Monday, August 10, 2009

Will Frontier Get a Little LUV?

Southwest today announced a formal $170m bid for Frontier Airlines, topping a bid by Republic Airlines of nearly $109m. In the announcement, Southwest gave a high level overview of their plans to operate Frontier that sounds quite similar to our post last week in which we detailed a likely scenario.

As we expected, Southwest will maintain service to all existing markets and add several new ones by rationalizing service in overlapping markets. Of particular interest is Southwest's plan to gradually reduce Frontier's airbus fleet as they take delivery of new 737s. The naysayers were concerned about fleet integration - we said it would never be an issue because Southwest would never integrate the Frontier fleet - they would just slowly fade away. Nice to see that Southwest agrees with our prognostication.

Southwest says they will keep about 80% or 40 aircraft in Frontiers fleet. That sounds like the small, 120 seat A318s will be leaving soon, leaving the larger A320s (with 162 seats) and the A319s (with 136 seats) in the fleet for now.

And now what of Republic? Do they really want to market their own airline? And what will do they do with Midwest Airlines - surely that operation isn't quite so swift without the heft that a Frontier/Midwest combination would have allowed for.

The auction is Thursday - we'll see what happens but our bet is that Frontier gets a little Luv...

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