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Frontier CEO talks hail storm, restructuring, Southwest Airlines

7:19 AM, Jul 22, 2011   |    comments
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Eighteen of the company's 59 Airbus aircraft sustained damage from heavy hail at DIA on July 13.

The airline had to cancel more than 200 flights this week because of the repairs and inspections needed to return the planes to the air.

"I don't think there's ever a good time for a storm like this," Frontier Airlines President and CEO Bryan Bedford said. "But certainly, the worst time is when your airline is booked to 95 percent."

The airline took a $10 million hit from the storm to accommodate passengers and fix planes, according to Bedford.

"What we have to do is not worry so much about the economic consequences," he said, "but worry more about getting customers to their destinations."

In a letter to employees Monday, Bedford said, "It's money, don't get me wrong, but it hardly rises to the point of being a risk to our survival. Believe me when I say, my biggest worry remains fuel prices and completing our restructuring program, not this hailstorm."

Republic Airways Holdings, Inc. bought Frontier out of bankruptcy protection in 2009 and combined it with Midwest Airlines, a small Milwaukee-based airline.

Republic plans to pull back to a minority stake in the company by the end of 2014, and Frontier pilots last month overwhelming approved concessions to help restructure the airline. They included giving up future pay raises and accepting reduced retirement benefits and vacations in exchange for an unspecified stake in the company.

Asked about the fuel prices and restructuring issues Thursday, Bedford said, "It's critical to get the airline back on a stable financial footing. Now, Republic's a big company," he said. "Could we continue to support Frontier? Certainly we could. OK, so, Republic's resources aren't an issue here. But as any company who invests in businesses, you know you want to get a return on your investment. And we want to make sure that Frontier can survive on its own, without having to rely on Republic's financial strength and we can do that by making sure that all the key stakeholders are participating in the airline's long-term business plan. We haven't had one stakeholder tell us, 'We'd feel like our business would be better without Frontier than with it. And that's why everybody continues to support our business.'"

Specifically in Denver, Frontier has been facing stiff competition from Southwest Airlines. Southwest recently took the number two position in domestic market share at Denver International Airport.

9NEWS asked Bedford about Southwest's effect on Frontier's business in Denver.

"I think the Denver community understands that Frontier is the reason there are low fares in Denver, not Southwest," he said.

"Clearly, it's a third competitor in the marketplace," Bedford added. "And the good news is that fares are incredibly low here. Fares out of Denver on all three of us, on United, Southwest, and Frontier are lower than any other Southwest market, so they're selling product here cheaper than they would any other place that there's no Frontier. You can make your own conclusions on why they do that."

As for rebounding from the hailstorm, two flights to/from Denver are still cancelled Friday, according to the airline's website.

To check flights from Frontier Airlines, visit: http://www.frontierairlines.com/frontier/flight-info/weather.

Frontier wasn't the only airline affected by the hailstorm. Denver's largest carrier, United Airlines, cancelled at least 120 flights but, by Monday, only had to cancel seven smaller commuter flights out of nearly 900 daily flights to and from Denver. Southwest Airlines said three of its planes were damaged by hail, but, with 550 planes in its fleet, it didn't have to delay or cancel any flights.

Helane Becker, an analyst at Dahlman Rose & Co., said it's harder for a small airline like Frontier to recover from weather problems since it doesn't have as many planes as a larger carrier, especially when so many airline seats are booked during the summer season.

However, she said insurance would cover the lost use of the planes and she would only expect it to have a minor impact on the company's earnings.

(KUSA-TV © 2011 Multimedia Holdings Corporation)

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