LAXintl
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Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 12:16 am

With the already once extended deadline looming on Monday, WSJ says negotiations for the sale of Frontier Airlines by Indigo Partners has stalled.

According to reports, Indigo is not expected to reach a deal by Monday with negotiations with the pilots union being a central sticking point.


Let see what happens now. Suppose parties can extend the deadline yet further, or RAH pursue some plan B...


Frontier Airlines Sale Talks Falter
http://goo.gl/iNuhWz

=

[Edited 2013-09-27 17:19:17]
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point2point
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 1:52 am

Since this is only a subscription link above to the story, I'm unable to access it

That being said, and assuming the standard fare reporting and discounting some shocking revelation in it..... well.... the pilots and others have to get what their agreement stated, and that is a percentage of the airline upon sale, and the sale is up to Brian Bedford to be made.

If Indigo walks, BB still has to find a buyer, or figure out a way to get the pilots and others what is due to them.

 
 
rj777
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 2:39 am

I have a feeling that there was something in the deal that the pilots union didn't like!
 
Jamake1
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 2:53 am

Quoting rj777 (Reply 3):
I have a feeling that there was something in the deal that the pilots union didn't like!

Indeed. Indigo Partners reportedly wants Frontier employees to give up their right to an equity stake (due them) in the event that Frontier is sold. The equity stake was made in exchange for wage and benefit concessions.
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Jerseyguy
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:17 am

Quoting point2point (Reply 1):
If Indigo walks, BB still has to find a buyer, or figure out a way to get the pilots and others what is due to them.

They may be playing with fire, "What is due them" could end up not being what they had hoped for.
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:21 am

Quoting LAXintl (Thread starter):
According to reports, Indigo is not expected to reach a deal by Monday with negotiations with the pilots union being a central sticking point.

Is it the equity stake? That might make the purchase price too high for this investor considering after F9 is purchased quite a bit of money must be put into the company to make it viable (e.g., new seats to go ULCC).

Quoting LAXintl (Thread starter):
or RAH pursue some plan B...

How much longer can they run F9 while finding a 'plan B?' At least per the link I found, it looks like Republic can take a bunch of the F9 related debt and package it with a 'spun off F9.'

Quoting point2point (Reply 1):
If Indigo walks, BB still has to find a buyer, or figure out a way to get the pilots and others what is due to them.

Actually, there isn't going to be much 'due to them.'
Republic can fall back to the spin-off plan if the Frontier sale can't be completed. As part of the spin-off, Republic could probably move some of its corporate debt onto Frontier's balance sheet, thereby reducing its interest costs and improving its credit profile.
http://www.fool.com/investing/genera...trating-airline-for-investors.aspx


At some point, its simply not worth it for an investor to deal with all the unions. It is but a matter of projected return on investment. If the ROI is too low, the investors will pursue another deal in another industry. Cest la vie. F9 would then be spun of from Republic with all the debt it is due and then the independent airline would 'sink or swim' on its own merits.

I hope the deal goes through. IMHO, it is the only long term solution for F9.

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aerorobnz
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 4:00 am

Will it result in imminent bankruptcy?? I don't know much about F9, I just know that I have flights booked in a fortnight that I don't want to lose.
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Jerseyguy
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 4:52 am

Quoting aerorobnz (Reply 8):
Will it result in imminent bankruptcy?? I don't know much about F9, I just know that I have flights booked in a fortnight that I don't want to lose.

I doubt you have anything to worry about.
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AWACSooner
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 6:47 am

Monday morning quarterbacking, they should have sold to WN...
 
point2point
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 7:53 am

Quoting Jerseyguy (Reply 5):
They may be playing with fire, "What is due them" could end up not being what they had hoped for.

IIRC, what is due the pilots/others by contract is separation of majority ownership of F9 by RAH, and that the pilots/others with get stock ownership/equity of a new F9.

Quoting Jerseyguy (Reply 7):
Another possible reason is that there is apparantly a dispute or lawsuit over whether it was legal for the concessions to take place in the first place.

From my understanding, what would this have to do with ownership? It would be pilots union suing pilots union.... something akin, but not quite, what has been going on at US. If Indigo is trying to use this...... shame.......

Quoting lightsaber (Reply 6):
At some point, its simply not worth it for an investor to deal with all the unions. It is but a matter of projected return on investment. If the ROI is too low, the investors will pursue another deal in another industry. Cest la vie. F9 would then be spun of from Republic with all the debt it is due and then the independent airline would 'sink or swim' on its own merits.
Quoting aerorobnz (Reply 8):
Will it result in imminent bankruptcy??

So long as F9 is pulling in 2 cents more in revenue than it does in expenses, it will not shut down.

Quoting lightsaber (Reply 6):
How much longer can they run F9 while finding a 'plan B?

It doesn't matter who or how, but it is the good faith contractual commitment of BB/RAH to get a separation done, and equities to contracted parties. And see comment above

Quoting awacsooner (Reply 10):

Monday morning quarterbacking, they should have sold to WN...

Uh huh.... and the pilots right now be sitting on their couches for the last two years without a job........

Quoting lightsaber (Reply 6):
Republic can fall back to the spin-off plan if the Frontier sale can't be completed. As part of the spin-off, Republic could probably move some of its corporate debt onto Frontier's balance sheet, thereby reducing its interest costs and improving its credit profile.
Quoting lightsaber (Reply 6):
with all the debt it is due and then the independent airline would 'sink or swim' on its own merits.

