Frontier Airlines would become a subsidiary of Republic Airways under a bankruptcy reorganization plan announced Monday afternoon.
Denver-based Frontier, which is operating under Chapter 11 protection, said it has entered into an investment agreement with Indianapolis-based Republic Airways Holdings Inc., one of its creditors, under which Republic would serve as equity sponsor for Frontier’s plan of reorganization and purchase 100 percent of Frontier’s equity for $108.75 million.
The agreement is subject to bankruptcy court approval and various conditions.
Frontier said that under the plan, Frontier Airlines Holdings Inc. would become a wholly owned subsidiary of Republic, an airline holding company that owns Chautauqua Airlines, Republic Airlines and Shuttle America.
It said that Frontier Airlines and its short-haul unit, Lynx Aviation, would keep their current names and operate as they do now.
Frontier, which had been one of the top 10 carriers at Sacramento International Airport, filed for Chapter 11 bankruptcy protection in April 2008.
Monday, Frontier filed its proposed plan of reorganization and related documents with the U.S. Bankruptcy Court in New York.
It also said it filed a motion for the court to approve the investment agreement with Republic, “subject to higher and better proposals under a court-supervised auction.”
A hearing on the proposed transaction is set for July 13.
Frontier’s reorganization plan calls for general unsecured creditors to get $28.75 million.
It said an additional $40 million of the sale proceeds would repay outstanding “debtor-in-possession” financing from Republic Airways Holdings.
If approved by the bankruptcy court, Frontier’s current equity “would be extinguished and holders of that equity would not receive any recovery,” the airline’s statement said.
“This agreement represents a major milestone in our ongoing efforts to position Frontier to emerge from bankruptcy as a competitive, sustainable airline,” Sean Menke, Frontier president/CEO, said in a statement.
He said Frontier management is “pleased that this agreement allows our customers and communities to continue to receive the outstanding service for which Frontier is known, while preserving the jobs of most Frontier employees.”
Staff cuts, if any, were not announced.
“We believe this agreement represents a new beginning for Frontier, positioning it to build on its recent successes and strengthen the Frontier brand for the benefit of employees and the customers and communities it serves,” Bryan Bedford, chairman, president and CEO of Republic Airways, said in the statement.