Deal Would Give Ownership Share To The Carrier's Pilots

In a recent filing with the SEC, Republic Airways Holdings announced a program to restructure the its subsidiary Frontier Airlines, Inc. by making changes to its network, fleet allocation and operating costs to improve overall business results by $100 million annually. A part of that effort included restructuring wages and benefits, including the Frontier pilots represented by the Frontier Airlines Pilot Association ("FAPA").

On June 10, 2011, Frontier reached a tentative agreement with FAPA which will lead to the postponement of certain pay increases, reduced Company contributions to the Pilots' 401(k) plan, reduced accruals for vacation days and sick days and   an extension of the collective bargaining agreement by two years The agreement is subject to ratification by the Pilots and final board approval by the Company. The vote on ratification is expected to conclude by June 17, 2011.

In exchange, FAPA will receive an equity stake in Frontier. The Company has agreed to certain other conditions which must be met during the term, including aircraft growth at Frontier, a liquidity raise of at least $70 million by the Company through one or more debt issuances or other financings, material execution of Frontier's restructuring program by the end of 2011, and a good faith effort by the Company to attract equity investment(s) in Frontier that would reduce the Company's ownership of Frontier to a minority interest by December 31, 2014. In addition, the Company has agreed to establish a profit sharing program for Frontier employees.

Republic won a bidding war with Southwest for Frontier in 2009 while the regional carrier was in bankruptcy. The airline emerged from Chapter 11 in September of 2009, and eventually became the unified brand for its self and Midwest Airlines, another Republic holding.

The Indianapolis Star reports that leadership of the pilot's union is still not sure how the vote will turn out. Analysts say the airline is facing stiff competition from legacy carriers United and Delta, as well as former suitor Southwest at some of the hub airports it serves.

FMI: www.frontierairlines.com