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Southwest makes bid to buy Frontier Airlines

July 31, 2009|Associated Press

DALLAS — Southwest Airlines Co. is trying to trump a rival bid and acquire Frontier Airlines, a Denver-based carrier operating under bankruptcy protection.

The move could strengthen Southwest's position in Denver and speed the low-cost carrier's expansion into new markets such as Atlanta and resort areas in Mexico.

A court had already approved the sale of Frontier Airlines Holdings Inc. to the parent of Republic Airways for $108.8 million, but that deal can be nixed if a better offer comes along.

Dallas-based Southwest said Thursday it submitted a nonbinding bid of $113.6 million. Southwest hopes that making the bid will allow it to talk with Frontier and get information to help shape its final proposal.

Southwest said it faces an Aug. 10 deadline for submitting a binding bid. If there is more than one qualified bidder, an auction will be held the following day.

"We are in this to win, and we think we have the resources to be successful," said Ron Ricks, Southwest's executive vice president.

U.S. airlines are struggling through a terrible slump in travel as the recession has grounded many business passengers.

But Southwest has $2.2 billion in cash and short-term investments and could probably borrow on its investment-grade credit rating.

Southwest said it would operate Frontier as a separate wholly owned subsidiary for a couple of years until its operations can be combined with Southwest.

Ricks said Southwest had "been considering a bid for some time, independent of any action Republic took with its bid proposal. In the past month, we began an intensive study of the airline and expressed that interest to Frontier."

Republic spokesman Carlo Bertolini said his company was reviewing Southwest's announcement and that it was too early to know if Republic would raise its bid.

Southwest recently went back into Frontier's home market of Denver, where it also competes against UAL Corp.'s United Airlines.

Southwest shares rose 6 cents to close at $7.73. Republic shares dipped 3 cents to close at $5.19.

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