Oh lordie...... and how rich would this make how many attorneys? Again, IIRC, the acquisition of YX caused all the debt for RAH, wouldn't that be correct?

 





[Edited 2013-09-28 01:05:44]
 
whereitswarm
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 1:24 pm

I am part of an investment group (kind of like Indigo, but much smaller) that is involved in the possible sales transaction of Frontier Airlines. (Coincidentally, I am also a pilot at Frontier) To date, my group has invested over 25 million dollars in the future of Frontier to grow it and make it more valuable and profitable. Indigo will also be investing money in Frontier, to help it grow and prosper and make it more valuable - just like my investment group did.

So years from now, do you think Indigo would give up their equity stake - for nothing - when ownership changes hands again?

Then why should my investment group be expected to do just that?

I have yet to hear anyone give me a good reason as to why we should just give up that 25 million dollar investment for little to nothing in return.

Would you?

Quoting awacsooner (Reply 10):

Monday morning quarterbacking, they should have sold to WN...


Being an Air Wisky guy, and a Sooner fan, both make me want to like you. But then you keep saying this (over and over) and completely ruin it.  . That particular Monday morning was over four years ago.
 
CarsAir04
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 1:30 pm

Quoting whereitswarm (Reply 12):
I have yet to hear anyone give me a good reason as to why we should just give up that 25 million dollar investment for little to nothing in return.

Would you?

No, and what sucks to see and hear from friends is that CEO's and the like are trying to pin the non-union people against you by saying, look, if the pilots don't do this, you will not get a raise and a bonus, but if they do, you will get on. But I was there when that stuff was promised before and never happened. I want to see Frontier continue and I am sure it will, but the pilots gave up a lot and I am glad to hear they are sticking to their claim.
 
whereitswarm
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 1:36 pm

Thanks Cars. Luckily, a lot of the non union employees get it too. Just like those employee groups thanked us and stood behind us for what they thought was 'our part' in turning down that immortal Southwest offer, they also seem to be standing behind us now, and not falling for the woefully obvious management tactics.
 
commavia
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 1:50 pm

Quoting awacsooner (Reply 10):
Monday morning quarterbacking, they should have sold to WN...

I just do not see a future for Frontier as an independent company.

The network strategy seems to change frequently, the product offering seems inconsistent with market realities, and the employees that are left are apparently - as already mentioned here - quite dissatisfied with the present course (understandably so).

Frontier is by far the weakest player in the 3-carrier slug fest in its home market of Denver, and I do not think it's present model - there or in general - is sustainable. I think Frontier's best option at this point is the full (not hybrid, kind-of-sort-of) adoption of the ULCC model. This will bring substantial changes and a fundamental realignment of the network, as fares in Denver are already so low that the typical Spirit low fare market stimulation is likely to have less impact there.

Perhaps a merger with Spirit would make sense. It would involve combining two very similar fleets and create a more balanced and comprehensive network - if you overlay the two route maps, you have a fairly impressive route system spanning virtually all the major leisure markets in North and northern Latin America.

One way or another, I think ULCC is the only plausible long-term scenario for Frontier.
 
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 2:01 pm

Quoting point2point (Reply 11):
Uh huh.... and the pilots right now be sitting on their couches for the last two years without a job........

Please explain that. They later brought AirTran and not ONE guy was thrown to the street.

As a pilot, WN is the most stable airline you can work for. Forget about Captain and First Officer, most of the AirTran guys got thrown to FO...and they still netted more take home pay.

Stupid move by F9. That's not Monday Morning Quarterbacking...I said it was stupid then so did 90% or a.netters.
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whereitswarm
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 2:16 pm

I think the AirTran deal absolutely proved that Frontier pilots were correct in turning down a seniority list stapling to the bottom. If we had accepted that, it would have set the absolute worst precedent imaginable for pilots in this industry - namely that a pilots worth in a merger/acquisition is determined by nothing more than the financial predicament that the management or other forces (credit card company) have put their employiing airline in.

If Southwest had offered an integration similar to what the AirTran guys got, we might not be having this discussion (why are we having this discussion again?). But if you live by that sword, be prepared to die by it. If someday, the financial fortunes of Southwest take a turn for the worst, then your place in a possible acquisition won't be relative seniority, or date of hire, right? If you're bankrupt at the time, will you gratefully accept a staple from whomever comes calling?
 
PHX787
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 2:20 pm

Ok I'm not a frontier expert like mariner, but I gotta wonder....what's stopping F9 from standing alone again?
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flyby519
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 2:42 pm

Quoting PHX787 (Reply 18):

Ok I'm not a frontier expert like mariner, but I gotta wonder....what's stopping F9 from standing alone again?

They don't have a leg to stand on. They are a 3rd place (out of 3) carrier in their home base of DEN.
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kingcavalier
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:26 pm

There is more to F9 than just DEN. Just look at how the route map has changed. TTN & ILG show the changing business model. Apple Vacations anyone? I don't understand the continued obsession with many on here regarding the so called 3-way battle in DEN. F9 has and continues to adapt its route map in DEN. It is finding its niche with markets like SBA, DRO, PSP, PHF, BKG, EUG, GTF, BZN, FAR, MOT, CID, BMI, GSO, MDT, ILG & FSD. And not to forget DEN-CVG which has been gangbusters. I doubt F9 would be here today if it hadn't adapted to changing business models and continued to fly to markets like BOI and compete with UA & WN. Those markets are too small for 3 carriers.

