Republic Airways Seeks To Unload Frontier

Advisors Helping Parent Company Seek New Buyer

Republic Airways Holdings announced Tuesday that it is working with advisers to help find a buyer for Frontier Airlines.

Company spokesman Peter Kowalchuck told 7NEWS that Frontier’s restructuring is nearly complete and that the airline is positioned for profitability in 2012 and for long-term sustainability.

The company has “substantially achieved" the $120 million in cost savings it was seeking for Frontier, CEO Bryan Bedford said. “Now is the time to establish Frontier as a separate entity.”

Kowalchuck said, “The separation could come in the form of a purchase by Republic shareholders, a major equity investment or an outright sale.”

While airline officials are outwardly optimistic about the future of the Frontier, local aviation consultant Steve Cowell is a bit less so.

“They’re trying to sell airbuses in order to raise cash. They’re trying to realign leases,” Cowell said. “You can’t shrink to prosperity.”

Cowell said that while Frontier is moving in the right direction short-term, long-term prospects don’t look good.

“Denver can’t support three hub airlines,” he said. “And I really don’t see another carrier buying Frontier at this point.”

Dr. Mac Clouse, a professor at the Daniels College of Business at the University of Denver, told 7NEWS there is a chance that another airline will bid for Frontier, but not necessarily to keep it as a stand alone airline.

“Frontier has some attractive routes, especially to Mexico,” Clouse said. “Another airline may get those routes either by acquiring Frontier or by waiting and taking a chance that no one else will step in and buy them.”

That news is raising concern among Frontier’s loyal customers.

“I’ll be bummed,” said Kim Mikkelsen. “I’ve always liked Frontier. I have kids and they have TVs and that’s important.”

Republic bought Frontier out of bankruptcy protection in 2009 with a bid of $108.8 million, beating out Southwest Airlines Co.

At the time, Republic's primary business was feeding passengers to major airlines, such as Delta and US Airways. Under that agreement, the big airlines find the passengers and pay the fuel bills, leaving carriers like Republic to focus on efficiency.

Frontier, in contrast, must find its own customers and pay its own bills. At its main hub in Denver, where it is based, it goes head-to-head with Southwest Airlines and United.

Republic now says it wants to return to its roots of feeding larger airlines, Bedford said.

That sent shares of Republic Airways Holdings Inc. soaring by 62 percent, or $1.66, to $4.35.

The Indianapolis carrier said Tuesday that third-quarter net income fell to $9 million, or 18 cents per share, for the quarter that ended Sept. 30. During the same period last year it earned $21.2 million, or 58 cents per share. Revenue rose 7.9 percent to $767.9 million, from $711.9 million a year ago.

Not counting special items, Republic said it would have earned $20.4 million, or 40 cents per share, in the most recent quarter. Analysts surveyed by FactSet had been expecting a profit of 24 cents per share on revenue of $763.3 million.

Frontier lost $4 million for the quarter as it endured $10 million in expenses from a hailstorm in Denver that damaged planes, as well as $5 million in paper losses on fuel hedges, and $4.3 million in expenses related to its fleet changes.

Republic reported a $17.3 million profit for its segment that flies for hire for other airlines.

Airport officials in Denver aren’t commenting about a potential Frontier sale.

They do note that, in spite of a weak economy, passenger traffic continues to climb at DIA.

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