NEW YORK (The Deal) -- Republic Airways Holdings (RJET ) on Tues., Sept. 17, further delayed the long-running auction of its Frontier Airlines discount unit, extending exclusive negotiations with a potential buyer until Sept. 30.
Indianapolis-based Republic, which has had Frontier on the block since November 2011, in July signed a nonbinding term sheet with an unnamed party interested in acquiring the discounter. Industry sources say the would-be buyer is private equity firm Indigo Partners, which this summer liquidated its stake in discounter Spirit Airlines Inc. ahead of a potential Frontier bid.
Republic acquired Frontier out of bankruptcy in 2009 for $108.75 million and added Midwest Air Group Inc. soon after in an attempt to build a viable discount brand, but the Frontier unit has been a distraction to Republic's core business providing small jet service under other airline brands, and has lost money during much of the time Republic has owned it.
Republic chairman and CEO Bryan Bedford in a statement said "we have made substantial progress towards reaching a definitive agreement with the buyer," saying that "we believe providing the additional time will allow for the process to be completed."Sources have said to expect Frontier to be sold for little cash, with the buyer instead assuming a significant amount of debt and Republic possibly holding onto a sliver of equity. If Indigo is indeed the buyer, the private equity firm is likely to accelerate the transformation of Frontier into a so-called ultra-low cost carrier similar to Spirit, which is known for its low fares and fees for specific services like carry-on bags and beverage service. The extension comes on the same day that Republic's board was set to meet, with some sources familiar with the company predicting a sale announcement as soon as Tuesday following a board vote. It is unclear whether the Republic board had objected to some aspect of the proposed deal, or if the delay is just a formality. "The hope among workers is that this is resolved soon," a source said. -- Written by Lou Whiteman
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