Why buy? Southwest's new Frontier

Maybe it's better to buy something because you want it instead of buying to collect a debt. That may be the lesson in Southwest's surprise bid for Frontier, the Denver carrier that ageed in June that it would be taken over by Republic Airways. Frontier owed Republic money and this way it could satisfy its creditor and keep flying. With Southwest ownership, Frontier flies for another year or two and likely gives way to Southwest's own Boeings after Frontier sells off its Airbus fleet.
What does Southwest get? It gets to bump United even further out of Denver, where UAL was always the big player. UAL now has about 35% of the Denver business, while Frontier has some 20% and Southwest has just 12%. Granted, that 12% is a lot more than Southwest's share at Denver just three years ago when it started up in the Mile High City.

Flinty Republic moves: buy 'em when they're broke

No, this is not consolidation. This is not the beginning of the next merger wave. This is not even about 'bottom fishers'. Instead, Republic Airways' buying spree - in which it is buying both Frontier Airlines in bankruptcy court and Midwest Airlines from private investors - is about protecting its investments. Republic, which owns three regional carriers, has been a lender of next-to-last resort for other airlines. It put money into the US Airways bankruptcy, and it lent Midwest $15 million last year as the Milwaukee-based carrier teetered on the edge. That deal came with strings: Republic also got a deal to fly its regional jets for Midwest, and so a source of revenue. With Frontier, based in Denver, Republic's $108 million bid to bring the carrier out of bankruptcy is way to recoup moneys Frontier already owes it for some flying that the Indianapolis-based Republic did for it.
The deals do also get Republic two brand-name airlines, each of which has had a strong, almost cult-like following. In Milwaukee, where Midwest is based, people think of it as their hometown airline, while Frontier has a similar appeal in Denver. Of course, both cities also have Southwest, whose competition certainly helped squeeze Frontier and which just announced service at Milwaukee.
(Photo: Republic Embraer in Midwest Airlines livery, via Flickr)