Frontier and Spirit to merge in US$2.9 billion ultra-low-cost-carrier deal

©Frontier Airlines

American budget carriers Frontier Group Holdings (Frontier Airlines) and Spirit Airlines Inc (Spirit Airlines) are to merge to create the fifth-largest American carrier in a US$2.9 billion deal. Frontier Airlines will hold a controlling stake in the yet-to-be-named new carrier.

The move could prove beneficial to both carriers while airlines, domestically and internationally, struggle to recover from the effects wrought on air travel by the COVID pandemic. Both companies have pledged to avoid job losses, with a prediction that the merger could generate a further 10,000 direct jobs by 2026. In addition, the new carrier intends to provide over 1,000 daily flights to over 145 individual destinations, despite higher fees having prompted Frontier to exit airports including Los Angeles and San Jose in California, and to stop serving Washington-Dulles and Newark.

The deal is anticipated to conclude by the end of 2022 and predominantly through operational synergies should save approximately US$500,000 per annum. However, before any merger can take place, the deal will have to pass antitrust regulation and gain Department of Justice (DOJ) approval. Unlike the merger between American Airlines and JetBlue Airways which saw the DOJ file a lawsuit alleging the deal would lead to increased fares at busy north-eastern US airports, regulators might look more favourably on the Frontier Airways and Spirit Airlines merger as that should result in lower fares for travellers. “In a competitive industry like ours, the lowest costs always win,” Frontier Airlines Chief Executive Barry Biffle told analysts. “These low costs will, in turn, enable us to keep our fares low for customers.”

Both carriers have orders with Airbus for new aircraft and have indicated they would be unlikely to cancel any of the ordered planes. Colorado-based Frontier Airlines would hold a 51.5% stake in the combined entity, while Spirit Airlines’ shareholders would receive $25.83 per share, a premium of 18.8% on last Friday’s close. (£1.00 = US$1.35 at time of publication).

Email Post to a Friend Email Post to a Friend