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The Deal: More Than Flight Delays in Store for Frontier Airlines

Stocks in this article: RJET

NEW YORK ( The Deal) --The union representing pilots at Frontier Airlines is warning that the airline's $145 million sale to Indigo Partners "may be in jeopardy" because the potential buyer is not negotiating with the labor group directly.

Indigo on Tuesday announced plans to buy Frontier from Republic Airways Holdings (RJET) for $36 million in cash and $109 million in debt, but that deal is contingent on Indigo first resolving thorny equity rights issues with Frontier's flight attendants and pilots. Indigo has until the end of October to resolve those issues and other matters.

Complicating matters is a lingering battle over who represents Frontier's pilots. Prior to Republic's 2009 purchase of the airline out of bankruptcy the aviators had their own union, the Frontier Airlines Pilot Association. After, Republic pilot union International Brotherhood of Teamsters successfully campaigned to the National Mediation Board that there should be one union representing pilots at all Republic subsidiaries, and the Teamsters in June 2011 won an election among the combined groups.

The equity rights plan, which traded concessions at Frontier for equity in the event of a sale of the unit, was negotiated around the same time but without the input of the Teamsters. A separate group, FAPAInvest LLC, is the fiduciary of that equity interest.

Craig Moffatt, president of Teamsters Local 357 which represents Republic pilots, in a statement said that his group has not been involved in negotiations over the equity, what he called "further proof that Republic Airways Holdings has violated labor laws in its dealings with the pilots."

The Teamsters already have litigation pending against FAPAInvest, which it calls "an alter-ego" of the former Frontier union, over the equity stake and other representation issues. The union in its statement said it "is reviewing and considering all legal options" following the deal announcement.

The union last week asked the U.S. District Court in Colorado to expedite ongoing litigation between the sides.

FAPAInvest disputes the Teamsters' claims. Regardless, the dispute highlights the level of uncertainty that still surrounds Republic's sale of Frontier nearly two years after the Indianapolis-based parent put Frontier on the block. Indigo, according to sources, is seeking to "substantially wipe out" the equity grants, and faces difficult negotiations even without the complication of a battle over labor representation.

Written by Lou Whiteman

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