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]

 

Why buy what you can kill.

 

Good 2,000th post!

 

What is the scoop on Frontier? Are they exiting anytime soon? How long can they hide in Ch11? If SWA is paying 10% on their loans for a line of credit, how much would a Ch11 company be paying?

 

It depends on who is supplying the financing.

 

I just do not see SWA purchasing a company that they have nothing in common with. Now I guess they could do it to get the gates and then go after UAUA, but they could do it with out the cost as well.

I can see another 320 operator merging with them first.

 

As long as we are making long shot predictions;

Look for SWA to make a move to merge or at least code-share in a more heavy way with WestJet.

That's my inside info.....

8

 

I agree with that!