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Frontier in play
There are several possible takes from this announcement:
On its first quarter 2011 earnings call, Republic Airways Holdings Inc. (the "Company") announced a program to restructure the Company's subsidiary, Frontier Airlines, Inc. ("Frontier"), by making changes to its network, fleet allocation and operating costs to improve overall business results by $100 million annually. A part of that effort included restructuring wages and benefits, including the Frontier pilots (the "Pilots") represented by the Frontier Airlines Pilot Association ("FAPA"). On June 10, 2011, Frontier reached a tentative agreement with FAPA pursuant to which FAPA agreed in principle to, among other things, (i) the postponement of certain pay increases, (ii) reduced Company contributions to the Pilots' 401(k) plan, (iii) reduced accruals for vacation days and sick days and (iv) an extension of the collective bargaining agreement by two years (collectively, the "Investment"). The agreement is subject to ratification by the Pilots and final board approval by the Company. The vote on ratification is expected to conclude by June 17, 2011. In exchange for the Investment, FAPA will receive an equity stake in Frontier. The Company has agreed to certain other conditions which must be met during the term to continue the Investment by FAPA. Those conditions include aircraft growth at Frontier, a liquidity raise of at least $70 million by the Company through one or more debt issuances or other financings, material execution of Frontier's restructuring program by the end of 2011, and a good faith effort by the Company to attract equity investment(s) in Frontier that would reduce the Company's ownership of Frontier to a minority interest by December 31, 2014. In addition, the Company has agreed to establish a profit sharing program for Frontier employees. One rumor is that Delta might be the acquiring carrier to fill the narrow body fleet gap and perhaps capture some early C Series deliveries. I do not think this likely due to the fact Delta has already passed on the E190 and would rather have the 320 NEO (my guess). A more likely buyer (which FAPA probably would not like) is SkyWest with their pile of cash and need to diversify revenue streams as fee for departure contracts expire. Republic is hoping for a Jet Blue sale. The problem for Frontier is their need for a network. In this marginal industry the marginal traffic from network feed is an imperative. |
Killer51993 Summed it up in his post:
Before the F9 pilots vote for concessions I really hope they look at the chart Bedford put out as part of the employee quarterly performance review. You guys can find it on the company intranets. The specific chart shows that our costs per seat mile excluding fuel is with in 0.2 Cents per seat mile of our compettitors. Our revenue per seat mile however is over 1 CENT per seat mile lower than our compettitors. The problem is not a cost issue. You dont see Jetblue taking a wage concession to make money. I am willing to bet every one at Southwest makes more than their counterparts at Frontier. Maybe management should figure out how to make revenue instead of bringing down your contract. |
I'm just on the outside looking in, but I can't believe this isn't getting more attention. Frontier is essentially taking concessions while all their competitors pilots groups are looking at recovering concessions already given (minus SWA).
Bedford has you right where he wants you. Also, by the way, there is no such thing as "good faith" at Republic. Unless you count going to church every week with Reverend Bedford. |
Originally Posted by Bucking Bar
(Post 1006673)
Killer51993 Summed it up in his post:
I would agree with you except for the fact that Killer's data is wildly inaccurate. With a successful out of court restructuring, F9's CASM will be nearly 2 cents below that of SWA and 6 cents lower than United's. United enjoys a premium RASM over F9, however, SWA is the price setter in the domestic market and is on par with Frontier on the RASM side of the equation. add in ancillary revenue and Frontier is slightly higher in their competitive markets. |
Originally Posted by Great Santini
(Post 1006794)
Bucking Bar,
I would agree with you except for the fact that Killer's data is wildly inaccurate. With a successful out of court restructuring, F9's CASM will be nearly 2 cents below that of SWA and 6 cents lower than United's. United enjoys a premium RASM over F9, however, SWA is the price setter in the domestic market and is on par with Frontier on the RASM side of the equation. add in ancillary revenue and Frontier is slightly higher in their competitive markets. |
Originally Posted by Columbia
(Post 1006802)
That is until UA and WN decide to smell blood in the water and start circling with predatory fares through DEN.
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Originally Posted by Bucking Bar
(Post 1006671)
A more likely buyer (which FAPA probably would not like) is SkyWest with their pile of cash and need to diversify revenue streams as fee for departure contracts expire.
Southwest could buy Frontier now at half their initial offer..... That would be a win/win. |
Originally Posted by Columbia
(Post 1006802)
That is until UA and WN decide to smell blood in the water and start circling with predatory fares through DEN.
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Originally Posted by JustAMushroom
(Post 1006811)
Not gonna happen. Jerry has said publicly he believes Republic was making a mistake and the current financial position of Frontier would ruin SkyWest's balance sheet.
Southwest could buy Frontier now at half their initial offer..... That would be a win/win. |
It makes sense but DAL does not like the 318 at all.
Also if DAL wants early positions on the C-Series, all they have to do is place an order. RJET is in trouble and unless they are bailed out, those orders will be available. I of course would like DAL to acquire parts of RJET, namely, all of the F9 airbus flying and those pilots as well as all of the MEH pilots. |
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