Southwest bid for Frontier could be in trouble

Southwest Airlines Co.’s bid for Denver-based Frontier Airlines Holdings Inc. may have hit turbulence, according to the
Dallas Morning News.

Dallas-based Southwest is bidding against Indianapolis-based Republic Airways Holdings Inc.
for the rights to acquire Frontier out of bankruptcy.

The newspaper reported late this morning that, in an e-mail
purportedly sent from Southwest’s pilot union to its members, the union failed to reach a deal last night with Frontier’s
pilot union over integration terms. Getting that deal is a condition of Southwest’s bid.

The newspaper reported
that the e-mail from the union says Southwest will ask for an extension on its $170 million bid for Frontier’s assets. A bankruptcy
court auction is in progress today.
 
 
 

Republic bid $108.75 million for Frontier
and intends to let the carrier operate on its own. Southwest would absorb Frontier into its system over the course of two
years.

The difference in the bids, however, isn’t as wide as it would appear because Republic is a major secured
and unsecured creditor of Frontier. A report on the thedeal.com today estimated the difference is actually less than $10 million
when factoring in other considerations.

Earlier today, the Denver Post reported that Denver-based business interests
are hoping Republic emerges as the winner. In fact, the Metro Denver Economic Development Corp. is encouraging Republic to
buy Frontier and move its headquarters from Indianapolis to Denver, according to the newspaper.

Tom Clark, executive
vice president of the business group, told the newspaper that his organization has been attempting to "go after all of
Republic" because the company would probably maintain and create more jobs in Denver than Dallas-based Southwest.

Frontier has an aircraft-maintenance operation at Denver International Airport, and Clark expressed concern about
the future of 200-plus jobs there if Southwest took over, the newspaper reported.

Officials from Republic could
not be reached this morning to comment on the report.

Frontier filed for bankruptcy protection in April 2008 after
its credit-card processor moved to hold back a big chunk of the proceeds from ticket sales, raising the prospect of a cash
crunch. According to court documents, a consultant hired by the airline began contacting potential buyers in January, and
some met with the airline’s management over the next two months.

Some prospective investors backed out, however,
because of lack of available credit and the downturn in the airline industry.