The airline industry has been hit hard by rising fuel costs, and at least one of Denver's leading carriers has had to think way outside of the box as a result. The parent company of Frontier Airlines and the carrier's Pilots Association announced earlier this week that they have agreed to restructure the airline's ownership.
The airline has been struggling financially, according to an executive. As an example, he said that last year's business plan was based on fuel priced at $2.75 per gallon, significantly lower than the current $3.50 per gallon.
According to reports, the tentative agreement gives the pilots union an equity stake in the business (the size of the stake was not disclosed). The agreement also calls for the creation of a profit-sharing plan for all Frontier employees.
For its part, Frontier's parent company, Republic Airways Holding Co. Inc., has agreed to reduce its ownership stake by recruiting other equity investors. By the end of 2014, Republic has promised to hold only a minority interest In Frontier.
Both the pilots union and the Republic board must agree to the terms for the deal to go through. If approved, the restructuring plan will be materially complete by the end of this year.
Frontier was an independent carrier until 2009, when Republic took it over. The parent has been working to combine Frontier's operations with another regional carrier's for a few years.
Competition is stiff in Denver, though, and Frontier has fallen behind. Other airlines have been more aggressive or more successful in attracting customers and keeping costs down, leaving Frontier in third place in the Denver market.
Source: Bizjournals.com, Ownership of Frontier Airlines to change under pilot deal, Mark Harden, 11 Jun, 2011