Tag Archives: Republic Holdings

Flea Market Open for Business: US Airways, Delta, AirTran and Continental Play “Let’s Make a Deal” With Slots

First, AirTran and Continental announce a slot swap involving slots at Newark, Reagan National and LaGuardia on Tuesday. But the scope of that deal was swamped this morning with news that US Airways and Delta Air Lines have agreed to terms on a much larger deal that involves both a swap of slots, and a few routes thrown in for good measure.

This morning US Airways announced that it will obtain 42 pairs of slots at Reagan National, as well as access to slots in Tokyo (NRT) and Sao Paulo, Brazil (GRU) from Delta Air Lines.

In return, US Airways is giving Delta Air Lines 125 pairs of slots at LaGuardia.

This is a big deal for US Airways. The airline estimates that the deal will create an additional $75 million dollars in revenue per year.

It’s a positive for Delta Air Lines as well, as Delta continues to muscle into the New York market in a major way. This is a huge gain for them.

And no, this does not affect the US Airways’ Shuttle operation in any way.

Meanwhile, yesterday it was reported that AirTran plans to stop flying to and from Newark completely — giving its takeoff and landing slots to Continental Airlines. In exchange, Continental is going give AirTran slots at both Washington Reagan and LaGuardia.

Apparently AirTran will give Continental 10 slots, a single gate and a jetway at Newark. In exchange, Continental will give AirTran four slots at LaGuardia and six slots at Washington Reagan.

So, those are the facts.

What does all this horse trading mean?

It means that the bigger airlines are doing exactly what we said they were going to do. They’re getting creative.

While most headlines over the last few months have continued to talk about the lack of liquidity, “Which airline is most at risk?” — we have continued to make the argument in PlaneBusiness Banter that in this industry — good management teams are going to find a way to survive.

Look at the airlines involved in these two deals announced. Four of the better management teams out there.

We don’t see United, we don’t see a mention of American.

Meanwhile, Republic and Southwest are slugging it out over Frontier. Again, two of the better management teams in the industry.

Oh, and speaking of American – is it just me, or does that Holy Grail of a British Airways – American Airlines anti-trust agreement seem to continue to diminish in importance as the days go by?

I continue to believe that American, by putting all of its eggs in one basket it doesn’t even have in its possession yet, runs a big risk of being odd man out when the music stops.

Southwest Airlines Ups Bid for Frontier to $170 Million

Southwest Airlines is holding a press conference in about 10 minutes to discuss its “sweetened” offer for Frontier Airlines. The airline submitted a binding offer of $170 million.

The airline issued a release in which it said,

“The offer contemplates that Southwest acquire approximately 80 percent of Frontier’s existing Airbus fleet, which translates into about 40 aircraft, plus all of Lynx. Initially, Frontier would operate its Airbus aircraft as it does today, with a planned retirement of the Airbus fleet and transition to Southwest’s Boeing 737s over a period of approximately 24 months. Despite the initial reduction in the fleet, Southwest intends to maintain all existing markets, as well as add new nonstop routes from Denver that are not served by either Southwest or Frontier today.”

Interesting. “Intends to maintain all existing markets.” That means no route rationalization? My guess is it means rationalization through reduction in frequency. But not routes themselves.

Also the question of Lynx and what Southwest would do with it has been determined.

More later. Now I’m trying to do at least three things at once. Oh, and eat lunch. That’s four.

This Week: Frontier Airlines Bankruptcy Auction

This week the big news in Airlineland (at least at this point early in the game) is the pending bankruptcy auction of Frontier Airlines.

Today is the deadline for interested parties to place their bids.

Could we see another “interested party” besides the two we already know about — Republic and Southwest — show up at the last minute?

I doubt it.

One reason is that Aug. 3 was the deadline for informal bids by potential buyers. No more likely prospects entered the fray as of that date. Last week officials of Frontier also said publicly that they had not been approached by any other potential buyers.

If no more live potential buyers show up between now and the end of the day — then what?

Then the auction will begin on Tuesday.

At that point, officials from Frontier, and the airline’s unsecured creditors, (which include Republic let’s not forget) will begin to consider their options.

