Anyone following airline news the last 2 months knows of the saga that was Frontier’s purchase by Republic Air Holdings.  It seems as if it was a nailbiter, would they get it, would Southwest beat them out?  All of this over an airline that hasn’t made a whole lot of money, or sense for a long time.

First, the money aspect.  Sure, Frontier just got approval to exit bankruptcy and has been “making money” for several quarters.  This seems to be a big turnaround from even a year ago when furloughs were coming, and some employees were predicting the airline wouldn’t even make it through the Summer of 2008. Furloughs followed, airplanes were sold, and the outlook wasn’t too rosy for Denver’s hometown airline.  During this time they took a substantial equity investment by Republic Air Holdings to ensure they would survive the next few quarters.

Fast forward to Summer 2009.  Frontier has been eeking out modest profits, however it is unable to exit bankruptcy on its own and is facing the end of the road.  Again, enter RAH.  RAH realizes that unless it does something major it is going to lose the millions invested in Frontier, much like it stood to lose the millions that it sank into Midwest Airlines during it’s fiscal troubles.  With Midwest Airlines, RAH realized it was much more profitable to purchase the company, lay off the employees and sell the assets to regain its investment.  Exactly what it is in the process of doing now.

Frontier proved to be a little thornier once Southwest entered the game.  Southwest was after gates, routes, and Denver marketshare.  It had nothing lose by losing, and a lot to gain by winning.  It’s strategy was hardball, its way or the high way.  Given the excellent financial position of Southwest and the prospects of expansion, it was in an excellent position to make the offer and set the terms that it did.  However, the president of Frontier’s pilot’s association disagreed and ended the deal.

This gave Republic the winning bid by default. 

Frontier is now the airline Southwest couldn’t get and Republic got stuck with.

I say Republic got stuck with Frontier because it is really an operation over the head of Republic’s operations.  Republic in its current contracts does not pay for its own ticketing, gates, or fuel, and it guaranteed and operational profit by its partners.  Sure they can use Frontier’s management team to lead the Frontier operation, but what happens when they come out of bankruptcy and have to pay all of their debts and bills again?

Frontier is already on its second try as an airline.  It operated in the 80′s, went bust, and was resurrected again a few years later by a new team.  Frontier doesn’t offer anything it’s competitors don’t.  It makes you pay outrageous prices for on board entertainment, sells mediocre snacks, and offers meals for sale on flights I have yet to ever ride on.  Even Frontier’s prices aren’t all that competitve with its Denver rivals.  It can’t match the route structure of United, nor can it match the efficiencies of Southwest.  What can it do?  Paint cute animals on the tail.

Is Republic willing to start sinking all of its profits into an ailing subsidiery?  Does it even make sense for Republic to operate Frontier?  What happens to the lucrative guaranteed profit contracts from airlines it now directly competes with?

Frontier’s work group certainly is not happy to be bought by a relatively unproven company, in uncertain economic times.  They are not going to be willing to give the concessions necessary to make Republic happy, nor are they going to provide excellent service while looking layoffs in the face.

For now Republic says they will operate Frontier as its own entity.  In reality they are using them to mop up the pieces of a dead Midwest Airlines, figuring out how to pay pilots twice as much as they have in the past, and trying to put lipstick on their new pig.

Unfortunate, yes.  I wish everyone at Frontier the best.  The people were always the friendliest around.