SWA bids for FFT

[A Guy Called Tyketto]

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http://tinyurl.com/m3c9v8
http://tinyurl.com/noyynd

This is roughly $8.5 million more than the RAH offer, and since this
is an auction, and FFT is nonplussed about it (they say they can go either
way), this is really going to get interesting. FFT made it rather
public that they were dropping all of their B737 equipment and going
completely A318/A319/A320, with the exception of their regional
carriers. SWA made it rather clear that they would bring them back to
Boeing in due time, so it's going to be interesting to see:

1) if FFT will like that (as if it has a choice),
2) what would happen to their regional contract with Lynx,
3) if RAH will counter with another bid with not much time left before
the auction, and
4) how this purchase, if SWA wins, will affect their interlining with
VOI and WJA.

August is going to be a very interesting month...

BL.
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[JF Mezei]

Post by A Guy Called Tyketto
This is roughly $8.5 million more than the RAH offer, and since this
is an auction, and FFT is nonplussed about it

SWA bid expected Aug 10th. They are now trying to do due-diligence to
see if it is really worth it for them. Southwest has complained it
doesn't have many growth opportunities, and buying Frontier would give
it plenty of growth in the Denver market.

Also mentioned in an article I read was that Southwest would start to
serve certain Mexican cities that Frontier currently serves. So it would
be SWA's first adventure on intl flights. (or do they already have some ?)


When was the last time Southwest made an acquisition like that ?

Wouldn't it be easier for Southwest to essentially wind down Frontier,
re-hire ex Frontier staff and indoctrinate them as Southwest and then
use WN metal and WN staff on the new routes acquired from Frontier ?

(As opposed to doing an actual merger and merging operating
certificates, unions etc etc)

If WN is expecting a litter of 737s from Boeing, they could be used to
handle the growth resulting from acquisition of Frontier's
routes/passengers, and WN could quickly return incompatible aircraft to
lessors.

Post by A Guy Called Tyketto
3) if RAH will counter with another bid with not much time left before
the auction, and

From what I read, this appears to be a liquidation driven by Frontier's
creditors. They are the ones who will decide which buyer will generate
the best money for them. If the creditors want cash from the sale and
no onwership in the buying company, then the higherst bidder will get
since they won't care about profitability of the buying company (and
Frontier would cease to exist once merged).

BUT, if aircraft lessors are big creditors in the deal, they will have a
vested interest in one or the other deals. The lessor that owns all
those Airbus Aircraft may not be too keen on the Southwest deal because
it will mean that the lessor will get all those Airbus planes back and
may have to park them in the desert where they won't produce any revenues.
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[Jeff Hacker]

Post by A Guy Called Tyketto
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http://tinyurl.com/m3c9v8
http://tinyurl.com/noyynd
This is roughly $8.5 million more than the RAH offer, and since this
is an auction, and FFT is nonplussed about it (they say they can go either
way), this is really going to get interesting. FFT made it rather
public that they were dropping all of their B737 equipment and going
completely A318/A319/A320, with the exception of their regional
carriers. SWA made it rather clear that they would bring them back to
1) if FFT will like that (as if it has a choice),
2) what would happen to their regional contract with Lynx,
3) if RAH will counter with another bid with not much time left before
the auction, and
4) how this purchase, if SWA wins, will affect their interlining with
VOI and WJA.
August is going to be a very interesting month...
BL.
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I think if you go back far enough (like 1971, when Southwest started), they
considered DC9's as well as 737's. At this point, WN is likely to use F9's
Airbuses as leverage to get a better deal from Boeing (although I would also
expect that as one of the few relatively profitable airlines and also a
loyal Boeing customer they probably get very favorable pricing as well.
Unfortunately, I would expect Southwest to liquidate Frontier as quickly as
possible; keeping only routes and cities they want and dumping the rest.
I've heard that if they bid on Lynx, Southwest would likely use the Q400's
on some of their smaller routes to places like McAllen, Texas, where the 70
seat equipment might make some sense.

