Frontier Airlines set to emerge from bankruptcy as part of Republic

Frontier Airlines is set to exit bankruptcy protection on Thursday as part of Republic Airways, which seems determined
to run an efficient airline even if it ruffles some feathers in the process.

By buying Frontier, Republic is transforming
itself from a regional jet hauler of travelers for other airlines into a carrier that competes for its own passengers. Earlier
this year it bought Milwaukee-based Midwest Airlines, too.

Republic may move Frontier’s maintenance operation out
of Denver. It’s grounding the last of the Boeing 717s flown by newly acquired Midwest Airlines. And it’s gambling that the
payoff from hauling its own customers will make up for whatever goodwill it might burn with the big-airline partners that
hire it to fly passengers for them.

Republic is looking at moving Frontier’s aircraft maintenance and some ticketing
operations out Denver because of high costs there, CEO Bryan Bedford said in an interview on Wednesday.

Bedford
said both Indianapolis (where Republic is based) and Milwaukee are competing for the maintenance operation, and he hopes to
make a decision by the end of October on where it will be located. Frontier employs about 250 people to work on planes in
Denver, and they would get a chance to move to jobs wherever they’re located, Bedford said.

Taxes at the Denver
airport make maintenance there more expensive, he said. And a special tax on tickets processed on Frontier’s computer in Denver
adds about $1.5 million a year extra to the airline’s tax bill, he said.

He said he expects Frontier pilots and
flight attendants to stay in their own unions since they work on the Airbus A320 family of planes while Republic crews fly
Embraer regional jets. Frontier’s mechanics are represented by the Teamsters, while Republic’s aren’t in a union.

Republic is also returning the last of Midwest’s 717s to Boeing in November, and furloughing the last 150 pilots and flight
attendants who crewed them on Nov. 30. Those workers could get jobs back if their unions integrate with those at Republic,
said Carlo Bertolini, spokesman for Republic Airways Holdings.

Struggling Midwest, known for good customer service
and warm chocolate-chip cookies served to passengers, had already hired Republic to do much of its flying. Republic and Frontier
planes will fly under Midwest’s name starting on Nov. 3, the Midwest chapter of the Air Line Pilots Association said.

Midwest pilot Anthony Freitas, chairman of the Midwest Airlines chapter of the Air Line Pilots Association, called Republic’s
move "dismantling our airline."

"Midwest’s new owner hopes that if they keep the same paint scheme
and cookies, no one will notice that the crews who helped build our airline’s well-deserved reputation for award-winning customer
service are gone," Freitas said in a prepared statement.

For Frontier, one thing that won’t be changing is
its competitive spot in Denver, with market share sandwiched between United Airlines and Southwest. According to the Denver
airport, United and regional partners had 44.3 percent of domestic passengers in July, versus 24.8 percent for Frontier and
15.2 percent for Southwest. Frontier’s share hardly moved from July 2007, while United’s share shrank from 50.6 percent as
Southwest grew from 5.9 percent.

"They beat Southwest in Denver, they held their own against a very strong
United," said airline consultant Darryl Jenkins of The Airline Zone.

Frontier’s trip through Chapter 11 began
April 11, 2008, after its main credit-card processor said it planned to withhold a greater share of proceeds from ticket sales.
Southwest tried but failed to outbid Republic for Frontier.

Jenkins said a key to Frontier’s renewed profits was
trimming its routes. For a while it was adding routes like Albuquerque to Puerto Vallarta, Mexico. Now, nearly all of its
direct flights are out of Denver.

The key to their recovery was "getting rid of the bad cities. Their network
before was really schizophrenic," Jenkins said. "Now it’s all Denver-based, it’s good routes, they’re making money
when no one else is in Denver."

Some have wondered whether Republic will anger its mainline airline partners
by competing for its own passengers. One of those partners is United, which has a hub in Denver.

Bedford said he
does not expect to lose any of his contracts for regional hauling. The big airlines understand that Republic needed to diversify,
he said.

"They get it, they’re not threatened by it, and that includes United," he said.