Why can't F9 stand on its own? I guess it could but as Bedford said Republic isn't taking it to the next level. It needs a boost of capital to buy the NEOs, to invest in new slimline seats, etc. F9 is making money but it needs to make more money so it can bank a big cushion of money. It needs to complete its transition to a full fledged ULCC to start making good money. It will be difficult to get to that next level on its own. Spirit was at this crossroad not so long ago before Indigo took it to the next level.

I believe the Indigo deal will go through. They could of course walk but I believe Franke is ready to put another feather is in his hat and recreate another Spirit. He obviously likes the potential he sees in F9. If he didn't why would he bother? Guys like Franke are only in it for the money.

I believe there is a future for F9 as long as it is a ULCC. Should Spirit be the only ULCC? G4 is a different model so NK is really the only other comparison. Look at Spirit's route map and schedule frequency to get a good idea of what a future F9 route map might look like.
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AWACSooner
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:31 pm

Quoting point2point (Reply 10):
Uh huh.... and the pilots right now be sitting on their couches for the last two years without a job........

Right...you mean the same WN that hasn't had a layoff in how long? The same WN that publicly came out and said they would find a place for ALL F9 employees in their organization that wanted to remain?
 
gustywinds
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:35 pm

Who cares if F9 is 3rd place in its hometown? They wouldn't be in any place if they cared about things like that because they would already be out of business. It's just people on here who care about winners and losers. If UA is in 1st place in market share in DEN then WN lost because it isn't?

I doubt the future F9 will be the biggest carrier in any market it serves except for places like TTN, and that doesn't bother me one bit!
 
gustywinds
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:41 pm

Awacsooner - that simply isn't true. WN never said ALL F9 employees would have jobs. They said some employees and those would have to reapply for any open position at WN.
 
whereitswarm
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:44 pm

Quoting awacsooner (Reply 20):
The same WN that publicly came out and said they would find a place for ALL F9 employees in their organization that wanted to remain?

I remember something like that, but I don't think it was worded quite that way. Do you have the source for that public statement? I am willing to concede that I am remembering it wrong if that is the case.
 
commavia
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:45 pm

Quoting gustywinds (Reply 21):
Who cares if F9 is 3rd place in its hometown?

The fact that they're in third place in a three-competitor race is important for other reasons. Namely - the DEN market is not nearly large enough to support that much capacity, and I - along with many others - continue to expert the market to rationalize at some point. And when it does, I do not think it will be UA or WN - both better-capitalized, with far larger networks, that are likely to lose. UA can draw upon their global network, premium amenities, and most of all connectivity to small regional markets, while WN can offer its low fares and comprehensive frequencies across the entire U.S. F9 can match neither, which is a critical problem.

Quoting gustywinds (Reply 21):
They wouldn't be in any place if they cared about things like that because they would already be out of business. It's just people on here who care about winners and losers.

This isn't about "winners and losers" in terms of market share. It's about "winners and losers" in general, of which market share is but one indicator of larger trends. And those trends do not appear - at least to me - to be going in F9's favor.

Quoting gustywinds (Reply 21):
If UA is in 1st place in market share in DEN then WN lost because it isn't?

Nobody is saying that. This isn't as simplistic as "F9 isn't #1 so they're a failure." For the reasons mentioned above, F9 being up against two far stronger competitors in its largest and most important market is a big strategic problem.
 
CarsAir04
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:50 pm

Quoting awacsooner (Reply 20):
Right...you mean the same WN that hasn't had a layoff in how long? The same WN that publicly came out and said they would find a place for ALL F9 employees in their organization that wanted to remain?

yes, but in any merger, in any type of business there will be casualties. It is hard to say what would have happened, even you could not know for sure how or what would have happened to the pilots, ramp workers, CS etc. Look at departments like pricing, reservations, advertising, marketing, IT etc. All those departments were already built at WN, so all those people would have lost jobs because you don't need two marketing departments, two pricing centers etc. There are only so many jobs for ramp workers, CS at the airport and only so many for pilots. Its not to say that some would have been able to have jobs, True, some would have. But not all. To say that WN would have found a spot for ALL F9 employees, I would find that hard to believe and for any company to say that in any merger would be tough to show in the end. Yes you would have people that would not want to move, etc.

But we can't live in the past, right now Frontier is holding up pretty good in going to the ULCC model, starting to show some potential in making money, cutting cost. Will they make it? It is hard to predict the future, but I for one wish them the best as I have friends that work there and would hate to see them, or anyone lose their jobs.
 
gustywinds
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:52 pm

Still don't by the market share argument. Just because F9 is third place in DEN doesn't mean it isn't viable. Why does F9 only have to be DEN? Why can't it be in number 5 in DEN, number 1 in TTN and ILG, number 9 in BNA, etc?
 
CarsAir04
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 3:56 pm

Quoting gustywinds (Reply 22):
They said some employees and those would have to reapply for any open position at WN.

exactly they way it was put.
 
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ERJ170
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 4:31 pm

Hmmm..

Just a shot in the dark and it may be totally crazy, but does the purchase of Frontier by Air Wisconsin sound like a good idea? They are heavily burdened by the 50 seat flying and as US is their only customer, I'm thinking they have to have more ways to diversify themselves.

Could they take on F9 and run it as a ULCC? supplement into some smaller cities using their CRJs?

Just a thought..
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MIflyer12
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 4:42 pm

Quoting gustywinds (Reply 26):
Just because F9 is third place in DEN doesn't mean it isn't viable. Why does F9 only have to be DEN? Why can't it be in number 5 in DEN, number 1 in TTN and ILG, number 9 in BNA, etc?

