Southwest Airlines is preparing a bid to acquire Denver-based Frontier Airlines, which is to be sold at auction in bankruptcy court next month. Southwest has submitted a non-binding proposal in accordance with the bidding procedures established in the U.S. Bankruptcy Court for the Southern District of New York.
Its bid is worth a minimum of $113.6 million, which is a larger amount than the bid already filed by Republic Airways.
Southwest says its submission of a non-binding proposal gives the Dallas-based airline an opportunity to engage with Frontier in the due diligence required for Southwest to prepare a binding proposal, which it will submit by the court’s August 10 deadline.
“We are excited about the opportunity to submit a bid,” says Gary Kelly, Southwest’s Chairman of the Board, President, and CEO. “We see a strong fit between our Company cultures, a mutual commitment to high quality customer Service, and similar entrepreneurial roots.”
A successful acquisition of Frontier Airlines would allow Southwest to expand its network, add jobs into Southwest, and boost competition in Denver and other cities, the Texas carrier says.
“Southwest is still preparing the proposal, so it’s premature to comment on the specifics at this time,” says Ron Ricks, Southwest Airlines executive vice president corporate services and corporate secretary. “What we can say is that we are interested in a substantial investment in Frontier and to operate Frontier as a wholly owned subsidiary, independently and separately from Southwest Airlines, for a period of time until the carrier could be combined into Southwest.”
In terms of the timing of Southwest’s bid, says Ricks, “Frontier has been in bankruptcy since April 2008, and we’ve been considering a bid for some time, independent of any action Republic took with its bid proposal. In the past month, we began an intensive study of the airline and expressed that interest to Frontier.”
Ricks says that if Southwest’s bid is successful, “Frontier would continue to operate independently and separately for a period of time with its Airbus aircraft and personnel. Over time, Frontier Employees would be hired into Southwest as needed to support our fleet growth and expanded operations. We believe the acquisition will boost low-fare competition across the country and certainly in the Denver market.”
However, Southwest Airlines hsn’t yet made up its mind about what it would do with Frontier’s regional-airline subsidiary Lynx Aviation, which operates a fleet of Bombardier Q400 turboprops. “As part of our overall due diligence, Southwest Airlines will study Lynx. Until a bid is finalized, it’s too early to say,” says Ricks.