Frontier Airlines’ parent Frontier Airlines Holdings Inc. could be acquired if domestic low-cost carriers consolidate, according to an analyst’s report Tuesday.
The Raymond James report, which upgraded Frontier shares to market perform from underperform, said Frontier could be attractive to carriers including Alaska Airlines, AirTran, JetBlue and Southwest.
Frontier’s share price jumped after the report came out, closing at $6.25 Tuesday, up 5.6 percent.
Frontier’s Denver hub would be an “attractive east-west flow traffic distribution hub” for AirTran and JetBlue, or an eastward expansion of Alaska’s West Coast market concentration, the report said. Frontier’s fleet of Airbus planes makes it more compatible with JetBlue.
Acquiring Frontier may also be attractive to Southwest Airlines as a way to gain gates and eliminate a low-cost competitor at Denver International Airport, according to the report.
“I don’t think (there’s) anything on the table right now,” said Southwest spokeswoman Paula Berg.
Frontier chief executive Jeff Potter and Southwest chief executive Gary Kelly have acknowledged the airline industry’s interest in consolidation, but Potter also has said he is focused on continuing to “grow the organization organically.”
Kelly has said, “We’re going to do our own thing.”
A takeover of Frontier is “not highly probable,” according to the report, but “the prospect of such and its undervalued assets may put a floor on the share price over the near term.”
The report also said Frontier’s new regional operation, including new Q400 turboprop planes and an expanded regional jet fleet, will likely enhance its profitability. Frontier aims to fly the smaller planes to markets where it will not directly compete with Southwest.
The report also said that Frontier’s Airbus A319 planes have a higher market value than the value on the company’s balance sheet. Because the market for used Airbus planes is “very strong,” according to Raymond James, any company that acquires Frontier could probably sell them over the next few years.
Denver-based Frontier has about 5,000 employees. It is the second-largest carrier at DIA with about 250 daily departures.
Staff writer Kelly Yamanouchi can be reached at 303-954-1488 or kyamanouchi@ denverpost.com.