Being a big fish in a few very small ponds isn't enough. The domestic air market shows successes broadly with three strategies:

1. Be a nationwide & global carrier. That's the game DL and UA play.

2. Be a great, if regionally limited, carrier. That's what B6 and AS do.

3. Have really, really low costs. That's what's working for Spirit and Allegiant.

F9 surely lacks the extensive network. People here are pounding on lack of success in DEN, pointing out that F9 doesn't have strategy #2 going for it. That's why in the past few months persistent talk has been given to F9 being transformed into a ULCC -- pretty much all that's left (other than Ch 7 liquidation when the $ and Republic's patience run out).
 
flyby519
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 5:33 pm

Quoting ERJ170 (Reply 28):
Hmmm..

Just a shot in the dark and it may be totally crazy, but does the purchase of Frontier by Air Wisconsin sound like a good idea? They are heavily burdened by the 50 seat flying and as US is their only customer, I'm thinking they have to have more ways to diversify themselves.

Could they take on F9 and run it as a ULCC? supplement into some smaller cities using their CRJs?

Just a thought..


Isn't that exactly what Republic did?
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sunking737
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 5:41 pm

Hey King looks like no one wants to listen to you about F9. Guys their is way more to F9 then DEN. You need to look at the big picture. A fleet of 53 Airbuses is a lot of planes. Yes they maybe leased, but it will be around for sometime yet.
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point2point
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 6:20 pm

Quoting jfklganyc (Reply 15):
Please explain that.

Oh good heavens...... F9 was in BK, remember? F9 employees had no leverage the way that employees of FL did. Then, WN wanted ATL with FL..... as F9 at DEN was already redundant in the WN system. Different aircraft between F9 and WN, not FL and WN. Etc. Need I go on?

Quoting jfklganyc (Reply 15):
Stupid move by F9. That's not Monday Morning Quarterbacking...I said it was stupid then so did 90% or a.netters.

Okay.... 99% of a.netters can think it a stupid move. I think that the pilots did the right thing not selling out to WN, I don't care if I'm 1% or less.

Quoting awacsooner (Reply 20):
Right...you mean the same WN that hasn't had a layoff in how long? The same WN that publicly came out and said they would find a place for ALL F9 employees in their organization that wanted to remain?

  

Yea, and I got a bridge to sell.......

Quoting flyby519 (Reply 18):
They are a 3rd place (out of 3) carrier in their home base of DEN.

I'll keep repeating this and everyone knows that it's true ---- as long as F9 pulls in 2 more cents in revenues than it spends in expenses...... it's not going anywhere. F9 has been a profitable the last couple of years. Now, if F9 starts spending more in expenses than it pulls in with revenues, it's a different ballgame.

Quoting ERJ170 (Reply 28):
Could they take on F9 and run it as a ULCC? supplement into some smaller cities using their CRJs?

Just a thought..

  

Maximize on what they have now....... after that..... then is the time for other strategies. In the meantime, there's probably still adjustments to F9 that can be done to get better results.



Quoting kingcavalier (Reply 19):
There is more to F9 than just DEN.

Not really..... at least at this point. But that's okay, because really, F9 is DEN, and when they concentrate their efforts there, they do well. When they venture elsewhere, well..... millions of $$$ seem to go flying out their door in a jiffy. TNN and ILG seem (again, seem) to be paying off, but...... F9's ambitions away from DEN have always ended up catastrophic. Let's keep our fingers crossed this can change.

Quoting PHX787 (Reply 17):
what's stopping F9 from standing alone again?

Nothing other than greed.......

 
 
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mariner
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 6:41 pm

Quoting whereitswarm (Reply 23):
Nobody is saying that. This isn't as simplistic as "F9 isn't #1 so they're a failure." For the reasons mentioned above, F9 being up against two far stronger competitors in its largest and most important market is a big strategic problem.

I'm not sure what that has to do with it.

Airport market share is meaningless in terms of profit - Frontier was making good money when it had less than 10% share at DEN. United had more than 60% and was, famously, bleeding money.

Until now, everything else has been agreed - except for this one issue:

Quoting CarsAir04 (Reply 12):
I want to see Frontier continue and I am sure it will, but the pilots gave up a lot and I am glad to hear they are sticking to their claim.

  

I don't know what happens if the deal falls apart and I'm not sure there is a viable Plan B - but I cannot work out why "the investor" is so adamantly opposed to the pilot participation in ownership.

It was the basis of the agreement for separation. The pilots would have a very small (low single digit) percentage and the "the investor" isn't buying the entire shareholding, the other 98% - or wasn't last time I heard, but maybe things have changed.

Good luck, Frontier.

mariner

[Edited 2013-09-28 12:01:41]
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 7:23 pm

Quoting point2point (Reply 10):
So long as F9 is pulling in 2 cents more in revenue than it does in expenses, it will not shut down.

Agreed. But where are they going to get the funds to adapt to WN's future growth at DEN?

Quoting point2point (Reply 10):
It doesn't matter who or how, but it is the good faith contractual commitment of BB/RAH to get a separation done, and equities to contracted parties. And see comment above

Is that the best deal for labor? I think otherwise. And they keep their promises if they spin off Frontier with the debt.   

Quoting point2point (Reply 10):
It doesn't matter who or how, but it is the good faith contractual commitment of BB/RAH to get a separation done, and equities to contracted parties. And see comment above

Contracts are renegotiated all the time. There won't be many opportunities like this one. I hope the unions are brought into negotiation and a deal is made.

