The New Republic

Republic Airways won its bid to buy bankrupt Frontier Airlines for $108.75 million after a day-long auction in bankruptcy court after pilots from bigger bidder Southwest and those of Frontier couldn’t reach agreement over seniority.

Southwest waded into the mix in late July. Its last binding offer was worth $170 million. Republic, Frontier’s biggest unsecured creditor, improved its bid by agreeing to waive recovery rights on its $150 million general unsecured claim, a move expected to boost the distribution to Frontier’s unsecured creditors by 94 percent.

Frontier said the deal preserves more jobs than the bigger offer from no-frills airline Southwest would have. But Republic’s pilots, who are Teamsters, apparently have not yet discussed seniority terms with Frontier, so it’s possible that the seniority issue will linger.

Showing Frontier the LUV

Known around the country as the no-frills airline, and among industry watchers as a most astute hedger of jet-fuel costs, Southwest Airlines showed it is willing to spend plenty to pick up bankrupt Frontier Airlines. Southwest appears to be spoiling for a fight with far bigger rival United Airlines on United’s — and Frontier’s — home turf in Denver.Southwest (owner of the heart-warming stock ticker LUV) boosted its offer for Frontier by about 50 percent to more than $170 million on Monday, far above a competing bid of $108.75 million from Republic Airways. Southwest says it is offering unsecured creditors 12 cents on the dollar, compared with Republic’s 8.7 cents. Frontier is set to hit the auction block on Thursday.Southwest said it wants to keep the bulk of existing Lynx Aviation, a Frontier subsidiary that serves 15 regional markets around Denver, but would transition to Boeing 737s and retire Frontier planes over a period of 24 months. These are the kinds of questions Southwest will need to answer to convince analysts that they know what they are doing with this deal. As Deepa Seetharaman reported in a July 31 analysis, integration issues are expected to cause some turbulence.If nothing else, raising the bid shows Southwest’s frugality has its limits.