As most of you know — the Republic deal would see Frontier remain intact — as a separate entity. The Southwest deal (whatever the final numbers prove to be) is predicated on Southwest swallowing Frontier whole. It would take a while, but eventually Frontier would cease to exist as a separate airline.

While we might see some off-the-wall attempt at an offer by some entity today — I doubt we see any kind of new serious offer materialize.

Stay tuned. The real fun begins tomorrow.

One last note: For fans of Frontier’s animal tails, and I am one of the biggest fans of them anywhere, check out this website, LockOn Aviation Photography. They have photographs of all the tails. The photo above is theirs. Thank you guys!

Tidbits from Southwest Airlines Call Concerning Frontier Deal

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.”

What Southwest Airlines Is Telling Their Employees About the Deal For Frontier Airlines

One of our PlaneBusiness Banter subscribers just passed along this information to us. It was communicated to employees via a Southwest Airlines’ Today@SWA email.

The airline has a press conference scheduled for 2 p.m. CT to talk about the airline’s bid.

Southwest Submits Nonbinding Proposal to Acquire Frontier Airlines

On Thursday, July 30, Southwest Airlines submitted a nonbinding proposal to acquire Frontier Airlines in accordance with the bidding procedures in the bankruptcy court. We view this as an exciting opportunity for the Employees and Customers of both Southwest and Frontier. It represents an opportunity for Southwest to grow our Denver Customers; grow our revenues; and grow our profits. We must caution, however, that this is merely a preliminary step in the bidding process.

We must submit a binding proposal by August 10. If there is more than one qualified investor, and at this time Republic Airways has also submitted a bid, an auction will be held beginning August 11. Frontier will determine, in consultation with the unsecured creditors committee, which bid to accept and present to the bankruptcy court for approval.

Although our plans may vary as we work our way through this process, we wanted to share with you our present plan as we envision it. Frontier would continue to operate independently and separately for a period of time with its Airbus aircraft and personnel. We do not intend to integrate the Airbus into our Boeing 737 fleet. As we are able to retire Airbus aircraft, we will add Boeing 737 aircraft. Over time, Frontier employees would be hired into Southwest as needed to support our fleet growth and expanded operations. There are many details to be worked through, but we are confident that the effort will be worthwhile. We are also confident that our bid, if successful, will boost low-fare competition and benefit consumers in Denver and other cities our expanded network will serve.

Even if our bid is accepted and approved by the bankruptcy court, our closing on this transaction will be subject to several contingencies. These will include the negotiation of acceptable labor agreements dealing with the interim period of separate operation and seniority; and the appropriate regulatory review. Absent the negotiation of these labor agreements, we will not go forward with this transaction. However, we are confident that the benefits of such a transaction for Employees of both Southwest and Frontier will become self-evident and that we will be able to obtain such agreements.

Food Fight: Southwest Airlines Going After Frontier Airlines in Bankruptcy Court

Just never know what the day’s news is going to bring. Especially in this environment.

Today, news of a fight for Frontier Airlines.

Southwest Airlines announced today that it has filed a bid of $113.6 million for Frontier Airlines. Republic Holdings, as most of you are aware, has already submitted a bid of $108.8 million. That proposal has already been approved by the U.S. Bankruptcy Court for the Southern District of New York.

However — just because the bankruptcy court approved that offer — Frontier still had the right to seek a higher bid. And apparently that is what it did. Actually I don’t think Frontier solicited anything. I’m pretty sure Southwest is the one who made the call.

Under terms of the Frontier bankruptcy auction, bidders can submit offers until Aug. 3 and a final proposal has to be submited by Aug. 10.

The auction is scheduled for Aug. 11.

Is it just me, or are memories of the fight over ATA creeping into your consciousness as well?

Well, we certainly now have something more to talk about than earnings.

PlaneBusiness Banter Now Posted

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This week’s issue of PlaneBusiness Banter is now posted.

It was a busy week for the Things With Wings last week.