Quoting point2point (Reply 10):
Oh lordie...... and how rich would this make how many attorneys? Again, IIRC, the acquisition of YX caused all the debt for RAH, wouldn't that be correct?

   It doesn't matter. For Republic its the better deal. If F9 does well, they would still own equity and they spin off the debt. Its a better deal for Republic and all they're doing is spinning off their 'large airline' debt. That debt belongs more with Republic than the regional division.

The pilots will get what was promised. Equity in the spun off F9. They had to know it would be a company in debt. If well run, it will grow and thrive with little trouble paying off the debt. Republic wouldn't be viable keeping all that debt. F9 should be.

Quoting point2point (Reply 32):
Okay.... 99% of a.netters can think it a stupid move. I think that the pilots did the right thing not selling out to WN, I don't care if I'm 1% or less.

It all depends if you consider ROI or not.

Lightsaber
"They did not know it was impossible, so they did it!" - Mark Twain
 
point2point
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 7:44 pm

Quoting lightsaber (Reply 34):
It doesn't matter. For Republic its the better deal. If F9 does well, they would still own equity and they spin off the debt. Its a better deal for Republic and all they're doing is spinning off their 'large airline' debt. That debt belongs more with Republic than the regional division.

The pilots will get what was promised. Equity in the spun off F9. They had to know it would be a company in debt. If well run, it will grow and thrive with little trouble paying off the debt. Republic wouldn't be viable keeping all that debt. F9 should be.

You think that this won't matter to the F9 pilots? Where have you been living?

If RAH tries to stick their corporate debt onto a spun-off F9, one had better believe that a lot of attorneys will make a lot of money litigating this. F9 had no debt when RAH acquired them, all of their debts had been discharged to BK. And IIRC, F9 was actually making a profit the last few months in BK before RAH entered the picture (we can discuss/argue ad nausea the merits of what this entails, nonetheless, it is fact in a court). It was only after RAH bought YX and tried to fly RAH birds on YX routes at MKE under the F9 banner that all of the debt skyrocketed. This was a BB/RAH management decision, not that of F9 pilots/employees, although they did their best with the situation. Some can guess that this YX acquisition cost some $70-100M........ and is still probably on the books at RAH.

Now..... if in its spin-off of F9, RAH tries to straddle the new F9 with any of this debt....... how can one think that this won't be contested by the F9 pilots? In their view, this new F9 incurred no debt on its own, and the pilots don't want to be stuck with the unfortunate costly decisions of RAH management. I don't think that the pilots had to know that this new F9 will be stuck with bad debt from RAH, nor are they expecting such.... nor will they accept such.

And I would be pretty safe in predicting that if a new F9 spin-off isn't debt free, then there will be a court case, and based on the good-faith contract/agreement between the F9 pilots and RAH, I could see the pilots easily winning. Of course, that's after a lot of attorneys make a lot of monies.......

 



[Edited 2013-09-28 12:49:06]
 
AWACSooner
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 9:59 pm

Quoting gustywinds (Reply 22):
Awacsooner - that simply isn't true. WN never said ALL F9 employees would have jobs. They said some employees and those would have to reapply for any open position at WN.

And you're not telling the entire story...because WN said they would have jobs for everyone who wanted to jump on board...albeit not necessarily in their current position!
 
CarsAir04
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 10:43 pm

Quoting awacsooner (Reply 36):
And you're not telling the entire story...because WN said they would have jobs for everyone who wanted to jump on board...albeit not necessarily in their current position!

that is not fact... I worked at F9 when WN was bidding and it was stated that you would have to apply for any open positions, that you would just not "get" a job, even if it wasn't in your position. As I mentioned above, in no way, no matter what company you work for, in a merger, there is no way all jobs will be saved or people brought over. There is just no need for all those people in any industry.
 
point2point
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RE: Frontier Sale Talks Stall - Monday Deadline

Sat Sep 28, 2013 10:49 pm

Quoting whereitswarm (Reply 13):
Luckily, a lot of the non union employees get it too. Just like those employee groups thanked us and stood behind us for what they thought was 'our part' in turning down that immortal Southwest offer, they also seem to be standing behind us now, and not falling for the woefully obvious management tactics.

The pilots/employees need to go about their jobs, doing as best they can to make sure that F9 is the carrier that would be the first choice of air pax if the choice is there. In the meantime, yes, pilots/FAs/other F9 employees all need to stay together on this and make sure that greedy investors are not going to be screwing hard working employees out of their hard-earned earnings while lining their own deep pockets with more monies that these corporate bigs don't even need anymore.

Quoting awacsooner (Reply 36):
WN said they would have jobs for everyone who wanted to jump on board...albeit not necessarily in their current position!

Would you be able to link/reference this?

Quoting lightsaber (Reply 34):
Contracts are renegotiated all the time.

Yes, but I do believe that all parties to a contract have to be agreeable to any renegotiations. One party in a contract cannot alone change terms.

 

[Edited 2013-09-28 15:58:22]
 
VictorKilo
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 1:52 am

Quoting mariner (Reply 33):
I don't know what happens if the deal falls apart and I'm not sure there is a viable Plan B - but I cannot work out why "the investor" is so adamantly opposed to the pilot participation in ownership.

Perhaps the issue isn't as philosophical as that and just comes down to dollars.

Indigo offers X. BB wants X. But the pilots get $25 million in a sale. So Indigo would pay X and BB would get X - 25. BB tries to get the pilots to wave their $25 million. They say no. BB tries to get Indigo to pay X + 25 so he can keep X. Indigo says no. Talks falter.
 
