North America

Frontier Airlines said to hire Barclays and DB for IPO

Frontier Airlines hired underwriters for an initial public offering, people with knowledge of the matter said.

Frontier, owned by private equity firm Indigo Partners, is working with Barclays Plc, Deutsche Bank AG and JPMorgan Chase & Co. on the IPO, said the people, who asked not to be identified because the discussions are private. Citigroup Inc. also will be working on the IPO, two people said. The carrier began talks with banks in December about going public.

The largest U.S. airlines, bolstered by slumping fuel prices and strong travel demand, reported record profits last year. Yet the Bloomberg U.S. Airlines Index fell 4.6 percent in 2015. The index slipped another 1.6 percent this year through Friday.

Ultra low-cost carriers, which also include Spirit Airlines Inc. and Allegiant Travel Co., have faced stepped-up competition for more than a year as some of the largest U.S. carriers, such as American Airlines Group Inc., have begun matching some of their deeply discounted fares.

Representatives for Frontier and Indigo declined to comment, as did representatives for Barclays, Deutsche Bank, JPMorgan and Citigroup.

IPO Drought

A Frontier IPO would be the first for a large U.S. carrier since Virgin America Inc.’s offering in 2014. Spirit Airlines went public in 2011.

There have been a dearth of U.S. IPOs this year — only six — as volatility has shaken equity markets. The Chicago Board Options Exchange Volatility Index, a gauge of investor nervousness, has averaged above 20 in 2016, which makes it difficult to price offerings. This week, the index settled in the high teens.

Denver-based Frontier, whose planes’ tails sport images of animals like bears and foxes, was acquired by Indigo in 2013 from Republic Airways Holdings Inc. for $36 million in cash. The total transaction value was $145 million including debt. Indigo is led by veteran airline executive William Franke.

Frontier has changed hands twice since filing for bankruptcy protection in April 2008. Republic bought the carrier in October 2009 for $108.8 million, agreeing not to pursue a $150 million unsecured bankruptcy claim. After the Indigo buyout, Frontier’s new owner transformed it into a so-called ultra-low cost carrier — an airline that offers inexpensive base fares and adds fees for everything else.

Frontier operates a fleet of Airbus Group SE airplanes on more than 275 daily flights within the U.S. and to Mexico and Jamaica.

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