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Southwest Airlines CEO Gary Kelly on Bid for Frontier

Mon, 08/10/2009 - 13:30 — Paula Berg A press release was issued today announcing that Southwest Airlines has submitted a proposal to acquire Frontier Airlines, which will be sold at auction in bankruptcy court this month. The following memo was sent to all Southwest Airlines Employees from our CEO, Gary Kelly.


This morning Southwest Airlines submitted a bid of more than $170 million to acquire Frontier Airlines, which has been in bankruptcy since April 2008. We understand an auction will commence later this week in New York. Once the auction is concluded, the bankruptcy court must approve the selection of the winning bidder. So really, we just don’t know when it will be that we’ll hear about these results, but I commit that we’ll keep you informed as we go.
We believe Southwest’s bid represents the best possible longterm scenario for Frontier, its Employees, and the Denver traveling public. Southwest brings to the table the most consistently profitable airline in commercial aviation history, the best Customer Service record in the industry (as repeatedly determined by the Department of Transportation), an Employee-centric Culture, and low fares. If we are successful in our bid, Southwest will offer a financially stable, Customer friendly, low fare alternative to the dominant carrier in Denver into the future.
I have seen and read speculation and reports as to why Southwest would be interested in acquiring Frontier. Simply enough, Frontier is for sale, and purchasing them would allow us to increase our Customer base in a city where we want to grow. Frontier also is a stellar airline with a great reputation known for quality Customer Service, passionate Employees, and low fares. Sound familiar? Those are the three main ingredients that Southwest Airlines was founded on more than 38 years ago, and those three values remain at the core of our DNA today. While there are obviously some differences in our companies, we also see a lot of similarities.
I have also seen some speculation as to why this move makes sense for Southwest Airlines. Southwest is a growth company. Who would have ever thought 38 years ago that we would grow from offering service between three Texas cities to carrying more passengers than any other carrier in the United States? Pretty remarkable, and even more remarkable is the fact that we have grown while being profitable for 36 consecutive years – a feat unmatched and unheard of the airline industry!
We began serving Denver in January 2006 with just 40 Employees and 13 daily nonstop flights. Today, we have nearly 400 Denver Employees and operate 113 daily nonstop flights to 34 destinations from the Mile High city, making Denver the fastest growing city in our history, and already among our top 10 airports (out of 66 and growing) that we serve in terms of daily departures. It’s clear Colorado Customers appreciate our low fares, great service, and convenient schedule to places they want to go.
If our bid is successful, we will return to growth mode in the midst of a deep recession, expand our network in Denver to include many attractive destinations that we don’t currently serve today, and offer Denver travelers a stable, low fare airline with legendary Customer Service to compete against the dominant carrier at DIA.
Through this acquisition, Southwest will continue to provide Denver a financially stable source of its historically low fares well into the future. There should be no doubt; the bankruptcy process will require some change to Frontier in any scenario. Given Southwest's history and track record of running a successful airline, we believe that our bid is the best option on the table for Frontier, Southwest, and the traveling public. A successful acquisition of Frontier Airlines by Southwest will expand our network of legendary low fares to additional cities, add jobs into Southwest through growth, and strengthen low-fare competitive pressure in Denver and other cities.

deltabound

Wow. I'd say Southwest REALLY doesn't want to deal with an ultra-low cost start up carrier in their own backyard.

Fine by me. Even if it eventually means competing with SWA in ATL, I'd rather deal with that than another ultra-low fare, ultra-low cost entrant.

MatthewAMEL

I don't understand the 'adds jobs through growth' statement he is basing this on.

Southwest will get bigger through the acquisition, but all those positions are currently filled by Frontier employees, right?

The statement that makes me nervous is "There should be no doubt; the bankruptcy process will require some change to Frontier in any scenario.

Sounds a lot like, "Don't blame us if we have to gut the airline and kill the brand, all we really wanted was the gates and a tough competitor dead."

flyguy23

Guess the so called labor agreement didn't mean much afterall. Good luck to everyone at F9.

BDGERJMN

Assuming Frontier's operations are the same as SWA's model yes. My guess is SWA will leverage equipment and locations to effect growth.

MILPILOT17

If you understood the process then you would know that the labor agreement is still in place and SWA will not proceed to closing without an agreement. The information is out there, but you have to actually read it in order to understand it?

Hal9000

An immediate 20% reduction in flight crews, back office staff gone, Frontier brand disappearing in the next 24 months, no guarantee of a job with Southwest - just a preferential interview slot? Doesn't sound like too good of a deal for the F9 folks.

It's too bad that F9 is caught in the middle of an outcome that no matter which way it ends (though the WN offer looks unbeatable, on paper at least), lives are going to be adversely impacted.

Southwest may the hgih point in the industry right now, but at what cost?

Seabat 33

Oh never mind, forget it, the PD will figure out you don't want to be at SW for us.

SWABrian

Before making a comment like that, at least listen to the WN press conference today with an open mind. LISTEN: Conference Call held today to discuss Southwest?s bid for Frontier | Nuts About Southwest

Kaptain

"We began serving Denver in January 2006 with just 40 Employees and 13 daily nonstop flights. Today, we have nearly 400 Denver Employees and operate 113 daily nonstop flights to 34 destinations from the Mile High city, making Denver the fastest growing city in our history, and already among our top 10 airports (out of 66 and growing) that we serve in terms of daily departures. It’s clear Colorado Customers appreciate our low fares, great service, and convenient schedule to places they want to go.
If our bid is successful, we will return to growth mode in the midst of a deep recession, expand our network in Denver to include many attractive destinations that we don’t currently serve today, and offer Denver travelers a stable, low fare airline with legendary Customer Service to compete against the dominant carrier at DIA.
Through this acquisition, Southwest will continue to provide Denver a financially stable source of its historically low fares well into the future. There should be no doubt; the bankruptcy process will require some change to Frontier in any scenario. Given Southwest's history and track record of running a successful airline, we believe that our bid is the best option on the table for Frontier, Southwest, and the traveling public. A successful acquisition of Frontier Airlines by Southwest will expand our network of legendary low fares to additional cities, add jobs into Southwest through growth, and strengthen low-fare competitive pressure in Denver and other cities."

Mr Kelly sure sounds like a selfish man...... what about the pride of Frontier and its employees and customers.