Wed, Jun 15, 2011
Deal Would Give Ownership Share To The Carrier's Pilots
In a recent filing with the SEC, Republic Airways Holdings
announced a program to restructure the its subsidiary Frontier
Airlines, Inc. by making changes to its network, fleet allocation
and operating costs to improve overall business results by $100
million annually. A part of that effort included restructuring
wages and benefits, including the Frontier pilots represented by
the Frontier Airlines Pilot Association ("FAPA").
On June 10, 2011, Frontier reached a tentative agreement with
FAPA which will lead to the postponement of certain pay increases,
reduced Company contributions to the Pilots' 401(k) plan, reduced
accruals for vacation days and sick days and an
extension of the collective bargaining agreement by two years The
agreement is subject to ratification by the Pilots and final board
approval by the Company. The vote on ratification is expected to
conclude by June 17, 2011.
In exchange, FAPA will receive an equity stake in Frontier. The
Company has agreed to certain other conditions which must be met
during the term, including aircraft growth at Frontier, a liquidity
raise of at least $70 million by the Company through one or more
debt issuances or other financings, material execution of
Frontier's restructuring program by the end of 2011, and a good
faith effort by the Company to attract equity investment(s) in
Frontier that would reduce the Company's ownership of Frontier to a
minority interest by December 31, 2014. In addition, the Company
has agreed to establish a profit sharing program for Frontier
employees.
Republic won a bidding war with Southwest for Frontier in 2009
while the regional carrier was in bankruptcy. The airline emerged
from Chapter 11 in September of 2009, and eventually became the
unified brand for its self and Midwest Airlines, another Republic
holding.
The Indianapolis Star reports that leadership of the
pilot's union is still not sure how the vote will turn out.
Analysts say the airline is facing stiff competition from legacy
carriers United and Delta, as well as former suitor Southwest at
some of the hub airports it serves.
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