According to an official press release, Republic Airways Holdings Incorporated announced earlier today that it has entered into a definitive agreement to sell Frontier Airlines to an affiliate of Indigo Partners LLC in an all-cash transaction valued at approximately $145 million.
$36 million — subject to certain adjustments under the purchase agreement — of that $145 million is to be paid in cash for the equity of Frontier Holdings; and the balance is indebtedness that will be retained by Frontier Airlines. Additionally, Indigo Partners LLC intends to invest additional funds directly in Frontier Airlines after the closing of this deal, which is expected to occur in December of 2013.
Denver is expected to remain as the location of the headquarters of Frontier Airlines. Indigo Partners LLC — which purchased Spirit Airlines in 2006 — intends to continue the transformation of Frontier Airlines into an ultra-low-cost airline after the deal has completed. There are years of experience to lead that effort, as William Franke — the former chairman and chief executive officer of America West Airlines and a current managing partner of Indigo Partners LLC — was named chairman of the board of directors of Spirit Airlines when it was acquired by Indigo Partners LLC in July of 2006.
Under a separate agreement as part of the transaction, Republic Airways Holdings Incorporated will assign all of its rights under agreements relating to its Airbus A320neo order to Frontier Airlines in exchange for reimbursement of pre-delivery deposits, which total $32 million.
Republic Airways Holdings Incorporated — which won the bid over Southwest Airlines to purchase Frontier Airlines back in August of 2009 — had been attempting to unload Frontier Airlines for almost two years.
FlyerTalk members are currently uncertain as to how this deal — pending negotiations with labor unions — will affect them. At least a couple of FlyerTalk members are concerned about redeeming their EarlyReturns frequent flier loyalty program miles sooner than later.
If the history of past acquisitions and mergers are any indication, there is no reason to be concerned about your EarlyReturns frequent flier loyalty program miles at this time. They should be safe. The worst that could happen is that they may become devalued in some way if there are any changes to the policies, terms, rules and conditions of the EarlyReturns frequent flier loyalty program. Even then, any devaluation would take time.
What are your thoughts on the purchase of Frontier Airlines by Indigo Partners LLC? Will Frontier Airlines simply become another Spirit Airlines?