CFO: If Frontier Ever Needs Cash It Can Sell Its Planes

Frontier Airlines chief financial officer Paul Tate acknowledged Wednesday that the company could sell off parts of itself if it needed to.

At the Bear Stearns Global Transportation Conference in New York, Tate said Frontier could someday spin off its Q400 regional turboprop operation or sell airplanes if necessary.

The airplanes owned by the carrier are like a built-in piggy bank, available "if we ever get into a situation where we need to raise cash for some reason," Tate said.

He made the comments after noting that "there's been some talk by the pundits about some of our hidden assets."

A Raymond James report last week said 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," the report said, any company that acquires Frontier could probably sell them over the next few years.

Frontier incurred $3.6 million in startup expenses in the 2007 fiscal year it just completed, including costs to get a certificate to operate the new Q400 planes it plans to use to fly to Rocky Mountain destinations.

"Once we get that certificate, that has value. That is something that we could spin off someday if we wanted to," Tate said.

Tate and other airline executives speaking during the conference also discussed fare wars in the airline industry. While heavy airline competition in Denver has led to relatively low fares, airlines hope to eventually raise fares and, meanwhile, are playing a costly, large-scale game of chicken.

Southwest Airlines and its pricing helped spark the contest. Frontier, United and other airlines eager to offer competitive fares are fueling the fight.

Tate said Frontier is performing well against Southwest in Denver, though its unit revenue is down in markets where it competes against Southwest.

"It's really the Southwest markets and their low-fare structure, which in our view is not sustainable," Tate said.

At the conference, Southwest chief executive Gary Kelly said, "We continue to seek fare increases where they make sense."

He included recent fare increases that affected about 25 percent of its system "in markets that we hadn't touched in a while in terms of fares," he said.

United Airlines recently moved to increase fares, but other carriers did not match the hike.

"Clearly, United is trying to lead a fare increase," said Kathryn Mikells, United's vice president of financial planning and analysis. Whether or not a fare increase sticks "has a lot to do with what low-cost carriers do and whether low-cost carriers match," she said.

Staff writer Kelly Yamanouchi can be reached at 303-954-1488 or