Republic Airways wants $260M after Frontier cancels contract

Frontier Airlines and regional partner Republic Airways Holdings on Wednesday cancelled their service agreement, which will result in the elimination of six flights from Frontier's schedule.

Frontier will save more than $20 million a year from canceling its contract with Republic Airways, according to a bankruptcy filing.

In the three months ended March 31, Frontier lost roughly $11.2 million under the Republic contract, the filing said.

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The contract will be terminated effective June 22, pending approval from the bankruptcy court.

Republic Airways, which operated a regional jet service for Frontier, said it intends to file a $260 million damage claim against Frontier in bankruptcy court. Denver-based Frontier filed for Chapter 11 bankruptcy protection this month after its credit-card processor -- First Data Corp., based in Greenwood Village -- raised the percentage of money it holds back from Frontier's credit-card transactions.

"We have enjoyed our partnership with Frontier and have a lot of respect for their people," Republic CEO Bryan Bedford said in a statement. "It's unfortunate that despite their many efforts to reorganize their business outside of Chapter 11, factors beyond their control conspired to force a deeper reorganization."

Republic, of Indianapolis, had leased 12 76-seat E170 jets to Frontier. Republic said it will remove four of the aircraft in May and the rest in June.

The agreement between the companies called for Frontier to bear certain costs, including landing fees and fuel. Republic said the partnership was generating $6 million in gross monthly revenues.

Frontier had intended to lease another five aircraft from Republic in the second half of the year. Republic said it will either find another airline that needs them or sell the planes.

"Unfortunately with current economic conditions and other business changes, we have been forced to drastically rethink the use of regional aircraft in our fleet mix," Frontier President and CEO Sean Menke said in a statement.

"With high fuel prices ... leasing arrangements with Republic don't make sense anymore," said Mike Boyd of the Boyd Group, an aviation consulting firm based in Evergreen. "You can't make money on those jets on a per-seat basis."

The agreement with Republic was signed last January and had an 11-year term. The bankruptcy filing enabled Frontier to cancel the contract.

"If Frontier had not been forced into Chapter 11 by that credit card company, they wouldn't be able to do this," Boyd said. "This is the only upside of this forced bankruptcy. If Delta and United had the opportunity to do it with their small jet provider, they'd do it, but they're not in Chapter 11."

Because of the cancelled agreement, the following Frontier flights will be discontinued:

• Missoula, Mont., service was originally scheduled to begin May 16; the route has been dropped instead
• Sioux City, Iowa, discontinued on May 12
• Jackonsville, Fla., discontinued on May 31
• Little Rock, Ark., discontinued on June 1
• Memphis, Tenn., discontinued on June 1
• Tulsa, Okla., discontinued on June 1

Reservation agents will contact those who bought tickets to those destinations and offer refunds or try to book them on alternative flights, said Joe Hodas, Frontier's spokesman.