Republic sells Frontier to Indigo

Washington DC
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Story updated to include comments from Frontier's flight attendants' union.

Republic Airways Holdings will sell its low-cost carrier Frontier Airlines to an affiliate of Indigo Partners for $36 million in cash plus $109 million in debt, following months of speculation that Indigo would be the buyer.

Under the all-cash transaction, Indigo's affiliate will acquire all the outstanding shares of Frontier. Indigo will pay $36 million in cash for Frontier's equity and the balance will be debt retained by Frontier. Indigo, the former majority shareholder of Spirit Airlines, will invest additional funds in Frontier after the deal closes.

Republic will assign to Frontier its rights for its previously announced order for 80 Airbus A319/A320neo aircraft, as Republic had earlier indicated. In exchange, Republic will be reimbursed $32 million of pre-delivery deposits.

“This transaction is a direct result of Frontier’s successful restructuring, continued cost reduction efforts and laser focus on revenue generation,” says Republic Airways chairman, president and chief executive Bryan Bedford. “I am confident that Frontier will enjoy future growth as Indigo continues the process to position the airline as a leading ultra-low-cost carrier in the United States."

Closing of the deal is dependent on agreements being reached with Frontier's flight attendants and pilots unions by no later than 31 October, as well as other third-party commercial agreements. Frontier expects the deal to close in December 2013 if all conditions are met.

Frontier's sale will conclude years of efforts by Republic to divest the low-cost carrier, which it acquired in 2009 for $109 million plus $1 billion in liabilities. Republic began a cost restructuring programme at Frontier in 2011, and rumours began swirling earlier this year that Republic had found a buyer in Indigo. Indigo sold its 12.1 million shares in Spirit in July.

Republic's Bedford says the carrier remains focused on its fixed-fee flying for US mainline carriers. "Our airline partner brands, including American Eagle, Delta Connection, United Express and US Airways Express, have a bright future at Republic Airways," he adds.

Barclays is serving as financial advisor for the deal, while Hughes Hubbard & Reed is legal advisor to Republic. Latham & Watkins is serving as Indigo's legal advisor.

The Association of Flight Attendants-CWA (AFA), which represents attendants at both Frontier and Spirit, says in a statement it is important that flight attendants’ “contributions be recognised before any sale can be finalised.”

“It is important that flight attendants first achieve fair value for the equity and profit-sharing section of our contract,” says AFA’s president at Frontier Kathie Weis in the statement. “Frontier flight attendants remain united and are resolute that any agreement must be for the good of the airline and be good for flight attendants."