One thing is certain, Southwest is a fierce competitor and they've probably
been considering how to deal with the Frontier bankruptcy and any
opportunities it presents for some time.

Jeff
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[JF Mezei]

Post by Jeff Hacker
I think if you go back far enough (like 1971, when Southwest started), they
considered DC9's as well as 737's.

Southwest has grown just a tad since then, and have also staunchly
adopted the "single aircraft type" religion. At this point in time,
unless there is some religious changes at WN, they aren't about to start
mixed fleet operations with WN.

Post by Jeff Hacker
At this point, WN is likely to use F9's
Airbuses as leverage to get a better deal from Boeing (although I would also
expect that as one of the few relatively profitable airlines and also a
loyal Boeing customer they probably get very favorable pricing as well.

I am not sure a couple of Airbuses could provide leverage. Everyone
knows that Southwest is a stauch follower of the 737 religion and
allowing a few Airbuses to be integrated in the WN fleet would cause way
too many headaches. (maintenance, crews, scheduling etc).


If there is any haggling to be done, it is likely to happen between
Southwest and the creditors, some of whom may be the lessors for those
Airbus aircraft. So it is to be who, between WN and Republic, can please
the creditors the most.

According to the frontier web site, they have a total of 51 aircraft.
38 - 319s
10 - 318s
03 - 320s

So roughly 10% of the Southwest fleet of over 500.

Post by Jeff Hacker
Unfortunately, I would expect Southwest to liquidate Frontier as quickly as
possible; keeping only routes and cities they want and dumping the rest.

I've just taken a look at their route map:

http://www.frontierairlines.com/frontier/content/pages/shared/largeFlightMap.html

Except for Kansas City and Salt Lake City, all flights originate from
Denver. Kansas City and Salt Lake City have a couple flights to Mexico.

Looking at the southwest route map,
http://www.southwest.com/travel_center/routemap_dyn.html?ref=wwf_fgn

If you click on Denver (show only nonstop service), you see that they
also have a substantial number of flights from denver.

So, there is a lot of room to streamline overlapping routes. But if WN's
load factors are already high, they couldn't take on many new customers
if they end the Frontier flights, so Southwest may be forced to continue
to operate Frontier aircraft for some time.

On the other hand, with the current economic environment, perhaps
Southwest has enough spare aircraft to fill the number of flight hours
needed to serve a combined WN-Frontier clientele out of Denver with a
combined WN-only schedule.

It also depends on what sort of financial incentives they get on those
Airbus aircraft. Often, during bankrupcy, the leases are negotiated
downwards at very interesting rates. Southwest could keep those, or
sell those aircraft. Air Canada made a bundle of money after its
chapter-11 (CCCA in Canada) because it was able to sell its A340
aircraft at a higher rate than the low lease paymenst they had
re-negotiated during bankrupcy.

My guess is that for the next 10 days, Southwest will be very busy
sharpening its pencils.


I think that they see an opportunity to grow, and if they don't seize
this opportunity, it may be gone for a long time if Republic can be
succesful on those routes and make Frontier grow over time.
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[A Guy Called Tyketto]

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Post by JF Mezei

Post by Jeff Hacker
I think if you go back far enough (like 1971, when Southwest started), they
considered DC9's as well as 737's.

Southwest has grown just a tad since then, and have also staunchly
adopted the "single aircraft type" religion. At this point in time,
unless there is some religious changes at WN, they aren't about to start
mixed fleet operations with WN.

Post by Jeff Hacker
At this point, WN is likely to use F9's
Airbuses as leverage to get a better deal from Boeing (although I would also
expect that as one of the few relatively profitable airlines and also a
loyal Boeing customer they probably get very favorable pricing as well.

