Q&A with Ron Ricks, Executive Vice President Corporate Services and Corporate Secretary
Today, Southwest Airlines confirmed that it is preparing a bid to acquire Denver-based Frontier Airlines, which will be sold at auction in bankruptcy court next month. We sat down with Ron Ricks, our Executive Vice President Corporate Services and Corporate Secretary, to discuss the bid and what this news means for Southwest Airlines.
Q: Ron, what’s the news today?
Southwest Airlines is preparing a bid to acquire Denver-based Frontier Airlines, which will be sold at auction in bankruptcy court later this month. The bid is worth a minimum of $113.6 million, and is a nonbinding proposal in accordance with the bidding procedures established in the U.S. Bankruptcy Court for the Southern District of New York.
Q: What does that mean exactly? What’s in proposal?
A: Southwest is still preparing the proposal, so it's premature to comment on the specifics at this time. 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.
Q. When will we know if Southwest’s bid has been accepted?
A. A nonbinding submission of interest must be provided by August 3, 2009. Assuming that Southwest is determined to be a qualified bidder, Southwest has until August 10, 2009, to submit a binding offer. If there is more than one qualified bidder, an auction will be held beginning August 11. Southwest believes our bid ultimately will be seen as the strongest bid by all interested parties, including Frontier Employees, management, and its creditors.
Q. Who approached whom? Is this a response to Republic’s bid?
A. 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.
Q. Obviously, we are in a tough economic environment. What makes this the right time for Southwest to seek to acquire Frontier?
A. We have always prepared in good times to weather the bad times and to be able to take advantage of a good opportunity, like this one, when presented to us. We have the cash, access to capital, and collateral that allows us to take advantage of this existing opportunity and synergies between Southwest and Frontier. We believe this is an opportunity to expand our network with legendary low fares, add jobs into Southwest, and boost competition in Denver as well as other cities with our low fares and high quality Customer Service.
Q. Is this a cash offer, or a combination of some sort? And, will Southwest accept all of Frontier’s debt?
A. We are still exploring what a final bid would be – it’s really too early to say.
Q: What would a possible acquisition by Southwest Airlines mean for the employees of Frontier?
A: We believe our bid proposal will allow Frontier to emerge from bankruptcy. 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. And, again, we believes our bid will be seen as the strongest bid by all interested parties, including Frontier Employees, management, and its creditors.
Q: What about Lynx (the regional carrier operating as a wholly-owned subsidiary of Frontier)?
A. As part of our overall due diligence, Southwest Airlines will study Lynx. Until a bid is finalized, it’s too early to say.
Q. Do Southwest’s most recent Union agreements include language that would allow for acquiring another airline and its Employees?
A. All of our collective bargaining agreements have provisions for the acquisition of or merger with another carrier. This is not new to Southwest, as it has in its recent history purchased assets of ATA Airlines (2008) and acquired Morris Air (1993).
Q: Final thoughts?
A: From a Customer perspective, nothing today changes at either carrier. This is merely a preliminary step in the process. There are many details to be worked through, but we are excited about the opportunity to submit a bid. We see a strong fit between our Company cultures, a mutual commitment to high quality Customer Service, and our similar entrepreneurial roots. We are confident that our bid, if successful, will boost low-fare competition and benefit consumers in Denver and other cities our expanded network will serve.
Comments
this seems a bit crazy for southwest to be considering. though it may be a great opportunity to acquire and airline for a cheap price, swa keeps pushing how much trouble we are in financially to its employees. swa employees are expected to do ten times more with ten times less just to stay afloat. i dont see how we are able to take over frontier and continue to run an airline that is in bankruptcy if we are barely surviving ourselves. unless, swa has just been fabricating stories to its employees to make us fear for or jobs.
KEEP F9 MY F9!
To the first commentor, I understand what you’re saying. However, I don’t think that the message from the Company has been that we are in trouble financially, but more that we (like the entire world) are facing very challenging economic times and, without knowing how long this tough economy will last, we have to do what we can to adjust. As Ron says in his Q&A above, we have the cash, access to capital, and collateral that allows us to take advantage of this opportunity. If successful, we could expand our network, add jobs into Southwest, and boost competition in Denver and across the country.
How can an only B737 airline like Southwest purchase an A318/319/320 airline like Frontier?
It sounds unbelievable to me.
Hallalujah!! Does this mean I can FINALLY fly Southwest into Atlanta??? Frontier has at least one gate there.
Aren't we concerned about our unique culture that begins with the hiring process? Seems to me trying to integrate Frontier employees, who may not believe in our Golden Rule, will destroy what we have built over 30+ years.
I'm worried about our culture going away.
Many carriers have both Boeing and Airbus aircraft. How is that so unbelievable?
Good point about the aircraft. We do not intend to integrate the Airbus into our fleet. As we would be able to retire Airbus aircraft from the fleet, we would add Boeing 737 aircraft.
expand our network? add jobs into Southwest? and boost competition? This sounds like promising news to me!!
Dear Concerned SWA Employee - Agree that our Culture needs to be protected - it's what makes working here so special. As someone who spent seven years living in Denver, I can tell you that Frontier has a very strong Culture, similar to our in its commitment to Customer Service and the genuine affections it garners from its Customers. I think their Employees would actually mesh well with our Culture.
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