Frontier Airlines Holdings Inc. unveiled plans Wednesday to buy 10 Bombardier Inc. turboprop planes for $257 million to use in a new service targeted at mid-sized cities in the Rockies.
The operation will start next year, serving up to 18 destinations and creating as many as 400 jobs, Frontier Chief Executive Officer Jeff Potter said.
Although Potter declined to specify cities under consideration, he said they would be within a 650 to 700 mile-circle around metropolitan Denver, including Colorado resort destinations.
The expanded service could give Frontier a competitive edge over Southwest Airlines and others that do not have smaller jets or planes necessary to serve those cities, said Mike Boyd, an aviation analyst with The Boyd Group.
He called the decision a good move for Frontier, particularly given the competition it faces from Dallas-based Southwest.
"This means it can access revenue streams that Southwest can't," Boyd said. "They can access markets like Durango, Grand Junction, Aspen or Jackson Hole (Wyo.)."
Based in Denver, Frontier is a low-cost carrier that operates a hub at Denver International Airport serving 55 destinations in the United States, Mexico and Canada.
Under terms of the agreement with Montreal-based Bombardier, Frontier will take delivery of the 74-seat Q400 aircraft between May and December of next year and has an option to purchase an additional 10 planes beginning in May 2008.
Each aircraft will cost about $26 million, according to a Frontier filing with the Securities and Exchange Commission. In a statement, Bombardier valued the contract at $256.8 million which would increase to $520.3 million if the additional 10 aircraft are ordered.
A wholly owned subsidiary will be created to operate the new service to give Frontier more control and improve cost efficiencies, Potter said. The fleet will carry the Frontier brand name and trademark animals on each aircraft's tail.
Frontier also is looking at changes for its regional jet aircraft service by either supplementing or replacing its existing fleet of nine CRJ-700 aircraft.
That service currently is operated by Horizon Air under the banner Frontier JetExpress, and Potter said the two companies are in discussions about the existing 12-year agreement which is permitted under its terms. Frontier plans to issue a request for proposals from Horizon and others about the regional jet operation within the next month.
Frontier's stock dipped 14 cents, or 2 percent, to $6.92 on the Nasdaq Stock Market. In the past year, the stock has traded between $5.66 and $10.92.
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