Indigo Partners LLC agreed late Monday night to buy Denver-based Frontier Airlines from Republic Airways Holdings and plans to continue turning the carrier into an ultra-low-cost airline.

The transaction is valued at $145 million of which $36 million is cash while the remaining value is the assumption of debt. Indigo plans to invest additional funds into the airline after the deal is finalized, said Republic Tuesday morning.

The transaction hinges on the condition that the owners reach an agreement with the Association of Flight Attendants (AFA) and FAPAInvest LLC by Oct. 31. If that is reached, the deal is scheduled to close by December.

Phoenix-based Indigo has a history in aviation investment, particularly in the ultra-low-cost airline sector. William Franke is co-founder and managing partner of the private equity firm and the former CEO of America West Airlines.

Indigo used to be a major investor in Singapore-based Tiger Airways and remains a major shareholder in Wizz Air Holdings, a ULCC in Europe, and Mexico-based Volaris Airlines, which launched service from Mexico City to Denver in December.

Indigo bought Spirit in 2006, and with Franke at the helm as chairman, helped change the carrier into an ultra-low-cost airline and one of the fastest growing carriers in the U.S.

Franke and TPG founder David Bonderman partnered on investments in Ryanair Holdings PLC, a discount carrier in Ireland well-known for its irreverent advertisement tactics.

"We endorse and will support continued efforts to build Frontier into a leading nationwide ultra-low cost carrier (ULCC)," said Franke, in a news release Tuesday morning. "As airline fares continue to move up, passengers need affordable travel alternatives. 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."

Indigo fueled speculation in July when all shareholders associated with the equity firm sold off their stakes in Spirit at the same time that Franke stepped down as chairman of the airline. Having a large stake in both carriers could be seen as a conflict of interest given Frontier's current transition to an ultra-low-cost carrier.

Negotiations appeared to stall last week over pilot agreements, but the parties came to an agreement just hours before the exclusivity agreement would be lifted between Indigo and Indianapolis-based Republic, reports The Journal.

Details of the sale have yet to be announced and the implications for the carrier's Denver, Colo., hub remain uncertain. 

Several airline analysts predict Frontier staying in Denver, but overhauling its image into the ULCC model, while others suggest the steep competition in Denver will drive the carrier elsewhere.

It is unclear what the future may be for Frontier, which is Denver's only hometown airline with an estimated economic impact of about $470 million each year on the metro area. Frontier employs 4,000 people nationwide, 3,000 of whom are in Denver.

Republic, a publicly-traded carrier that flies small aircraft on behalf of large airlines, bought Frontier out of bankruptcy in 2009 for $109 million, plus the assumption of $1 billion in debt and aircraft lease obligations and was its foray into running a brand-name carrier.

Frontier was a money-suck for Republic at the beginning of the relationship but saw an improved financial performance following restructuring and cost-trimming efforts.

The Denver-based airline had a pre-tax income in 2012 of $23.9 million compared with a loss of $95.3 million the year prior. Revenue grew from $1.3 billion in 2011 to $1.4 billion last year.Republic carried long-term debt of $2.1 billion, a significant portion of it acquired when it purchased Frontier.

The sale has been a long time in the making with Republic missing several target sale dates over the past year. Republic hired bankers at Barclays Capital in April 2012 to court potential buyers.

Frontier, in its 20th year of operations, is a recently-turned ultra-low-cost carrier servicing more than 75 destinations in the U.S., Mexico, Costa Rica, Jamaica and the Dominican Republic.

Kristen Leigh Painter: 303-954-1638, kpainter@denverpost.com or twitter.com/kristenpainter