The inability of Southwest and Frontier pilots to work out seniority differences killed Southwest's $170 million bid to buy the Denver-based airline and lead it out of bankruptcy.
Instead, Republic Airways Holdings won the right to buy Frontier for $108.8 million at Thursday's bankruptcy auction.
Frontier and regional operation Lynx Aviation will be run as wholly owned subsidiaries, Republic said.
"I look forward to welcoming Frontier to our Republic family," said Republic CEO Bryan Bedford. "Frontier has made impressive strides in returning to sustained profitability in a challenging and uncertain economic environment. We congratulate the employees of Frontier. Their commitment and perseverance during the bankruptcy process has allowed the Frontier brand to survive and thrive."
Republic recently completed an acquisition of Midwest Airlines. Now with Frontier in its stable, the Republic is bigger than AirTran, using available seat miles as a yardstick.
It’s a new ball game for the Indianapolis-based company, which until now had focused mainly on running regional air service for major airlines.
Through subsidiaries Chautauqua Airlines, Republic Airlines and Shuttle America, Republic provides planes and crews to major airlines to schedule, book and market under their own regional brands, including AmericanConnection, Continental Express, Delta Connection, Midwest Connect, United Express and US Airways Express.
Republic's crews now operate 1,200 flights daily to 99 cities in 34 states, Canada, Mexico and Jamaica.
On paper, it looked like Republic had no chance to take Frontier away from Southwest, which had raised its bid by 50% over its initial placeholding offer.
Analysts had said it was clear that by upping the ante by such a large amount, Southwest was signaling it would brook no other comparable bids.
But Southwest executives also sent another clear signal – the bid was contingent on its pilots taking the deal. And federal law in this case required the two pilot groups work out their differences or face binding arbitration.
The sticking point was seniority. Frontier pilots wanted to keep theirs and Southwest junior pilots didn’t want to be knocked down a few rungs on the seniority ladder.
The pilot unions met but failed to clear that hurdle.
"One of the contingencies in Southwest's proposal was that labor groups from the two airlines would need to reach an agreement on how the two pilot unions would work together," Southwest said on Thursday evening.
"Despite a good faith and diligent effort by all involved, including the top leadership of the Southwest Airlines Pilots Association and the Frontier Airlines Pilots Association, who labored long into the night, the two unions were not able to come to an agreement before the auction deadline. As a result, Southwest's bid was deemed unacceptable."
Southwest will remain committed to Denver, the airline said.
