TAILSPIN OF FRONTIER
by Scott E. Dial
THE STAPLETON INNERLINE
8/29/86


	Under a management team initially headed by A. L. Feldman and later by Glen Ryland, 
Frontier had been an industry leader in profitability for 10 years until 1982, 
when arch-rival United launched a major campaign to dominate the Denver hub — 
including a one-third increase in flight operations and a massive invasion of Frontier’s top markets. 
The following year, after Continental’s bankruptcy and return to service as a low-cost airline, 
Frontier found itself “caught in an accordion-like squeeze” between the ongoing growth of United 
and Continental’s new-found ability to operate profitably at lower price levels. 
To stay competitive, Frontier had to match Continental’s prices, but without Continental’s cost advantage. 
Frontier’s financial decline began in late 1982 when the airline suffered its first quarterly loss since 1972, 
resulting from its competitive problems at Denver coupled with the negative impact of industry-wide fare wars.
	The following is a chronology of key events — pieced together by Stapleton InnerLine from company documents, 
union records and published reports — that occurred over the past 3 & 3/4 years as Frontier struggled 
to fight its way out of the “accordion-like squeeze” and to regain its profitability.

1983

Jan. 6: In conjunction with “extraordinary and aggressive marketing measures” in progress, 
then-president Ryland directs management to take “additional dramatic action on the cost side” 
and announces a plan to seek union contract concessions.

Aug. 9: Frontier Horizon is created as a non-union sister carrier (within Frontier Holdings) 
to Frontier Airlines, to specialize in “quality. cost-effective service in high 
-density air corridors to be added to the Denver hub.” Unions raise strong opposition, 
fearing that Frontier Horizon will be a “stalking horse” that threatens the future of Frontier Airlines unions.

Sept.24-27: Continental files for protection under bankruptcy laws, 
abrogates its labor contracts and returns to service as a low-cost carrier offering cut-rate fares.

Dec. 9: Akron (Ohio)-based GenCorp, Frontier’s majority shareholder (through its RKO subsidiary) since 1964, 
says a buyer may be soughtfor its interest in Frontier.

Note:	At year-end 1983. Frontier posted a net loss of $13.8 million, its first annual loss since 1971.

1984

Jan. 9: Frontier Horizon begins operations, but with a “cap” on the size of its fleet 
and limits on future route growth in return for contract concessions granted to Frontier Airlines 
(by the Air Line Pilots Association). 
Cost concessions are subsequently granted by the Association of Flight Attendants and the Air line Employees Association. 

Oct. 1: Frontier terminates service to 20 “unprofitable or marginal” cities. 

Oct. 11: Ryland reports that Frontier’s board of directors rejected an offer from Los Angeles investor 
Travis Reed to buy the company, but he says furthur cost reductions must be achieved by Frontier. 
“Failing that,” Ryland tells empLoyees, “the company will be liquidated.” 

Nov. 5: M.C. “Hank” Lund replaces Ryland.

Dec. 18: Frontier’s board approves sale of Frontier Horizon to Skybus Inc. 

Dec. 21: Frontier and a coalition of its unions announce agreement on guidelines 
for an Employee Stock Ownership Plan (ESOP) in which employees will grant major cost concessions 
in return for an option to buy all outstanding shares of the company through outside financing.
	
Note:	At year-end 1984. Frontier posted a net loss of $31.1 million, its worst performance ever.

1985

Jan. 29: Frontier sells its five MD-80 jets to United for $96 million, then leases the aircraft back. 

March 2: Union coalition teams up with an investment group headed by Tulsa-based 
Frates Enterprises to propose a joint buyout of Frontier. 
April 4-25: Union/Frates financing efforts are unsuccessful.
—Frontier’s board rejects a proposal from Texas Air Corp. to acquire the company.
—Frontier reports $14.2 million loss for the first quarter of 1985. 

April 25: Joseph R. O’Gorman Jr. replaces Lund.

May 13: Frontier’s board approves a plan to finance the ESOP through the sale of company assets, 
including 25 of its 48 Boeing 737’s. Under a
new ESOP proposal, Frontier’s employees will gain ownership of the company without third-party financing, 
in return for union contract concessions to make the airline cost-competitive.

May 17: Twenty-five Boeing 737’s are sold to United Airlines for $265 million, then leased back to Frontier. 

July 16: Terms of the new ESOP are firmed up in an agreement with four of Frontier’s five unions. 
Pending ratification of cost-reduction contracts by the union memberships, 
all current stockholders will be bought out at $17 a share, and employees will be given ownership of the company.

Aug. 23: Members of the four unions participating in the ESOP ratify the new contracts. 
The stage is now set, pending shareholder approval, for the 3,500 union members 
to receive 80 percent of Frontier’s stock and some 500 non-contract employees to get 10 percent 
in return for actions by the five groups to reduce company costs by more than $32 million a year. 
Management gets the right to acquire the remaining 10 percent through stock options for key personnel.

Sept. 12: Frontier’s board sets Oct. 30 for a special shareholders meeting to finalize the ESOP.

Sept. 19: Texas Air Corp. announces plans to buy control of Frontier at $20 a share.

Sept. 25: Union coalition says it will vigorously oppose the TAC takeover and subsequently prompts a buyout by PEOPLExpress.

Oct. 8: Frontier’s board approves purchase of the airline by PEOPLExpress at $24 a share.

Nov. 21: Shareholders approve the PEOPLExpress buyout.

Note:	Glowingly highlighted in the annual reports of GenCorp/RKO during the 70’s and early 80’s 
was Frontier’s net earnings of $163 million for that period; in GenCorp’s 1985 report, 
Frontier received scant mention other than its sale and a note that 
“Frontier had been a drain on (GenCorp’s) earnings in recent years.”

1986

Jan. 30: PEOPLExpress executive Larry Martin replaces O’Gorman and subsequently 
begins a changeover to PEOPLExpress’ management style and “corporate culture.” 
New marketing programs include deep fare cuts and introduction of “no frills” service.
—Travel agents begin “selling away” from Frontier.
—Frontier’s losses escalate to a reported $10 million a month. 

June 23: PEOPLExpress, itself experiencing heavy losses, 
announces it is “considering the sale” of all or part of the company.

June 24: United says it is “interested in buying Frontier. 

July 8: TAC bids $235.8 million to buy all of PEOPLExpress, including Frontier.

July 10: PEOPLExpress rejects TAC’s offer and announces sale of Frontier to United for $146 million; 
sale is contingent upon the successful outcome of contract negotiations to be held by United 
with Frontier’s unions and the United Airlines unit of ALPA.

Aug. 2: Negotiations with ALPA are unsuccessful. Snag is centered mainly over the issue 
of a future date at which salaries of Frontier’s pilots reach parity with United’s pilots. 
United announces, “...unless dramatic changes occur, the merger is off."

August 24: Frontier terminates operations. All realistic deals for purchase seem to vanish.

(Frontier filed banktuptcy on August 28)