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Southwest Bids for Frontier Airlines

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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.

 

269 Comments

  1. I’m unsure that I agree 100% with your blog post, but I did find it intriguing.

  2. Since most of the large corporations allow their high value employees to fly business/first class only on international flights, it will be the best of ALL deals if after the UA/USAir merger Continental and SWA create a partnership to supplement each other. The ideal partnership will be SWA to have all domestic market and CAL the international. Both airlines have very smart CEOs…I’m sure they can make it work…The bottom line it will be a necessary survival partnership that it will serve the public, make money for their stock holders and keep the majority of their current employees.

  3. At the risk of beating a dead horse, I believe I came across another reason why certain Frontier employees did not want SWA to win the acquisition bid for them. The on-time performance rankings published several days ago indicated that Frontier ranks as one of the worst, at least for July. Perhaps the Frontier employees didn’t want someone like SW, that prides itself on on-time peformance & a triple-crown like mindset, to come in and remove some of the integrated “slack” that the Frontier operations appear to be enjoying. That could have actually translated to requiring a little more focus and hard work!

  4. Since SWA did not win the bid to tak over Frontier, will they be bidding on any other airlines anytime soon? Will they ever have a presence in Atlanta? I recall there had been bad blood when Eastern was around, but that is water under the bridge. It would be wonderful if SWA had a presence in Atlanta. The acquisition of Frontier woudl have achieved that– but it was not to be. Any other hews on this front?

  5. i don’t like being hearded like cattle at the gate…………
    but i luv the low fares, but also miss not being able to truly
    fly worldwide service of a triple 7. I just dont like stopping
    50 times either.

  6. I just want to say that it’s absolutely amazing that SWA started and kept this blog alive with all of the negativity in its threads. I am – and always will be – a fan of Southwest Airlines (as just a regular old passenger) and think some of what was said in here was uncalled for. I think this blog deserves more positivity, so I’m going to provide some.

    I love Southwest Airlines for the following reasons, and have been flying them for 15 years:

