Frontier Says NEO Order Deadline Is No Issue

Frontier Airlines says it and parent company Republic Airways have “satisfied or amended” a contractual promise to execute a firm order for 80 AirbusNEO aircraft by Sept. 30, 2011, but will not elaborate.

The commitment to execute the firm order is (or was) in a commercial agreement Republic and Frontier signed with FAPAInvest, a limited liability corporation created to represent Frontier pilots employed by the airline as of June 24.

Under that deal—created to compensate pilots for the cost-cutting they agreed to in a separate but concurrent amendment to their collective bargaining agreement—Republic promised to do several things. Two of them had a Sept. 30 deadline: to raise more than $70 million in new financing and execute a “firm order” for 80 NEO aircraft. Republic signed a letter of intent for those aircraft in July.

Jeff Thomas, FAPAInvest’s manager and registered agent, told Aviation Week on Sept. 30 that the group “came to a resolution” with Frontier and Republic on the financing issue, although he declined to provide details and Republic referred questions about the financing issue to FAPAInvest.

Thomas added, however, that the deadline for a firm NEO order was not amended, and referred questions about the order to Republic.

Republic and Frontier refused to comment on the NEO order until Oct. 5, when a Frontier report on its September traffic included a two-sentence update that referred to it indirectly.

Ambiguous NEO Order

“Certain of Frontier’s restructuring agreements included conditions that were to be satisfied by Sept. 30, 2011. Those conditions have either been satisfied or amended, and Frontier is in compliance with all restructuring agreements,” the carrier reported. It did not immediately respond to a request for elaboration.

Presumably, if Republic finalized the NEO order, it or Airbus would have announced it. That has not happened, and Airbus is declining comment on the deal’s status.

One question is whether any of it matters because there is no real consequence to missing the deadline unless someone makes an issue of it.

The biggest potential consequence of missing the deadline is that, under the separate collective bargaining agreement with the Frontier Airline Pilots Association, some of the cost-cutting concessions are supposed to be negated if any of the conditions in the commercial agreement are not met. But Frontier pilots do not really have an incentive to enforce that—as long as they believe the financing and aircraft order eventually will come through—because the cost cuts have been declared essential for Frontier’s survival.

The International Brotherhood of Teamsters does not seem inclined to make it an issue, either. The Teamsters became the union representative for pilots at Frontier and Republic’s three regional carrier subsidiaries just days after the former Frontier Airline Pilots Association ratified the cost-cutting collective bargaining agreement amendments and the newly created FAPAInvest signed the commercial agreement. The Teamsters union is challenging the legal validity of the entire FAPA and FAPAInvest agreements in court—not whether a condition in them has been violated.

“At this point, Republic Airways Holdings’ position is FAPAInvest controls whether the concessions are voided,” adds William Wilder, the Teamsters’ attorney for the case.

Republic says the uncertainty created by the Teamsters lawsuit has made it more difficult to obtain the new financing. That delay also could be a factor in firming up the aircraft order.