NEW YORK (The Deal) -- Indigo Partners' planned $145 million acquisition of Frontier Airlines appears on track to close as scheduled as the private equity firm, according to sources, has made steady progress working out some contentious issues with the airline's workers.
Phoenix-based Indigo on Oct. 1 announced plans to acquire Frontier from Republic Airways Holdings (RJET) for $36 million in cash and $109 million in debt, but that deal was contingent on Indigo first resolving thorny equity rights issues with Frontier's flight attendants and pilots. Disagreements over redemption of those rights, which were granted to Frontier workers in 2011 in exchange for concessions, had delayed a deal for months prior to the announcement.
Terms of the deal with Republic gave Indigo until the end of October to resolve those issues. Though the parties offered no comment on Tuesday, sources close to Frontier said that Indigo has a tentative deal in place with FAPA Invest, the fiduciary of the pilot equity interest, and expects to have the flight attendants on board to allow for a close.
"A fair deal is in place," one source familiar with the pilot negotiations said. "Pilots are no longer an issue."
All parties involved have been motivated to complete a deal. Republic and Frontier workers are eager to undo the company's 2009 purchase of Frontier out of bankruptcy protection, and Indigo hopes to continue to transform Frontier into a so-called ultra-low-cost carrier similar to one-time Indigo portfolio company Spirit Airlines (SAVE).
But even if the dispute is resolved to allow for the deal to close, the equity rights grant figures to continue to be an issue at Frontier for some time. The International Brotherhood of Teamsters, the union representing pilots at Republic who won a 2011 election to represent Frontier fliers as well, has litigation pending arguing that the equity rights deal violated labor rules.