Republic reaches deal with Frontier pilots for cost reductions

Washington DC
This story is sourced from Pro
See more Pro news »

Frontier Airlines, a subsidiary of Republic Airways holdings, has reached a tentative agreement with its pilots as part of a restructuring programme, according to a company regulatory filing.

Frontier's pilots are represented by the independent Frontier Airlines Pilot Association (FAPA).

The new agreement is part of a programme to improve Frontier's results by making changes to the carrier's "network, fleet allocation, and operating costs", according to Republic. The new initiative was first announced during Republic's first quarter earnings call.

The agreement was reached on 10 June, and requires a ratification vote by Frontier's pilots, which is expected to be completed by 17 June. The agreement also requires board approval by Republic.

Included in the deal are the postponement of certain pay increases, reduced contributions to the pilot retirement plan, and "reduced accruals for vacations and sick days". If approved, the contract between Frontier and FAPA will also be extended by two years.

As part of the deal FAPA will receive an equity stake in Frontier, according to the SEC filing. Republic has also agreed to certain other conditions to continue the new arrangement with the pilots.

Among these conditions are fleet growth at Frontier, a liquidity raise of at least $70 million by Republic through one or more debt issuances or other financings, material execution of the business improvement programme at Frontier by the end of this year, and "a good faith effort" by Republic to attract new equity investment in Frontier that would reduce Republic's "ownership of Frontier to a minority interest by December 31, 2014". The filing also explained that Republic "has agreed to establish a profit sharing programme for Frontier employees".

Republic has already made some adjustments at Frontier, including a downward revision of its capacity plan and the planned removal of 17 Embraer 170s from Frontier's fleet, 14 of which are being placed into Delta Connection service.

Frontier was acquired by Republic in 2009, the same year Republic also acquired Midwest Airlines. Last year it was decided that Midwest would be folded into the Frontier brand.