The risks of Republic Airways Holdings' Frontier purchase
A Wall Street Journal article published in the wake of Republic Airways Holdings' surprising victory over Southwest in the Frontier Airlines sweepstakes may temper the enthusiasm with which most locals viewed this unexpected turn. "Commuter Airline Aims Higher," written by Susan Carey, calls Republic's so-called "acquisition spree" risky and points out that the currently profitable firm is "thinly capitalized." As of June 30, Republic had "$97 million in cash" but "long-term debt of $2.2 billion," not counting the $1 billion or so in debt and aircraft-license obligations from Frontier that it's promised to assume. No wonder Republic CEO Bryan Bedford hopes to announce success in an attempt to raise $120 million in fresh revenue sometime this week.
In all likelihood, Republic will succeed in this last effort. But considering the continued economic pressures assailing the airline industry, no one at the firm should assume that the purchase of Frontier will guarantee clear skies.
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