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Southwest Ups Bid To Purchase Frontier Airlines

Bankrupt carrier faces auction

ConsumerAffairs.com

August 11, 2009

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Southwest Airlines has raised the stakes, offering to buy bankrupt Frontier Airlines for $170 million. The bid outdistances a competing offer of nearly $109 million from Republic Airways and is higher than its original offer of $113 million.

Frontier is being liquidated at auction as part of its bankruptcy settlement.

Over the next week, Southwest will discuss its offer with the various interested parties. The auction is expected to commence on Thursday, Aug. 13. Once the auction is concluded, the bankruptcy court must still approve the selection of the winning bidder. From there, the bid will undergo review by the United States Department of Justice, which is normal and customary when one airline is purchasing another.

"At this point, it is premature for Southwest to release complete details of its offer, which may change during the auction process before a winning bid is approved by the bankruptcy court," the airline said in a statement. "The offer contemplates that Southwest acquire approximately 80 percent of Frontier's existing Airbus fleet, which translates into about 40 aircraft, plus all of Lynx."

Southwest said it does not intend to incorporate the Airbus jets into its fleet on a permanent basis. The airline has made a point of using just one kind of plane – Boeing's 737 – as a means to streamline its operations.

Initially, it said, Frontier would operate its Airbus aircraft as it does today, with a planned retirement of the Airbus fleet and transition to Southwest's Boeing 737s over a period of approximately 24 months.

Despite the initial reduction in the fleet, Southwest said it intends to maintain all existing markets, as well as add new nonstop routes from Denver that are not served by either Southwest or Frontier today.

"We believe our bid ultimately should be seen as the strongest offer by all interested parties, including Frontier, its creditors, Employees, and Customers," said Gary Kelly, Southwest's Chairman of the Board, President, and CEO.

"Given Southwest's history and track record of running a successful airline, we believe that our bid is the best option on the table for Frontier, Southwest, and the traveling public," Kelly said. "A successful acquisition of Frontier Airlines by Southwest will expand a network of legendary low fares to additional cities, add jobs into Southwest through growth, and strengthen low-fare competitive pressure in Denver and other cities."

Frontier filed for bankruptcy court protection in April 2008. Southwest submitted its initial indication of interest to acquire Frontier Airlines on July 30, 2009, which gave the carrier an opportunity to engage with Frontier in the due diligence required to determine the scope of a binding proposal.

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