Southwest bid for Frontier hits a snag
August 13, 2009
Plans by Southwest Airlines to buy Frontier Airlines out of bankruptcy hit a snag on Thursday as pilots for the two carriers failed to work out a deal on how they would merge their ranks.
Southwest has said its $170 million bid to take Frontier out of Chapter 11 is contingent on pilots from the two airlines making a deal on seniority.
As of Thursday, that hadn’t happened. Talks ended between the two pilot unions around midnight Wednesday, said Carl Kuwitzky, president of the Southwest Airlines Pilots’ Association.
Seniority is a key issue for pilots; in a merger, seniority rankings can be more contentious than pay. Seniority determines a pilot’s rights for schedules and protects them if there are layoffs.
Kuwitzky said the Southwest pilots’ offer was to put Frontier pilots at the bottom of the combined seniority list. For pilots in an airline merger, that’s considered the worst possible outcome.
An auction had been expected to begin Thursday to sort out competing bids by Southwest and regional jet operator Republic Airways Holdings Inc. On Monday Southwest bid $170 million for Frontier, topping an earlier $108.8 million bid by Republic.
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Southwest spokesman Chris Mainz said the airline is still participating in the process but he declined to provide details. He said the auction process can continue through Monday.
Republic has said it would keep Frontier as a stand-alone carrier, while Southwest plans to absorb the airline over about two years, dumping Frontier’s Airbus planes in favor of its all-Boeing 737 fleet.
Kuwitzky said Southwest pilots offered to guarantee that their Frontier colleagues would not lose pay if they go from being a Frontier captain to being a Southwest first officer.
Kuwitzky said they based their offer to Frontier pilots on the career expectations of both. Southwest pilots had higher career expectations than Frontier pilots, who work for a carrier that won’t get out of bankruptcy unless someone else buys it, he said.
“We understood their needs. They wanted their jobs, and we think we’ve offered all of them jobs at Southwest, which we think would be a much more secure future for them than Republic would be,” he said.
He said it was possible talks could resume. “We’ll negotiate through the weekend if necessary,” he said.
Frontier Airline Pilots Association President John Stemmler and a Republic spokesman did not return phone messages.
Federal labor law generally requires binding arbitration to work out seniority issues in an airline merger, putting Southwest pilots at risk of a ruling they wouldn’t like. So Southwest, at the request of its pilot union, included a clause in the Frontier bid requiring labor agreements before the acquisition would close, according to an update the Southwest union issued to its pilots.
While Frontier pilots are able to make some kind of deal before their airline is sold, other workers aren’t so lucky. The head of the union local in Denver that represents 415 Frontier mechanics and other workers said two Southwest vice presidents told them on Wednesday that the airline intends to eventually liquidate Frontier and hire only a handful of its members.
“We obviously think that’s outrageous,” Teamsters Local 961 President Matthew Fazakas said Thursday. “They told us only a handful of people would be offered jobs, and they were not coming over by seniority.”
Southwest shares rose 23 cents, or 2.6 percent, to close at $9.24, while Republic shares fell 14 cents, or 2.3 percent, to close at $6.