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mariner
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 2:41 am

Quoting VictorKilo (Reply 39):
Indigo offers X. BB wants X. But the pilots get $25 million in a sale. So Indigo would pay X and BB would get X - 25. BB tries to get the pilots to wave their $25 million.

I'm still struggling because - as I understand it - it's a paper deal for the pilots, no actual money changes hands.

Unless it is an unusually structured deal, the pilots get no money down, only a shareholding with a conceptual value, a paper value, until a price can be established - probably (almost certainly) by way of an IPO, an offering to the public.

At that point an actual value is placed in Frontier and thus an actual value is placed on the shares of Frontier.

The pilots have, in effect, paid for the eventual shareholding already with the original deal - givebacks (or no salary increases), in return for that eventual shareholding.

I had expected more of a storm because (I'm told) "the investor" wanted to take away the profit sharing deal - also completely conceptual because there haven't been any profits to share - but, as I understand it, an acceptable offer has been made to the non-union staff in return for dropping the profit sharing deal.

I'm not aware that any such sweetener has been offered to pilots - there may have been something but I don't know about it - so I am not surprised the pilots are aggrieved and I am equally surprised that this really quite small ownership participation by the pilots would be a deal-breaker.

I gather a lot of the pilots think they've been shafted (or would be) by this and I can't say they're wrong.

mariner

[Edited 2013-09-28 19:43:58]
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kingcavalier
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 4:02 am

If BB had invested the resources into a ULCC F9 back when they acquired the carrier we would probably be talking about an IPO right about now instead of a private equity deal that could possibly be falling through. Instead, BB squandered resources and time, capital which should have gone into what Indigo is hopefully getting ready to do. Hindsight is 20/20 but I can't help but wonder where we would be right now if BB had not made so many mistakes. I am thankful RAH saved F9 at the time from WN's obvious intentions to eliminate a competitor. I would've been onboard with the WN deal if WN had not already re-entered DEN and built up a 100+ flights a day operation. But they didn't need F9 so their intentions were very evident.

I feel sorry for the employees of F9. They are definitely fighters and that's what I like about the scrappy airline. They went through a couple years of bankruptcy and now several years of mismanagement by BB. Now, they are facing more uncertainty with the Indigo deal.

BB should've kept F9 separate from day one. Egos got in the way and BB thought he knew best how to run a branded carrier, even though he had no experience outside of contracted flying. SM was out. A tale of young lions. I hear BB's MCI hub alone lost over $40 million. F9 was DEN and was making money when BB acquired the carrier through the bankruptcy process. F9 was not MKE or MCI. That was all BB. F9 had simplified its fleet to one aircraft type during bankruptcy (except for the Qs whose days were numbered), but BB came along and thought he had found a home for all of his regional aircraft that no one else wanted. Then you had 37 and 50 seat ERJs, 76-seat E170s and 99-seat E190s flying under the F9 brand with BELFs well above 100%. The regional aircraft were notoriously bad operationally with maintenance issues, delays and cancellations. It was SM's cancellation of the original RAH E170 flying that opened the door for BB to use that claim against F9 to acquire them in bankruptcy. SM tried to simplify the operation but BB came in and complicated everything. Complexity adds costs. Every LCC knows that, but BB tried to make F9 a little UA or YX.

F9 was ready to go the next level, the Spirit ULCC level?, coming out of bankruptcy. BB had other ideas and thought he could run separate and confusing brands with F9 in DEN and YX in MKE, MCI and DCA. Everyone here knows how that worked out. BB picked the F9 brand over YX and thought he could win over the old YX passengers. The press as not kind, and it wasn't F9 that asked for any of it. BB wasted money painting aircraft in YX colors simply to turn around and paint ERJs in the F9 livery. They took forever just trying to get a codeshare between F9 and YX due to I.T. Issues. BB added fresh cookies and milk on all F9 flights, even though reports said half of the cookies went uneaten and were tossed out. Wasteful. Then, hot breakfasts and other fresh food options started appearing on most F9 flights. Wasteful. BB kept the Best Care Club in MKE but had no club in DEN. It was wasteful, inconsistent for service since one hub had it and the big hub did not, and the MKE club was eventually closed. BB moved a lot of corporate jobs to IND and maintenance to MKE and MCI. All of that is disruptive, costs money and makes for bad press. After I saw BB on the CBS Undercover Boss show I knew it was all about his ego and that he was in over his head. F9 has been in a downward spiral with an identity crisis since BB took over, but I'm happy to say that is being corrected with surprise, a hands off approach by the folks in IND.

It's aggravating to witness history and not relive it and wonder where F9 would be today if all of that time and money had been invested into a ULCC F9. I believe we would be talking about a different and stronger Spirit model F9 ready for an IPO with RAH ready to cash out and make some good money. But alas, here we are with more uncertainty.

I believe F9 is poised to take off. I also thought that right when it exited bankruptcy a few years ago, but that opportunity was squandered. I have higher hopes for Indigo and believe the deal will go through although I am perplexed that due diligence didn't show the pilot equity deal. That deal was made in good faith and it should be honored or settled in a way that is satisfactory to all parties. Indigo had to have known about the deal with the pilots before they started divesting their shares in Spirit and resigned from their board of directors. There must be more to the story and I'm sure the IBT is somehow involved.

