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Southwest Airlines Takeover Bid for Frontier Airlines Stalled Over Pilot Unions Deal

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Frontier Airlines old school logoDenver-based Frontier Airlines is on the auction block. Will Southwest Airlines swoop in and buy it?

Not unless the companies can get their pilot unions on board.

Find out the chances of this corporate marriage ending happily ever after…

Southwest Airlines’ bid for the Frontier Airlines has stalled over labor discussions as pilot unions failed to reach an agreement last night.

On Monday, the Dallas-based Southwest submitted a $170 million offer for the Denver-based Frontier, up from a previous bid of $113 million and beating out a bid of $108.75 million by Republic Airways Holdings Inc.

Part of Southwest’s formal bid includes pilot-seniority integration. According to an internal Southwest email obtained by the Dallas Morning News, Southwest’s position is to place Frontier union pilots at the bottom of the Southwest Master Pilot Seniority list.

Frontier Airlines planeThe Frontier Airline Pilots’ Association balked at the agreement, which also included pay protection for Frontier’s pilots after transitioning to the Southwest Pilots’ Association (SWAPA) master list. SWAPA has maintained that any bid from Southwest must include the labor contingency clause to protect its pilot group.

Because an agreement couldn’t be reached by the deadline of midnight EST on August 12, Southwest has asked the bankruptcy court for an extension on the auction, which was originally set for Thursday.

Southwest CEO Gary Kelly has said that he will not close the deal unless the two airlines’ unions can reach an agreement, an implicit swipe at the Delta-Northwest merger, which is still wrangling to integrate its combined workforce.

Check out What’s Next for the Delta-Northwest Merger and the Future of Airlines.

A deal with the Frontier, which filed for Chapter 11 in April 2008, would make Southwest a major force in the Denver market, which is currently dominated by United Airlines.

Another part of the bid includes purchasing and phasing out 80 percent of Frontier’s Airbus fleet, and replacing it with Boeing 737s.

The Indianapolis-based Republic Airways Holdings, which operates regional-jet services Chautauqua Airlines, Republic Airlines and Shuttle America, is Frontier’s biggest creditor and stands to gain money even if it loses the auction. Its original bid would keep Frontier largely intact as a wholly-owned subsidiary.

By Sarika Chawla for PeterGreenberg.com.

Related links: USA Today, Dallas Morning News, Fort Worth Star-Telegram, Dallas News Aviation Blog, Wall Street Journal, Associated Press

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