Republic Airways to reduce stake in Frontier Airlines as part of restructure
Republic Airways Holdings announced (10-Jun-2011) a programme to restructure the company’s subsidiary, Frontier Airlines, by making changes to its network, fleet allocation and operating costs to improve overall business results by USD100 million annually. As part of this, the carrier has reached a tentative agreement with Frontier pilots represented by the Frontier Airlines Pilot Association (FAPA). FAPA agreed, in principle and among other things to the following:
- The postponement of certain pay increases;
- Reduced Company contributions to the Pilots’ 401(k) plan;
- Reduced accruals for vacation days and sick days;
- 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 17-Jun-2011.
In exchange for the Investment, FAPA will receive an equity stake in Frontier. The company has agreed to certain other conditions which must be met during the term to continue the Investment by FAPA. Those conditions include aircraft growth at Frontier, a liquidity raise of at least USD70 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 31-Dec-2014. In addition, the Company has agreed to establish a profit sharing programme for Frontier employees. [more]