F9 is sort of back to where it was when it came out of bankruptcy. It has one aircraft type. It has relocated most jobs back to DEN from IND. Maintenance is on its way back. And it's around 75% of the way to a true ULCC. Forget the hybrid model. It needs to go full blown ULCC. Love it or hate it passengers fly them and it makes the shareholders money.

What have I seen F9 doing lately to adapt to the new realities? MKE and MCI are gone. They are flying the A320 family only. Fresh food is gone. They have given back unnecessary airport real estate. They are outsourcing all non-DEN stations although I'm not crazy about that and think they should have kept their own personnel in some of the bigger stations. Got a new web site. Unbundling of services and fees continues. Charging for carry on bags for passengers who don't book on flyfrontier.com. Charging for non-alcoholic beverages for Economy and Basic passengers. Classic and Classic Plus get the full can for free. Pushing more passengers to book directly with F9. They aren't trying to fight it out with UA and WN on markets like DEN - ABQ. They are showing love with often less than daily frequencies to places like FAR and GSO. They've added extra rows of seats. And I love how they are growing their relationship with Apple. DEN - MBJ in December is a prime example of how that takes some of the risk off F9 to try new routes.

They can't quite push it to the next level, though, without some capital investment. Some things simply cost money and you need some money to make some more money. It's not impossible for F9 to do it on its own and I guess RAH could offer an IPO right now, but Indigo is the best case scenario. These guys want to make money and aren't inclined to experiment the way BB did. Capital can ensure the NEO order happens and the fuel savings that will bring. Capital can pay to remove a lav onboard and install lighter weight slimline seats with more rows are installed. Capital can pay to remove the heavy, obsolete LiveTV from the fleet. Capital can put the resources toward more bundling of vacation packages. Capital will allow F9 to expand the TTN model to other cities across the U.S. DEN will always be F9's largest operation but I don't think it will live or die by it like it has in the past. I think a look at Spirit's route map should give us an indication of what Indigo has planned. I would expect to see more focus cities like TTN and ILG.

This isn't your same old F9 and that is difficult for many to grasp. Conventional Wisdom needs to change. CW changed on Tower Road quite some time ago. I wish it would catch up for some on this board. F9 continues to break LF records so there is definitely room for another Spirit in the market. The business model change isn't always pretty to witness, but the old model was broken. I hope to ride the ride until it's over. Just the fact that Franke and Indigo are cashing out their profits at NK and willing to invest in F9 tells me that they see the potential in this piss ant airline. It will hopefully be a new and not final chapter for this great, little airline that could.
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Jerseyguy
Posts: 2006
Joined: Sun Oct 30, 2005 12:05 pm

RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 4:42 am

Quoting kingcavalier (Reply 41):

I agree KC, capital is needed to really run the airline in the fashion it needs to be. They need lighter seats, they need to get rid of the LIVETV (I certainly enjoy it but the ULCC model doesn't support it), and they certainly need the NEOs long term. Fuel savings is the order of the day. That being said Indigo is probably their best bet. Sure they don't like losing their equity shares but if the sale doesn't go thru, it is likely that they won't be worth the paper their written on. Could F9 perhaps go it alone, maybe it might work but odds are you wouldn't see any significant profits, probably just enough to keep it afloat. I won't sit here and say that this deal is fair but life isn't always about what is fair and sometimes you have to accept the fact that your going to get screwed over.

Likely no one will perticularly like life as a ULCC under Indigo but the other options aren't very pretty either. Lots of F9 employees say BB doesn't know what he's doing and maybe their right. Indigo has a track record of helping Spirit make money,

Lastly if we are going to have ULCC policies like charging for drinks and cracking down on carry-on size, we need ULCC pricing across the board. This hybrid thing isn't cutting it.

Good luck to all F9 employees but this might be a bitter pill you just might have to swallow.
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gustywinds
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 4:56 am

Agree JerseyGuy

awacsooner - I've seen another Q&A but this is some of the first communication WN put out regarding their bid for F9. Mariner can confirm but I believe WN intended to immediately ground the A318 flying and there was a big question mark over Lynx. The F9 employee integration is discussed in the second link.

http://www.blogsouthwest.com/news/so...lines-bankruptcy-court-proceeding/

http://www.blogsouthwest.com/southwest-bids-frontier-airlines/
 
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lightsaber
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 5:16 am

Quoting point2point (Reply 35):
You think that this won't matter to the F9 pilots?

It will matter. But the analysis I've read, while limited in scope, imply that if F9 is spun off, it will be with the debt and there isn't much that can be done about it.   

Quoting point2point (Reply 38):
Yes, but I do believe that all parties to a contract have to be agreeable to any renegotiations. One party in a contract cannot alone change terms.

Of course. Hence why I commented that the unions need to be brought fully into the negotiations. I do not believe what was promised allows F9 to be sold at a price any buyer would seriously consider. Republic has a responsibility to do what is best for their investors, not the pilots. There is no reason to spin off a company with less debt just because one union group feels they are entitled. Every analysis I've read on Republic spinning off Frontier is with the debt. It sounds as if that debt was tied to the airline a long time ago.

In a sale, how much debt is taken is negotiable. Its part of the sales price. In a spinoff, it is all what debt was tied to F9 earlier.

I suspect this deal will fall through. It will be interesting to see how Frontier does on their own.

Quoting kingcavalier (Reply 41):
Instead, BB squandered resources and time, capital which should have gone into what Indigo is hopefully getting ready to do.

That we can agree on. However, its too late to turn back the clock...

