Republic Airways Wins Frontier Auction

In a surprising turn of events, Republic Airways, which submitted a significantly lower bid for Frontier, won the Bankruptcy Court auction today for the carrier. Republic, which submitted a bid of $108.75 million, far less than Southwest's $170 million, appeared to win the auction because of Southwest's refusal to remove a clause in its bid requiring its Pilot Union to come to agreement with Frontier's Pilot Union regarding seniority list integration. Without such integration, Frontier's pilots would have likely been at the bottom of the pecking order, should they have been kept on by Southwest, getting the lowest pay and least desirable routes. This could have resulted in labor tensions at the worker-friendly Southwest, and the carrier didn't want to risk labor strife over the issue, even at the cost of being able to purchase Frontier.

In the short term, this changes nothing. While Southwest may try and lure Frontier's pilots union back to the bargaining table (and lure Frontier's creditors into rejecting an agreement which gives them far less than what Southwest is offering), this is rather unlikely. Southwest will probably continue to expand methodically in Denver and do its best to compete with Frontier.

And Republic's purchase of Frontier gives the carrier a reprieve. Although Frontier has suffered since Southwest's entry into Denver, the carrier has responded well, reporting many months of consecutive profits. Even as Southwest expands further into Denver, if Frontier plays up its hometown roots and amenities such as LiveTV, it should have a chance. Remember, Frontier serves many routes to a variety of airports (eg. LaGuardia, Washington National, Anchorage, Mexico, and Lynx regional cities) that Southwest does not serve from Denver. These give the airline pricing power, and they make the airline more attractive to flyers who need to go to a variety of destinations.

Then again, Southwest operates dozens of nonstop routes from Denver, plenty for many travelers, and has lots of cash, which it could use to reduce fares and hurt Frontier's (and United's) competitiveness. Southwest will develop its own loyal following in Denve over time, and both Frontier and United could suffer as a result. The future of Frontier and Southwest in Denver will depend in part on the economy, as well as how aggressive Southwest chooses to be in terms of adding frequencies, offering frequent flyer promotions, and most importantly, lowering fares. If Southwest chooses to focus its competitive energies (for lack of a better term) on other markets, such as Milwaukee, Minneapolis, and LaGuardia, Frontier could benefit. But if Southwest chooses to come down hard in Denver, the carrier has the potential to weaken Frontier and United, and that could make for a messy situation a year from now.