Indigo Partners will buy Frontier Airlines from Republic Airways for $145 million, according to a statement.
Indigo will invest about $36 million of equity in Frontier, while the remaining $109 million will be used to pay existing Frontier debt. Indigo plans to invest additional funds directly into Frontier, which operates low-cost flights in the US, Mexico, Costa Rica, Jamaica and the Dominican Republic, from its hub at the Denver International Airport. Republic Airways acquired Frontier out of bankruptcy in 2009 for a reported $109 million.
“As airline fares continue to move up, passengers need affordable travel alternatives,” Indigo managing partner William Franke said in the statement. “Our goal will be to meet that need in more markets as we invest in the airline to grow its footprint, while maintaining a commitment to quality service, customer choice and satisfaction and continued employment opportunities for the Frontier team.”
Frontier, soon to be backed by Indigo
The deal is subject to regulatory approval by the Association of Flight Attendants and FAPAInvest (Future & Active Pilot Advisors) and is expected to close by the end of the month.
Phoenix-headquartered Indigo was established in 2003 to invest in the air transportation industry. The firm was a key investor in in Spirit Airlines and Singapore-based Tiger Airways, which its Singapore affiliate partially exited during an initial public offering that raised S$248 million ($178 million, £109.7million) in 2010, according to media reports.
Indigo has also been a lead investor in Central and Eastern European airline Wizz Air and Mexico City-based Volaris Airlines.
Other private equity firms to invest in the air travel and transportation sector include TowerBrook Capital Partners, which last month acquired AIM Aviation, a UK-based company that provides engineering services for the aviation industry. Apollo Aviation Group also invests exclusively in the sector and held a final close on $595 million for its second fund earlier this year.
In 2010 and 2011, Cinven, CVC Capital Partners and Oak Hill Capital Partners, invested a combined $1 billion in aircraft leaser Avolon.