First, American Airlines reported its second quarter earnings results. The airline lost a lot of money. $390 million to be exact. $319 million excluding special items. However, you’d never have known it if you listened to the airline’s earnings call — which seemed focused on one thing — liquidity. Oh, and capacity reductions. That’s fine, but there are other aspects of an airline’s operations I’d like to hear about.

Then we had the blockbuster news concerning Continental’s Chairman and CEO, Larry Kellner. As I write in this week’s PBB, even though the management backbench strength at Continental Airlines is strong, and the airline should be able to carry on just fine as Larry goes to seek his fortune in the equity investment game — it’s quite discouraging to see one of the industry’s best and brightest leave.

Following up on our piece in last week’s issue about United’s bone-headed (or would that be heavy-handed) attempts to get travel agencies to take on more financial risk — or rather some travel agencies — the airline said late last week that it is going to give agencies 60 days to implement the business operation changes it seeks.

This whole thing still reeks. Nothing the airline says rings true.

Southwest Airlines had its own place in the spotlight last week, or would that be the sunlight, as the airline had a 737-300 aircraft develop a hole in the roof while enroute from Nashville to BWI. Not what the airline wants or needs — especially considering the issues the airline has had with the FAA concerning fuselage checks in the past. Preliminary NTSB report says there was no evidence of previous corrosion at the site.

That was not the only bad news Southwest had last week. The airline was also notified that its debt rating with Moody’s is under review, signaling a potential downgrade.

The Senate produced its version of an FAA Reauthorization bill last week. How did it differ from the House version? It differed on quite a few items. We talk more about that in this week’s issue.

Those misguided folks at the US Airways Pilot Association, the pilot union that was created in an attempt to circumvent the original ALPA seniority award that was handed down after US Airways and America West combined forces — had their head handed to them on a plate by U.S. District Judge Neil Wake last week. Wake issued his final injunctive order on the case brought against USAPA by the former America West pilots. Yes, we talk about this too.

Oh, and speaking of USAPA, we also give them, and our readers, a handy step-by-step instruction of how you correctly determine just how much an airline executive makes, using SEC documentation. Apparently the folks at USAPA have a problem figuring these things out.

British Airways raids its guaranteed employee pension benefit larder, Air Canada gets all of its employees “on board” with its 21-month contract extension program, and 215 Delta pilots sign up for the airline’s sweetened “early-out” package. Somehow I think the guys in suits over in Atlanta had hoped that number had been higher.

All this and more in this week’s issue of PlaneBusiness Banter.

If you are a subscriber, you can access this week’s issue here. If not, you can learn how you can become a subscriber by clicking here.

Republic Makes the Anticipated Midwest Acquisition Announcement

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While this is technically “breaking news,” we’ve all suspected something like this for months. Especially after the last TPG/Republic cash infusion given to Midwest.

This afternoon, Republic made it official. It is buying the remains of Midwest Airlines. I say, “remains” because what constitutes Midwest Airlines these days is a far cry from what most people think of when they think of “Midwest.”

Republic announced that it will acquire 100% of the equity in Midwest, in addition to TPG’s $31 million secured note from Midwest.

According to the airline’s statement,

Consideration will be $6 million in cash and a $25 million, five-year note, which may be converted to RJET stock at $10 per share. In addition, TPG will have the right to nominate a member to the Republic Board of Directors.

Under the agreement, Midwest will become a wholly owned subsidiary of Republic Airways, with the Midwest brand continuing. Midwest’s Boeing 717s will be replaced with Embraer 190 aircraft, enhancing Midwest’s ability to offer nonstop service to key destinations important to its frequent flyers.”

Well, how ’bout that?

It looks like the gang that started out with Chicken Taco has decided to add chocolate chip cookies to the mix.

So how does this help Republic? The airline has now announced that it is going to buy both Frontier Airlines and Midwest AIrlines in the span of two days. What I continue to have a problem with, and even more so now that the Midwest part has been added to the mix — how can Republic continue to operate as a regional carrier when it will now be a major entity in operations that go up against major players?

Then there is the AirTran marketing agreement with Frontier — what is going to happen to this?