Quoting jerseyguy (Reply 42):
capital is needed to really run the airline in the fashion it needs to be.

Only Indigo would invest enough. I think Frontier could get by for a while. But they will need the capital to re-align the product. There are other ways to come up with the money. Alas, I'm not sure what mechanism would work to provide the funds... I do not know.

Lightsaber
"They did not know it was impossible, so they did it!" - Mark Twain
 
gustywinds
Posts: 141
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 5:40 am

This is the best link to illustrate the uncertainty of the F9 employees during WN's failed bid attempt.

http://www.blogsouthwest.com/news/li...iscuss-southwest’s-bid-frontier/

It's a transcript of a conference call held by WN execs and the Q & A with different news outlets. It says WN would've immediately dropped 20% of F9's Airbus flying, basically taking it down to 40 aircraft. They do say they thought Lynx was profitable and would keep it flying. It discusses Mccaskill-Bond legislation but they never say they would fair and equitably merge F9's employees with WN's employees. They discuss attrition at WN and say F9 employees would need to interview. It's a great read if you want to relive what happened.
 
F9Animal
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 10:49 am

I can't blame the pilots one bit for standing their ground. If Indigo is that hell bent on screwing over the pilots, it just shows how much vision they have for their potential employees. Mentioned earlier, could Air Wisconsin take a chance and buy F9? Sure! However, they would have to be much smarter than Republic was. BB and his crew royally screwed the pooch, and clearly mismanaged almost every aspect of combining YX and F9. Plenty of terrible decisions, and costly knee jerking moves. BB and crew wasted millions upon millions of dollars, and obviously had no Idea of what they were doing. F9 would have been much better if they had not inherited YX's mess. I am sure BB still wishes he had never combined the two.

Anyways, I suspect Siegel and BB are using scare tactics to force further concessions from the workers. Indigo has to accept the fact that they are buying a good airline, and some amazing employees. Indigo also needs to understand that these employees have been through absolute hell, and absolutely terrible leadership. If Indigo thinks for a minute that it can start snatching anything it wants from employees, they will have a rude awakening. The pilots alone have saved F9 more than once. Wish the employees could just buy the airline.
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capejet
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 2:14 pm

So I guess the way it works is pilots go to work for the Ultra Low Cost Carrier and work longer hours at lower pay rates, so the ULCC can then have $9 sales (Spirit Airlines). So that is what Frontier will be all about when Indigo takes over?
 
VS11
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 3:48 pm

The F9 story is certainly fascinating - somehow the WSJ article is open through a google search and the key points in it are :

1. "In 2011, Frontier agreed to give its pilots an equity stake in the company or a $7.2 million cash settlement in exchange for cuts to their pay and benefits, according to regulatory filings. Indigo would like to terminate or reduce promised equity stakes for Frontier's pilots and flight attendants, these people and another person familiar with the talks said."

2. "Indigo is negotiating with the Frontier Airlines Pilots Association," and that's the union that negotiated the deal in 2011. However, "the International Brotherhood of Teamsters replaced the association as the aviators' representative and sued Frontier in federal court to annul the agreement that promised the equity stake, according to the filings. Litigation is continuing.".." Craig Moffatt, head of the local Teamsters chapter, said his union legally represents all Republic pilots, including Frontier's. "Indigo is talking to the wrong pilots," he said."

3. "Indigo is also far apart in talks over the equity stake with Frontier's flight attendants, though the two sides are negotiating, people familiar with the talks said."

4. "...any deal would likely include Indigo-owned Frontier assuming hundreds of millions of dollars of liabilities, according to the two people familiar with Indigo's thinking. One of the people said that in addition to any liabilities, Indigo would pay between $20 million and $50 million to Republic for Frontier."

It looks like Indigo is trying to work it out with the pilots and FA's who got shares in F9. As shareholders in F9, the pilots and FA's could be bought out just as RAH is. If they want to continue to be shareholders alongside Indigo then it is almost a given that in the new capital structure of the firm, their shares will be valued less as the company will supposedly have hundreds of millions of dollars in debt.

Also, if the pilots and FAs decide that they want to cash out their shares to Indigo, they have to agree to a price. Logically, this shouldn't be that difficult as if Indigo and RAH agree on a sale transaction then they are technically setting a fair market value of F9. Now the pilots and FA's may disagree to what that fair market value is but in the end of the day, their options may be limited by the fact that they are minority shareholders in F9.

If the deal with Indigo fails, is F9 going to have to file for bankruptcy? If yes, then the pilots and FA's don't have much bargaining power as they can lose their shares or the value of them. And whomever the creditors of F9 are could easily sell their claims to Indigo or some other investor group, which can then assume ownership of F9 in which case the pilots and FA's could be in a more disadvantageous situation. Also, what are the implications for RAH if F9 goes bankrupt? And what is really out there to stop Indigo from setting up an operation identical to what they envision for F9, in the case the current deal fails and F9 has to be liquidated?

Somehow I find the Frontier story much more fascinating than let's say AA/US merger and I really hope they make it through.
 
Jerseyguy
Posts: 2006
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RE: Frontier Sale Talks Stall - Monday Deadline

Sun Sep 29, 2013 5:29 pm

Quoting VS11 (Reply 48):
One of the people said that in addition to any liabilities, Indigo would pay between $20 million and $50 million to Republic for Frontier

how many pilot/FAs does Frontier have? 200. Hoping its more towards $50 million lets say $35M, Republic pays each pilot $100K and each FA $60K they still get $20M and the debts from Frontier paid off. Everyone wins
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