Frontier and Spirit Airlines, two budget carriers, will merge

Spirit Airlines and Frontier Airlines, two major U.S. budget airlines, announced on Monday that they had agreed to merge, a combination ...

Spirit Airlines and Frontier Airlines, two major U.S. budget airlines, announced on Monday that they had agreed to merge, a combination that would create the country’s fifth-largest airline by market share and put pressure on the biggest carriers nationwide as the industry seeks to shake itself up. of the pandemic.

The airlines, which together offer 1,000 daily flights serving destinations in the United States, the Caribbean and Latin America, said in a report they would realize annual savings of $1 billion from the combination, without layoffs. They also said they plan to create 10,000 direct jobs by 2026 and create thousands more through their business partners.

They said the merger is expected to close in the second half of the year, subject to regulatory review and Spirit shareholder approval. Frontier’s parent company, Frontier Group Holdings, in which private equity firm Indigo Partners has a majority stake, has approved the deal.

Under the merger agreement, Frontier shareholders would control 51.5% of the combined company, and Frontier would appoint seven of the 12 board members. The board would be led by William A. Franke, chairman of Frontier and managing partner of Indigo Partners, a private equity firm specializing in investing in low-cost airlines. The companies said branding would be decided before the merger closes.

Mr. Franke served as Chairman of Spirit from 2006 to 2013. Indigo played a key role in the IPO of Spirit in 2011 and Frontier last year. She has also advised and invested in Tigerair in Singapore, Volaris in Mexico and Wizz Air in Europe.

When Frontier went public last spring, the airline said it stood out among low-cost carriers. Spirit serves busier markets and Allegiant Air serves less crowded markets, but Frontier is more evenly distributed, he said at the time.

The combined airline would fly primarily within the United States, but also to destinations in Latin America and the Caribbean. Spirit operates three times as many international flights as Frontier, according to Cirium, an aeronautical data provider.

The companies say the merger will benefit consumers, allowing them to sell cheaper tickets and provide better service. In November, the average price for a domestic ticket sold by Spirit was $109, before taxes and fees, compared to $73 for Frontier.

The merger could be pushed back by the Biden administration, which has increasingly challenged such deals in court, arguing they reduce competition and raise prices. In the fall, the Department of Justice filed a lawsuit to prevent a national alliance between American Airlines and JetBlue Airways. Currently, the country’s four largest airlines collectively control approximately 80% of the domestic air market.

Shares of Spirit surged in premarket trading, although they remained below Frontier’s offer of $25.83 per share, implying some skepticism that the deal will go through.

That said, shares of other airlines rose on the news, which is not usually how competitor shares react to the potential entry of a new “disruptive” challenger. It’s another sign that Frontier and Spirit may struggle to convince regulators that their merger would in fact lead to stiffer competition and lower prices.

The combined airline would have annual revenue of around $5.3 billion based on 2021 results, according to the announcement.

Michael J. de la Merced contributed report.

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Newsrust - US Top News: Frontier and Spirit Airlines, two budget carriers, will merge
Frontier and Spirit Airlines, two budget carriers, will merge
Newsrust - US Top News
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