My bet is that we are going to hear more about all of this before the week is over. You have to think that there was a reason the announcements were stair-stepped, and that they both came immediately on top of one another. A defensive play against another potential deal that was about to go down? That would be my guess.

Republic Holdings To Buy Frontier Airlines? Yowsa — Wonder What United Airlines Thinks of This?

Just never know what news is going to come across the wires these days.

Hi guys.

It’s good to be back.

Yes, moi has been a bit offline over the last month or so. No, I still love you. It was not because of anything you said. Or did. Or didn’t do. Stop it.

Without going into detail, maybe this analogy will help explain. If someone is a pilot, then it’s pretty hard to also work the back of the plane, sell the tickets at the counter and make sure the engine is functioning properly.

Moving, new website drama and delays, exhaustion. I just had to step back and concentrate on our flagship operation — PlaneBusiness Banter for a bit.

But hey — as I told PBB subscribers today — it’s time to get back into the swing of things.

And what fortuitous timing for our coming out party!

This afternoon the newswires were literally abuzz with the news that Republic Holdings is buying Frontier Airlines.

As we all know, Frontier has been trying to put together a financing deal that would allow it to exit bankruptcy protection.

We also all know that Republic had already stepped up its financial involvement with Frontier as part of its current bankruptcy process.

Yes, well — this afternoon Frontier announced that it has entered into an agreement under which Republic will serve as the equity sponsor for Frontier’s reorganization plan.

But the big newsmaking kicker is this: Republic will then purchase 100% of Frontier’s equity for $108.75 million

Under the agreement, Frontier Airlines Holdings Inc. would become a wholly owned subsidiary of Republic.

Frontier Airlines and its short-haul unit, Lynx Aviation, will keep their current names and operate as they do now.

A hearing on the proposed deal is now scheduled in bankruptcy court for July 13.

Frontier’s reorganization plan calls for general unsecured creditors to get $28.75 million.

It said an additional $40 million of the sale proceeds would repay outstanding “debtor-in-possession” financing from Republic Airways Holdings.

If approved by the bankruptcy court, Frontier’s current equity “would be extinguished and holders of that equity would not receive any recovery,” the airline’s statement said.

Okay, so while this is great news for Frontier Airlines — I think a very real question is this one — what happens when Republic, which does a chunk of regional flying for United Airlines, essentially becomes the new owner of Frontier — a major thorn in the side of United?

Stay tuned. This one should be fun to watch.

Virgin America, Republic Holdings and Shuttle America DOT Reports Are Finally Public

Eureka. It’s about time.

“The Department of Transportation’s Bureau of Transportation Statistics today upheld its June 2008 decision to release to the public traffic, financial and origin and destination survey data filed by Virgin America.

            BTS denied an appeal by Virgin America of the June 26, 2008 decision by BTS’ Office of Airline Information on the airline’s request to keep the data confidential.

            All filings on the docket DOT-OST-2008-0107 can be found on Regulations.gov: http://www.regulations.gov/search/index.jsp

            BTS also denied appeals from Republic Airlines and Shuttle America.  The two airlines appealed a previous denial of their confidentiality requests.  Documents for these cases can be found on Regulations.gov:

Shuttle America: DOT-OST-2005-23354

Republic Airlines: DOT-OST-2005-23355″

Readers will recall that Virgin America has refused to make its DOT financial and O&D information available ever since it began operation. The reason? We can only assume that it didn’t want us all to know how much money it was losing. And on what routes.

So the airline played the legal “wait it out” game by first refusing to do so, saying that it would be forced to “reveal confidential information” if it did so. That set in place a legal process that took time. In June the DOT ruled against the airline, but again, an appeal was filed.

So now, finally, we will all get to see the numbers that we should have had access to all along. On February 3. At 10:00 AM EST to be exact.

Oh, and yes, Republic and Shuttle America have been playing the same game. Their gig is up as well. Their numbers will also be available as of Feb. 3.

This whole thing is ridiculous. There should be changes made immediately to the process that prevents airlines from “opting” out of the reporting process. If they don’t report — their right to fly is yanked. Period.