    1) This company thrives on making it affordable to fly. From weekly fare specials, to Ding! fares (that conveniently and frequently show up in your task bar with a cute little piece of mail on the tail of airplane), to their Featured Destination, you can get a great deal to great US cities often. I can cite many specific examples of fares I’ve gotten for less than $100, and can only recall paying more than $200 on two or three (of ~90) occasions. SWA has spoiled me to the point that fares over $200-250 are appalling!
    2) Southwest has a great rewards program. After flying 8 roundtrip trips, you can get a free flight. This program has (understandably, considering the economy) offered fewer of the “double rewards” it used to offer, but I have gotten SEVERAL free tickets on SWA.
    3) Southwest has some of the greatest employees on earth. They are positive, cheerful, helpful, funny, concerned, and passionate about keeping up a great reputation for themselves and their company. I’ll never forget the time a flight attendant said “meow” over the intercom around 35 times while explaining that we were arriving to Chicago on time and beginning our descent.
    4) Southwest has an excellent record of leaving on time, and getting places early. I’m not the type to look up the exact stats, or how they compare with other airlines, but I’ve experienced very few late departures (luckily, the times I did, I really needed the flight to be as late as I was running), and very few late arrivals (maybe even none…).
    5) The Spirit magazine they have on board is always interesting. I know they encourage it, but I’ve taken many of them home with me.
    6) I happen to love the fact that, regardless of flight time, I always get a package of peanuts and a little snack whose smell is non-offensive to people sitting around me. While some people may complain about an airline that does not provide in-flight food service (not many do these days anyway), I like the fact that if it’s a longer flight, I know I need to pick up my own lunch or dinner.
    7) They don’t hate my bag (and I just love that commercial!). I rarely check bags, but if I did, I sure wouldn’t want to have to pay for it. If, however, it was necessary to keep the company alive, I would.
    8) Each month in Spirit magazine, they take the time to recognize an outstanding employee and an outstanding customer (or group of customers). There are full pages dedicated to these people, and I think it’s just amazing. The CEO or CIO also make it a point to dedicate an article to the magazine talking about their experiences with the airline industry, with travel in general, with customers who’ve touched their hearts, with recollections of personal and emotional times in our nation’s history that shall never be forgotten, and stories of the happiness and joy travel brings to families during the holidays. I’ve never felt like I’ve known the values and beliefs of the “higher ups” of a major corporation the way I feel like I know this Southwest’s.
    9) Southwest and its employees gives millions of dollars and a lot of time/hours (again, don’t know stats) to various charities around our country. The great employees of Southwest make perfect fits as true altruists!
    10) Southwest makes no bones about valuing its employees over its customers. I’ve read several accounts of this fact in the Spirit magazine, and to be frank, didn’t really understand it at first. How could a company value its employees more than its customers? Well, clearly, it’s great for any employee to work for a company that believes in this. Every working person would agree, right? Every consumer who believes that the customer is always right may not. However, it is clear to me that the trickle down effect of this value system makes for a very positive customer experience. And, you gotta love a company that loves its people.
    11) Southwest’s stock symbol is ‘LUV’ for goodness sakes! Enough said. (it’s not over yet, though)
    12) Southwest has never (knock on virtual wood) crashed. They only fly one type of aircraft for several business reasons, no doubt, but the main driver behind this is passenger safety. Every pilot and co-pilot knows how to fly the plane, every bagging agent knows how to appropriately and safely load baggage, every person on the maintenance crew knows how to maintain the aircraft and knows everything that could possibly be wrong with the plane if something doesn’t look or sound right, etc. Bottom line is, I feel SAFE on Southwest Airlines.
    13) This company, its corporate culture, its loyal customer base, and its sheer success is documented in many business articles and books and is studied in business schools around the country. Many companies admire, but can never achieve, the (near) perfection that is SWA.
    14) New one from today: They have the character, confidence, transparency, and courage to publish and maintain this particular blog.
    15) Southwest does not think of it as a business opportunity to make money when people need to change their flights – regardless of the reason. It’s rarely free to change your flight last minute, but you’re not going to be paying $100+ to do so.
    16) There are probably a good 10 more reasons I think this airline is great, but I’m winding down and hope I’ve made enough of a point.

    To all the other Southwest customers and employees that happen to love this company, I hope you choose to make your voice heard here as well. To those of you who have posted threads on this site, I sincerely wish you all the best. Mergers/acquisitions are no fun, and tend to scare people. I truly hope that the deal that was reached will be the best for all involved.

  7. CONGRATULATIONS REPUBLIC!!!!!
    Disclaimer – There is nothing wrong with SouthWest. They made a great business move. Unfortunatly it did not happen for them. There is nothing wrong with Frontier -it appears people want them to stick around.

    To all of those who obviously do not have TV, Radio, Newspapers, or Internet. You might want to check your stats again on who has the Safest Airline. Maybe, fact finding could give you that information! To those who think that any Frontier employee would ever put anyones life at risk you better check yourselfs again! You are clearly blind to how much the employees care about their company, each other, passenger and for keeping their company alive. I do belive as a company their #1 VALUE is SAFETY!

    Please check out each Airlines History if you want facts on both.
    Southwest Airlines – Wikipedia, the free encyclopedia
    Frontier Airlines – Wikipedia, the free encyclopedia

    Thank god this blog can now be closed!

  8. Now the Wal-mart of the skies is free to move about the country. Keep your hands off our airline.

  9. Given a choice, I will fly Frontier every single time. I was one of the passengers abused by United during the work “slow down”, and I must say it sucks to be on a runway for many hours because the the union prescribed the work action.

    I don’t fly Southwest, because I like having my tv, my assigned seat, and I love the animals on the tail. Plus, I loved the enhanced comfort of the Airbus over the Boeing 737.

    So… I have no idea who I would fly if Frontier went away…. perhaps I would simply drive…

    I truly hope Republic wins this deal, because I believe that they would best honor the “culture” of Frontier airlines.