I am not sure a couple of Airbuses could provide leverage. Everyone
knows that Southwest is a stauch follower of the 737 religion and
allowing a few Airbuses to be integrated in the WN fleet would cause way
too many headaches. (maintenance, crews, scheduling etc).

Which goes along with a FFT Pilot's take on the whole lot:

http://tinyurl.com/mbw8mm

By his reckoning, if the pilots don't reach an agreement with
SWA, the deal will fall through, leaving SWA to withdraw. It seems to
me that the RAH bid would be the most seamless and advantageous to FFT.

Post by JF Mezei

Post by Jeff Hacker
Unfortunately, I would expect Southwest to liquidate Frontier as quickly as
possible; keeping only routes and cities they want and dumping the rest.

If you click on Denver (show only nonstop service), you see that they
also have a substantial number of flights from denver.

This would be interesting. Should SWA win the auction, they
would pick up FFT's slots at LGA, right?

BL.
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[A Guy Called Tyketto]

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Looks like SWA has upped the ante:

http://www.flightglobal.com/articles/2009/08/10/330819/southwest-increases-and-finalizes-frontier-bid.html

Currently, we're at $170 million, with the auction coming up on
this Thursday. No word yet on if RAH will counter. Thursday will be a
very interesting day in court.

BL.
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[JF Mezei]

Here is some insight on fleet plans:

FLEET PLANS; RETAINING LYNX

In a release, Southwest said it would acquire about 40 planes in
Frontier's existing Airbus fleet and Lynx Aviation, a Frontier
subsidiary that operates 11 Bombardier Q400 planes and serves 15
regional markets around Denver.

A transition to Southwest's Boeing 737s and the retirement of Frontier's
planes would occur over a period of 24 months.


and

"We're learning from Frontier in this case that Lynx is a valuable
asset," said Executive Vice President Ron Ricks."


So I wonder if WN would keep the Lynx dash-8s.

Also in the article I read is mention that Republic is already a secured
creditor to Frontier and would get about $20 million from Southwest if
WN wins.

So if WN is to integrate the Frontier pilots and convert them to 737
religion within 24 months, my guess is that WN's pilot training
facilities will be fully booked during that period.
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[A Guy Called Tyketto]

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Post by JF Mezei
So I wonder if WN would keep the Lynx dash-8s.
Also in the article I read is mention that Republic is already a secured
creditor to Frontier and would get about $20 million from Southwest if
WN wins.

Very interesting! It would be unusual for them to keep another
aircraft type after religiously decreeing they would have only one
type.. but that is something they could get used to.

Post by JF Mezei
So if WN is to integrate the Frontier pilots and convert them to 737
religion within 24 months, my guess is that WN's pilot training
facilities will be fully booked during that period.

This is interesting as well. I don't think there would be much
that they would need to book up. FFT was a B737 shop as recent as 3
years ago (I was on a flight from SMF-DEN-OMA, where the first leg to
DEN was on an A319, and the DEN-OMA leg was on a B733). Unless they
phased out the B737 certfied pilots along with the B733s they had,
there would still be pilots at FFT familiar with the type. Just those
that were totally Airbus pilots would need the retraining.

BL.
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[Jeff Hacker]

Post by JF Mezei
FLEET PLANS; RETAINING LYNX
In a release, Southwest said it would acquire about 40 planes in
Frontier's existing Airbus fleet and Lynx Aviation, a Frontier
subsidiary that operates 11 Bombardier Q400 planes and serves 15
regional markets around Denver.
A transition to Southwest's Boeing 737s and the retirement of Frontier's
planes would occur over a period of 24 months.
and
"We're learning from Frontier in this case that Lynx is a valuable
asset," said Executive Vice President Ron Ricks."
So I wonder if WN would keep the Lynx dash-8s.
Also in the article I read is mention that Republic is already a secured
creditor to Frontier and would get about $20 million from Southwest if
WN wins.
So if WN is to integrate the Frontier pilots and convert them to 737
religion within 24 months, my guess is that WN's pilot training
facilities will be fully booked during that period.
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it is kind of interesting that WN's largest airplane is the 737-700 which is
somewhat smaller than F9's A320's (although they only have 3 of those).
picking up routes like DEN-LGA and DEN-DCA (which I assume Southwest would
want to operate) might cause Southwest to purchase 737-800's or even -900's
for those routes.

