The Dallas Morning News ran an article stating that Southwest Airlines Co. will bid $113.6 million to buy Frontier Airlines Holdings Inc., a rival airline known for its low costs and low fares that is now operating in bankruptcy. According to Southwest officials, they're taking advantage of a good opportunity to grow by actively courting the Denver-based carrier.
"We are excited about the opportunity to submit a bid," Southwest chairman and chief executive Gary Kelly said in a prepared statement. "We see a strong fit between our company cultures, a mutual commitment to high quality customer service and similar entrepreneurial roots."
On the flip side, some analysts believe the carrier's primary goal was to acquire a competitor that was severely cramping its style in the Denver market. "This is all about a tactical move," said analyst Michael Boyd, who is based in the Denver area. "It's not about consolidation. It's not about Southwest wanting to expand. It's not about Southwest wanting to get into Costa Rica. It's because Frontier is the main reason they ain't making money in Denver."
Airline analyst Bob McAdoo of Avondale Partners believes the deal just plain makes sense for Southwest. "It's a great way for Southwest to improve its own economics in Denver and to ensure that Denver is going to be profitable for them over the next several years," he said.
A New York federal bankruptcy court is overseeing the sale of the troubled air carrier, and has set an Aug. 10 deadline for bidders to submit proposals. A court-supervised auction is scheduled for Aug. 11. "This is a normal part of the auction process, and we thought there could be multiple bids," Frontier spokesman Steve Snyder said. "But the auction process isn't over yet, and it would not be correct to speculate on an outcome until the process is complete."
Southwest Airlines Pilots' Association president Carl Kuwitzky wasn't surprised by the planned bid since "consolidation is always a possibility, especially in down times...We haven't seen the proposal yet, so I guess the devil's in the details. It has the potential to be very good for the company and our pilot group," Kuwitzky said. "But that remains to be seen until we get the actual proposal that the company gives to the bankruptcy court."
Frontier filed for bankruptcy protection in April, 2008, after the bank that processed its credit card receipts began withholding all proceeds until passengers made their trips. Frontier said in late June that it had posted a $1.1 million profit in May, its seventh consecutive monthly profit. Of course, that's a matter of too little, too late. The sale must go on!