Republic Airways looking into split with Frontier
The Associated Press
Aspen, CO Colorado
Frontier Airlines could soon be up for sale.
Known to travelers as the airline with pictures of animals on the tails of its planes, Frontier has lost $102.4 million this year. Smaller planes have been jettisoned and unprofitable flights cut by its owner, Republic Airways, in an attempt to turn Frontier’s finances around.
Republic believes that Frontier will be profitable next year, not counting interest payments, and says it will bring advisers on board to help find a buyer.
“We think that airline is going to be attractive either to private equity or to our shareholders or potentially to a strategic investor,” Republic Chairman and CEO Bryan Bedford said Tuesday.
The company had “substantially achieved” the $120 million in cost savings it was seeking for Frontier, Bedford said.
Frontier had 95 planes as of Sept. 30, down from 100 a year ago.
Republic bought Frontier out of bankruptcy protection in 2009 with a bid of $108.8 million, beating out Southwest Airlines Co.
At the time, Republic’s primary business was feeding passengers to major airlines, such as Delta and US Airways. Under that agreement, the big airlines find the passengers and pay the fuel bills, leaving carriers like Republic to focus on efficiency.
Frontier, in contrast, must find its own customers and pay its own bills. At its main hub in Denver, where it is based, it goes head-to-head with Southwest Airlines and United.
Republic now says it wants to return to its roots of feeding larger airlines, Bedford said.
That sent shares of Republic Airways Holdings Inc. soaring by 62 percent, or $1.66, to $4.35.
The Indianapolis carrier said Tuesday that third-quarter net income fell to $9 million, or 18 cents per share, for the quarter that ended Sept. 30. During the same period last year it earned $21.2 million, or 58 cents per share. Revenue rose 7.9 percent to $767.9 million, from $711.9 million a year ago.
Not counting special items, Republic said it would have earned $20.4 million, or 40 cents per share, in the most recent quarter. Analysts surveyed by FactSet had been expecting a profit of 24 cents per share on revenue of $763.3 million.
Frontier lost $4 million for the quarter as it endured $10 million in expenses from a hailstorm in Denver that damaged planes, as well as $5 million in paper losses on fuel hedges, and $4.3 million in expenses related to its fleet changes.
Republic reported a $17.3 million profit for its segment that flies for hire for other airlines.