The Q400's would fit nicely on some of WN's lighter routes, like to places
like MFE (McAllen, Texas) and might even open up some new feeds like
DAL-SHV, for example.

I'll personally be sorry to lose F9, though, as I absolutely hate
Southwest's boarding process and also like the DirecTV on F9's planes.
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[A Guy Called Tyketto]

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http://www.npr.org/templates/story/story.php?storyId=111852076
http://online.wsj.com/article/SB125019375046930049.html

Well, apparently this is over(?). SWA's pilot union and FFT's
pilot union couldn't reach a deal on seniority (SWA wanted their pilots
to be senior to FFT's, with FFT's only consolation being no loss in pay
if they come aboard as a FO on SWA), which was a requirement for SWA
winning the bid. FFT said no to that, so apparently SWA is out, leaving
RAH as the winner of the auction. The bankruptcy court in New York set
a firm deadline for the close of the auction as end of business on
Monday, 8/17/09. SWA still has time to reach something for this, but
chances are looking slim unless something miraculous happens over the
weekend.

The other big issue not reported by the media would be the loss
of jobs should SWA win the auction. a lot of frontline people (agents,
ramp crew, etc.) would be coming into SWA, who may or may not have the
capacity to handle that many people. That would mean some would come
in, and others pink slipped. That would be somewhere around 2500-3000
jobs, which would not change in the RAH deal.

If RAH wins outright, it would be interesting to see if they'd
offer up some sort of interlining with MEP, as they just bought them.

BL.
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[Jeff Hacker]

Post by A Guy Called Tyketto
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http://www.npr.org/templates/story/story.php?storyId=111852076
http://online.wsj.com/article/SB125019375046930049.html
Well, apparently this is over(?). SWA's pilot union and FFT's
pilot union couldn't reach a deal on seniority (SWA wanted their pilots
to be senior to FFT's, with FFT's only consolation being no loss in pay
if they come aboard as a FO on SWA), which was a requirement for SWA
winning the bid. FFT said no to that, so apparently SWA is out, leaving
RAH as the winner of the auction. The bankruptcy court in New York set
a firm deadline for the close of the auction as end of business on
Monday, 8/17/09. SWA still has time to reach something for this, but
chances are looking slim unless something miraculous happens over the
weekend.
The other big issue not reported by the media would be the loss
of jobs should SWA win the auction. a lot of frontline people (agents,
ramp crew, etc.) would be coming into SWA, who may or may not have the
capacity to handle that many people. That would mean some would come
in, and others pink slipped. That would be somewhere around 2500-3000
jobs, which would not change in the RAH deal.
If RAH wins outright, it would be interesting to see if they'd
offer up some sort of interlining with MEP, as they just bought them.
BL.
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There's been some discussion of how a Republic acquisition of Frontier will
interface with their acquisition of Midwest. Expect the backroom stuff to
be combined where possible - neither airline has that many flights in any
market other than their respective hubs, so I would assume that there would
definitely be an opportunity for the two airlines to have their own combined
staff rather than rely on outsourcing ground handling to other airlines.

But you need to realize that the Midwest fleet is transitioning to E-Jets
(170's and 190's) while Frontier's fleet is mostly A320 family aircraft
(318, 319, 320) so the Midwest operation is more similar in many ways to
some of Republic's contract flying, whether shuttle america (Delta, United),
Republic (USAirways), or some of the others (using Embraer 145 and Canadair
CRJ family planes). I can't see a merger of Frontier and Midwest, at least
for a couple of years.
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