The press conference with Southwest Airlines just ended.
Handling the call for the airline was Ron Ricks, Executive VP of Corporate Services and Corporate Secretary and Bob Jordan, Executive VP, Strategy and Planning.
The airline says their idea at this point at time is to initially operate Frontier Airlines as a separate entity until a certain point in time. But the eventual goal, they say, is to merge Frontier into Southwest in a “reasonable” amount of time.
The binding bid is due into the bankruptcy court no later than Aug. 10.
Quote of the conference: “When United flies certain banks out of there [Denver] it’s like a solar eclipse there are so many flights.”
That was Ron Ricks talking about why he did not think there was going to be a problem with any “competition” issues involving the deal, were it to go through.
The next ten days the airline will be working on their due diligence, in regard to a final bid. This preliminary bid allows them access to Frontier Airline’s information.
Comments about the possible length of a transition period? As long as two years, but nothing is set at this point.
Mary Schlangenstein from Bloomberg asked on the call if the airline was ready for a “fight” with Republic over Frontier. Ron Ricks was pretty straight up that “Southwest’s bid is going to be superior in every respect.”
He left no question that the airline intends to fight as hard as it can, that it feels it can provide a better offer than Republic, and that it intends to win.
Overlap of markets between the two airlines now — about 27.
For those with enquiring minds, there are about 12 markets or so that Frontier flies into that Southwest does not, including a number of markets in Mexico.
Dan Reed with USA Today asked if the airline was going to sell the Frontier Lynx operation. Ron said the airline is going to use the due diligence period to determine more about Lynx and other aspects of the Frontier operation. No decision has been made as of yet. This is something that will be determined in the next ten days.
Eric Torbensen from the Dallas Morning News asked if one of the reasons behind the deal was not to more or less remove a competitor that could come out of bankruptcy leaner and more competitive.
Ron said no. This was about growth, a “jumpstart” as he put it.
“This was an opportunity to get back in a growth mode,” Ron said. “This was an opportunity that presented itself. We are just trying to react to the timelines set up by the bankruptcy court.”
“If you look at Denver prior to our entry, I think there is a lot of evidence that we are the ones that brought low fares to Denver,” said Bob Jordan.
The question was asked, “How much capacity can you add with this deal?” Bob responded that it would be roughly about 10% — over time.
A question was asked as to whether their bid is being encouraged by those at Frontier and creditors of the airline. Bob Jordan said that the bankruptcy attorneys “verified through the process that our offer would be welcome.”
Ron made the point that there are “dozens and dozens of non-stop monopoly markets out of Denver today that we feel would benefit from competition.”
David Jonas from Promedia brought up the point that CEO Gary Kelly said in the earnings call just last week when asked about Denver, and whether the airline would be interested in assets there, that he said, “The right fit had not been found yet” or words to that effect.
So, as David said, had something happened between then and now?
[David, we know that nothing happened between then and now...]
As expected, Bob said he didn’t remember the remark, and Ron didn’t want to go any further with it. But the comment was made that well, Gary probably did not want to say anything because of confidentiality issues.
I think it would be safe to say that Gary just didn’t want to talk about it.
The question was asked if the airline had bank financing for the deal. The answer was yes.
“A pocket of opportunity in a sea of pain,” is how Ron Ricks typified the deal, when asked if the move to get bigger, given the current economic situation, and given Gary Kelly’s comments just last week in the airline’s earnings call, was not contradictory.
Lisa Stark from ABC asked if there was anything that might keep them from making a final binding bid. Ron said that because they already know a lot about Frontier — they doubted it. But in the next ten days, the work is going to be intense as the airline reviews contracts, etc., as part of the due diligence process.
Bob said, “We’re in this to win.”