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Sat, Mar 07, 2009

Frontier Receives More DIP Financing From Republic Airways

Money Will Repay Earlier Loan, Provide A "Cushion"

Republic Airways Holdings is building a reputation for bailing out cash-starved airlines. On Thursday, Frontier Airlines announced it has received a new commitment for $40 million in post-petition debtor-in-possession (DIP) financing from Republic, subject to bankruptcy court approval and other pre-closing conditions.

The Denver Post reports the loan will essentially repay an earlier $30 million loan granted by the Indianapolis-based regional airline, as well as providing Frontier with a $10 million "cushion to move forward," in the words of Frontier spokesman Steve Snyder.

"Since filing for Chapter 11 protection, we have lowered our unit costs, right-sized the operation to adjust for a challenging economic climate, improved our unit revenue performance and customer product satisfaction with the introduction of AirFairs and maintained sufficient liquidity to execute upon our business plan," said Frontier CEO Sean Menke.

"This financing commitment is a tremendous vote of confidence in the company's plan and validates our employees' significant efforts during the restructuring. This new DIP facility refinances the existing DIP loan that matures in April 2009, increases the available financing compared to the expiring DIP loan and preserves our financial stability as we seek a plan sponsor to emerge from bankruptcy later this year."

Republic CEO Bryan Bedford added "we believe Frontier is on the right path to emerge from bankruptcy this summer as a very efficient, low-cost airline."

Frontier's announcement follows last September's news that Republic, in partnership with investment group TPG Capital, issued $60 million in DIP financing to cash-starved Midwest Airlines. As part of that agreement, Republic was granted rights to operate 12 regional jets for Midwest, to replace mainline planes (and mainline pilots.)

Neither Frontier nor Republic stated whether the regional carrier might resume flying for Frontier, as part of the loan agreement. Republic operated regional routes for Frontier from March 2007, until the Denver-based airline filed for Chapter 11 bankruptcy protection in April 2008 and terminated the contract. Frontier has since moved its regional operations in-house, through its Lynx subsidiary.

FMI: www.frontierairlines.com, www.republicairlines.com

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