

But pilot opposition was only one of several reasons the deal fell apart in the 11th hour. Frontier management and creditors had other problems with Southwest's offer. And there were things they liked more about Republic.

Frontier officials talked publicly Friday about the two offers and their decision process. Southwest officials wouldn't comment beyond a statement issued Thursday evening.

Frontier executives said they liked Republic's ability to close its deal quickly and its commitment to expand Frontier's fleet of Airbus planes. The fact that Republic sweetened its offer at the last minute also helped, Frontier managers said Friday. It had originally bid $108.8 million, but Frontier didn't release the amount of the winning offer.

"I think both parties had a substantial chance of winning," said Sean Menke, Frontier's chief executive, in a conference call. However, Republic's ability to get Frontier out of bankruptcy protection by next month and its vision to keep Frontier as its own airline were significant factors, he said.

Southwest's offer probably would have triggered antitrust concerns from the Department of Justice, and a full competitive review could have taken four to six months, Menke said. Republic has already received antitrust approval to buy Frontier.

Also, Southwest's plan to drop 11 Airbus planes from Frontier's fleet of 51 would have delayed the bankruptcy case and added extra costs that Republic's bid avoids.


Not apples to apples

Among the biggest misconceptions of the auction process was the price tag. Southwest's $174 million offer – some details of which were not made public until Friday – included merger-related costs that never would have found their way to Frontier's creditors. It included a series of extra charges to pay off aircraft lessors and other creditors as well as money for Republic's claim against the Frontier bankruptcy and a termination fee for Republic, an Indianapolis-based airline holding company.

"These were not apples-to-apples comparisons," said Ted Christie, Frontier's chief financial officer.

Indeed, the bids were just a few million dollars apart in total value initially, despite the different totals. Southwest's bid would have paid creditors at a rate of 12 cents on the dollar; Republic's at 9 cents.

But Republic sweetened its offer late in the game, effectively pushing the amount of money creditors received to 19 cents on the dollar by agreeing to accept less money for its claims.


Southwest 'naive'

Critics who watched the process closely said Southwest's bid wasn't ready for prime time. Southwest executives "seemed not to understand the dynamics of the process or the obvious bottlenecks and complexities involved," said industry consultant Mo Garfinkle of Arlington, Va. Southwest "was naive and it didn't know it. It underestimated Republic and its talented management team, and it overestimated the reception to a Southwest bid, especially by the Frontier stakeholders."

Southwest withdrew its bid Thursday evening when the pilots' unions of the two airlines could not reach agreements before the auction process, as was required by Southwest's offer. The offer would have given pilots more pay, but kept them at the bottom of the seniority list.

In a note to members Friday, Carl Kuwitzky, president of Southwest's pilots' union, said he applauded Southwest chairman Gary Kelly for sticking to a promise to have the labor settlement a condition of the bid. "I called Gary last night to personally thank him, and he shared a closing thought that I agree with – 'It was not meant to be.' "

Kuwitzky said his team had 3 ½ hours Wednesday to negotiate an agreement that typically would take months. He had his doubts that Frontier pilots "had any intention of ever reaching an agreement" with Southwest and said Frontier's union never responded to calls for more talks Thursday.

Picking the winner was up to Menke, his executives and Frontier's board of directors after they consulted with Frontier's creditors committee. Their obligation was to keep the bidders informed about their status and to work with the trailing bidder to raise their offer. "The whole process was very cordial," he said. "Southwest was very professional."

For Frontier, the focus turns to growing its fleet and emerging from bankruptcy protection, which it said is possible by Sept. 17. Frontier was forced into bankruptcy in April 2008, when its credit card processor changed the terms on ticket sales and tied up substantial amounts of its cash.


Battle for Denver

The Denver air market is no more appealing for three airlines than when Frontier filed for Chapter 11; Southwest continues to add to its presence, though analysts say the carrier is losing money on its fast-growing Denver operations, an assessment Menke agrees with. "They're having some difficulty here," he said, adding that he believes incumbent carrier United is also losing money in Denver and will cede more market share.

Frontier said its lower costs and brand loyalty will help it survive in Denver. Frontier believes its operating costs are lower than Southwest's and substantially lower than United's. "We will continue to compete very, very vigorously," Menke said.

Airline financial analysts such as Vaughn Cordle of AirlineForecasts LLC expect a brutal war of attrition in Denver. Republic-controlled Frontier is unlikely to win unless Republic replaces some of Frontier's Airbus aircraft with its own regional jets flown by pilots making substantially less than what Frontier pilots are paid.

He estimates that Frontier's pilots cost the carrier $170 an hour in wages and benefits, compared with $99 an hour for Republic's regional jet pilots; Southwest's pilots cost $290 an hour, he estimates.

Cordle said that although Southwest pilots make more, the carrier can absorb deep losses in Denver that Frontier cannot.

Cutting pilot costs "is the only way Republic's Frontier survives," he said Friday, noting that Republic is in the process of switching out bigger planes for smaller ones with Midwest Airlines, the Milwaukee-based carrier that Republic officially bought July 31.

Investors had bid up Southwest's shares 20 percent since July 30, when the airline announced its intention to bid on Frontier. Southwest shares fell 19 cents to $9.08 Friday, while Republic's shares rose 60 cents to $6.60.