Southwest increases and finalizes Frontier bid

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Southwest Airlines submitted today a binding cash offer of more than $170 million for rival Frontier Airlines ahead of the Denver-based carrier being auctioned off in bankruptcy court on 13 August.

The amount is greater than Southwest's previously announced plans to offer at least $113.6 million for Frontier, which has been in Chapter 11 bankruptcy protection since April 2008.

Republic Airways Holdings is also in the running to buy Frontier. Republic said in June it would offer $108 million and it is not yet clear whether it will increase this to trump Southwest's $170 million offer.

Today's bid from Southwest contemplates that the low-cost carrier will acquire roughly 80% of Frontier's existing Airbus fleet, about 40 aircraft, on top of the 10 Bombardier Q400s operated by Frontier regional subsidiary Lynx. But Frontier's Airbus fleet would be phased out and replaced with Southwest's Boeing 737s in roughly 24 months.

Dallas-based Southwest intends to maintain existing Frontier markets despite the initial fleet reduction. The airline says it will also add new nonstops from Denver presently not offered by Southwest or Frontier.

Frontier and Southwest overlap in Denver in about 27 markets, Southwest has said. There are about six cities that are served by both carriers but for which only Frontier currently serves on a non-stop basis.

Southwest first launched 13 daily non-stop flights from Frontier's Denver hub in January 2006. Competition between the two low-cost carriers intensified throughout 2008, with Southwest adding flights as Frontier trimmed capacity. Today, Southwest operates 113 daily non-stop flights from Denver.