Frontier Airlines to Emerge from Bankruptcy

Frontier Airlines A319-111 (2392) N936FR arrives at

San Diego (SAN/KSAN) on a lovely winter afternoon.

(Photo by Michael Carter)

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.

(Joshua Reed - AP Airlines Writer)