Frontier Receives DIP Financing from Perseus

Frontier CEO Sean Menke is either very lucky or very skilled. Somehow, he found someone to give his airline Debtor in Possession (DIP) financing to restructure. I can't believe he pulled it off, and it leaves me wondering what the investor, Perseus, is thinking.

When I look at Frontier, I see an airline with no real future the way it stands now. Despite their best efforts to expand beyond Denver (Mexico, LAX, Memphis), they've never been able to get away from being a one-city operation. They live and die by Denver.

So why is that bad? Well, you have United there maintaining a hub (and not much more than that) with Southwest ramping up faster than I've ever seen an airline build a hub. There's plenty of capacity in the Denver market, so something has to give. Is Southwest going to walk away? Yeah, right. They'll probably ramp up even more now. Will United walk away? Not unless they liquidate.

So, Perseus comes along and decides to drop in $75 million in DIP financing and the option to buy just under 80% of the airline once it leaves bankruptcy for $100 million. My question is . . . how long will it take for that money to all disappear?

Is a combination with someone else in the works? Maybe, but then the other airline would be making a mistake. Frontier only provides a bunch of planes and a hub that's overserved. Those planes could be picked up on their own without needing to invest in the whole airline.

So this one just leaves me scratching my head. I know I tend to sound like a broken record, but I like Frontier, and I like flying them. I just don't see a future. Maybe Perseus sees something I don't. Congratulations to the employees of Frontier. It looks like they'll live to see another day.