Southwest plans $114M bid for Frontier

— -- Southwest Airlines, already the top domestic carrier by some measures, wants to get nearly 10% bigger overnight by acquiring struggling rival Frontier.

Southwest has filed its intent to bid at least $113.6 million for the Denver-based carrier that has been operating in Chapter 11 bankruptcy since April 2008. Frontier already had a bid on the table from Republic Airways Holdings, the parent of a string of regional carriers. The auction is expected on Aug. 11.

Republic, based in Indianapolis, could try to outbid Southwest, as could others. But Southwest has the strongest balance sheet of any U.S. carrier right now. It has $2.4 billion in cash and access to credit.

"We're in this to win," said Ron Ricks, a Southwest executive vice president.

Tactically, buying Frontier would remove a low-fare competitor in the large Denver market and strengthen Southwest in competition against United, which has more than 50% of the market there. Strategically, the deal could give Southwest a way into several key U.S. markets it has never served, including Atlanta and Reagan National airport in Washington, D.C. Frontier flies to both.

Combined, Frontier and Southwest carry about a third of all Denver passengers. They compete directly on 27 routes.

Southwest officials said some of Frontier's capacity could be shifted to Denver routes that currently are flown on a non-stop basis only by United, creating new low-fare competition.

Vaughn Cordle, analyst and consultant at AirlineForecasts, says Southwest's non-binding bid is a "smart strategic and financial move" because it would be acquiring a carrier that he values at around $300 million at a lower bankruptcy auction price. Southwest's domestic market share also would increase 9.7%, which would make it by far the largest domestic carrier.