Things in the Sky

From Southwest’s blog:

Today, Southwest Airlines confirmed that it is preparing a bid to acquire Denver-based Frontier Airlines, which will be sold at auction in bankruptcy court next month.

From an interview with the company’s Ron Ricks:

Southwest is still preparing the proposal, so it’s premature to comment on the specifics at this time.  What we can say is that we are interested in a substantial investment in Frontier and to operate Frontier as a wholly-owned subsidiary, independently and separately from Southwest Airlines, for a period of time until the carrier could be combined into Southwest.

And later on:

Frontier would continue to operate independently and separately for a period of time with its Airbus aircraft and personnel.  Over time, Frontier Employees would be hired into Southwest as needed to support our fleet growth and expanded operations.

So, this is very interesting to say the least. But, unfortunately all we know is that Southwest is planning to compete with Republic on this one, but there’s not much in terms of detail as to what Southwest will do with Frontier. For example, when asked about Lynx, Ron said that “Southwest Airlines will study Lynx.”

I think some clues can be found from last week’s earnings call, when one analyst asked about a potential deal. Gary Kelly responded:

Our desire is to maintain the integrity of our fleet, which is, of course, an all Boeing 737 fleet. We have absolutely no interest in any kind of a regional jet operation. So any opportunity out there is going to have to fit our operating style…So in summary I think we’re open, but I certainly can’t comment specifically on any particular situation.

So, there are definitely more questions than answers. What happens with Frontier’s fleet? Based on what Gary said during the call Southwest would probably like to dump those over time. Will Lynx be completely dismantled? Will they operate as a separate subsidiary? Could Southwest find somewhere else to use those Q400s? Frontier has a few Mexico destinations – what does that mean for the Volaris deal? Frontier has service out of DCA and ATL – what happens there? (This would also give Southwest some more LGA slots to boot.)

There’s plenty of stuff to ask about here. I guess we’ll just have to see how it plays out.