Republic Airways Holdings said Tuesday that it has agreed to sell Frontier to an affiliate of the private-equity firm, Indigo Partners, a key early investor in ultra-low cost carrier Spirit Airlines.
Indigo's affiliate will pay $36 million in cash, and assume roughly $109 million in Frontier's debt.
Officials at Republic and Indigo said that once the sale is completed, the plan is to continue trying to position Frontier, a small carrier possibly best known for the colorful animals on its fleet's tails and its devoted customer base in Denver, as an ultra-low cost carrier in the same vein as Spirit or Allegiant.
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"We endorse and will support continued efforts to build Frontier into a leading nationwide ultra-low cost carrier," Indigo Partners' managing partner William Franke, said in a statement announcing the agreement. "As airline fares continue to move up, passengers need affordable travel alternatives."
William Swelbar, research engineer with Massachusetts Institute of Technology 's International Center for Air Transportation, says Franke's interest is not surprising.
"This fits Franke's mold,'' he said, "and I think he believes that there's some magic here that he can perform with this airline . . . that through consolidation of the industry, there are opportunities for another ultra low cost carrier.''
Swelbar says that passengers who want the lowest fare possible, and don't fret much about frills, may welcome yet another ultra low cost airline. But to truly meet that need, Frontier may have to abandon Denver as a primary base.
"I'm not so sure that an ultra low cost carrier will continue to choose Denver,'' he says. "Hubs add costs.''
More likely, he says, is "a lot of one off flying. I think this is going to look a lot like Spirit, and less like Allegiant, where they're finding some holes in the schedule out there that they can take! advantage of, and move into some markets that tend to be higher priced.''
Before Frontier's sale can be finalized, there needs to be an agreement with the Association of Flight Attendants and others. If those hurdles are cleared, Republic says the deal should close in December.
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