INTERVIEW-UPDATE 2-Republic Airways CEO sees fewer airlines

* Says Frontier acquisition expected to close Oct. 1

* Shares close up 4.4 pct at $8.60

(Adds byline, larger plan, accretion to earnings)

By Ilaina Jonas

INDIANAPOLIS, Aug 26 (Reuters) - Republic Airways Holdings Inc (RJET.O), which recently bought bankrupt Frontier Airlines Holdings Inc FRNTQ.PK, is done with acquisitions for now and is working to create an airline that can flourish in a shrinking market, Republic's CEO said on Wednesday.

"We think that the world is headed to fewer airlines, more consolidation, fewer hubs," Bryan Bedford, told Reuters in an interview in his company's Indianapolis headquarters.

"Fewer hubs means less demand for the types of products that we've historically offered the market," said Bedford, who is also company chairman. "Our market is changing and our role in that market has to change. And that's all this is an acknowledgment of."

Republic recently surprised investors and some at the company when it beat out much larger rival Southwest Airlines (LUV.N), for Denver-based Frontier at the end of a bankruptcy auction.

Southwest had been expected to emerge as Frontier's buyer, but the pilots' union of both carriers couldn't come to an agreement over seniority. Such an agreement was not a condition for the offer by Republic, Frontier's largest unsecured creditor.

Republic intends to operate Frontier under the Frontier brand. Its shares have risen 40 percent since winning the auction earlier this month and closed 4.4 percent higher on Wednesday at $8.60 on the Nasdaq.

The acquisition most likely will close on Oct. 1 but possibly as early as Sept. 17, Bedford said.

PLANS FOR MIDWEST

In July, Republic bought Milwaukee-based, money-losing Midwest Airlines, another partner, which had been under assault by some of the low cost competitors. But Republic, with its fleet of 230 aircraft that dwarfed Midwest's 30, could operate the flights more efficiently. "Our ability to operate products at substantially lower costs than their ability is dramatic to the tune of about $4 million an airplane a year," he said.

Republic is replacing Midwest's planes with its own and has so far cut 200 of Midwest's 1,600 jobs. More cuts are expected.

Republic owns three regional airlines, Chautauqua Airlines Inc, Shuttle America Corp and its largest subsidiary, Republic Airlines Inc. However, these units operate their flights for larger carriers instead of under their own names.

Larger network carriers, such as AMR Corp's (AMR.N) American Airlines, Continental Holdings Ltd's Continental Airlines, Delta Air Lines Inc (DAL.N), UAL Corp's (UAUA.O) United Airlines and US Airways Group Inc (LCC.N), pay Republic a fee for each flight, which operate under brands such as AmericanConnection, Continental Express, Delta Connection, United Express and US Airways Express.

They feed passengers to the larger airlines' hubs.

Republic's three subsidiaries differ not by the market in which they fly but by the size of aircraft, with Shuttle America flying the smallest planes -- 50 seats or less.

Midwest was Republic's first foray into branded airlines.

Bedford said his company is done with acquisitions, but now has to cut jobs. He declined to say how many.

"Now we're in execution mode," said Bedford, the father of eight children aged 1 through 16.

"There's a significant amount of transition work that has to be done. We need to be thoughtful and respectful of the folks that are caught up in the middle of the transition issues whether they'll be here, Denver or Milwaukee."

Bedford said Frontier's July financial operations report will be "outstanding," when they are released in the next few days. He expects Frontier to boost Republic's earnings quickly.

On the other hand, Midwest is not expected to boost the bottom line until the second quarter 2010.

Ultimately, the two new airlines are expected to enhance each other's operations, with Frontier's larger planes helping serve Milwaukee's business customers and Midwest's smaller plans serving some of Frontier's leisure customers, Bedford said.

By adding the branded airlines and the mixture of plane sizes, Frontier hopes to be able to serve a spectrum of customers

-- from vacation passengers to carriers. -- from vacation passengers to carriers.

"We want to have all the tools that all of our customers want," he said. "Our customers are still our network partners. And we also need to have tools that allow us to work with Frontier, work with Midwest, in a way that gives us an ability to grow and still make money."

(Reporting by Ilaina Jonas; Editing by Richard Chang and Dhara Ranasinghe)

((1-646-223-6193, ilaina.jonas@thomsonreuters.com)) Keywords: REPUBLICAIRWAYS/

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