Wednesday, June 24, 2009

Republic Airways Bids for Frontier Airlines Takeover

Republic Airways Holdings has offered to buy bankrupt Frontier Airlines Holdings for $108.8 million, which if approved would allow Frontier to exit bankruptcy and increase Republic's stable of carriers.

"Adding Frontier to the Republic portfolio of operating companies is an opportunity for both companies to build on recent successes and strengthen the Republic organization for the benefit of all stakeholders," Republic Chairman, President and CEO Bryan Bedford said. Its three wholly owned subsidiaries, Republic Airlines, Shuttle America and Chautauqua Airlines, operate under air service agreements with American Airlines, Continental Airlines, Delta Air Lines, Midwest Airlines, United Airlines and US Airways.

The Frontier deal would diversify Republic's holdings and offer a hedge against further reductions in regional flying by its mainline partners. While regional partnerships have been strained as mainline carriers won concessions and reduced flying by regional partners, a number of regional carriers, including Republic, have maintained strong cash reserves.

If the Frontier acquisition is approved it will mark the second takeover by Republic this year. It issued an $8 million line of credit to struggling Hawaiian carrier Mokulele Airlines, which defaulted on the loan in March, allowing Republic to take control.

Yesterday, Frontier filed its proposed plan of reorganization and a motion to approve the investment agreement with Republic, subject to higher and better proposals under a court-supervised auction. A hearing is scheduled for July 13. "This agreement represents a major milestone in our ongoing efforts to position Frontier to emerge from bankruptcy as a competitive, sustainable airline," President and CEO Sean Menke said.

The proposed plan provides $28.8 million in cash for general unsecured creditors and for $40 million of sale proceeds to be applied as repayment of a debtor-in-possession loan held by Republic since March.

(ATWOnline News)

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