A pair of U.S.-based budget airlines might be coming together to form the country’s fifth largest carrier if Frontier’s $2.9 billion bid to acquire Spirit Airlines goes through. Should they merge, the airlines plan to purchase 350 more planes to offer budget flights throughout the U.S., Caribbean, and Latin America. The total value of the deal would be $6.6 billion.
“This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public,” Spirit Airlines CEO Ted Christie said in a prepared statement.
Spirit and Frontier both have posted losses the last two years as the pandemic has cut travel to a fraction of its previous frequency. Just in the fourth quarter of 2021, Spirit lost $87.2 million, and Frontier lost 53 million.
Frontier stockholders would own 51.5% of the new airline, with Spirit shareholders owning the rest if the deal goes through in the second half of the year. Frontier shares rose 2% on the news, while Spirit shares jumped 15%. Current Spirit Airlines shareholders would receive 1.9126 shares of Frontier stock plus $2.13 for every share of Spirit they own. The new company, as yet unnamed, would be overseen by a board of 12, with seven appointed by Frontier and five by Spirit.
With the new orders of aircraft and increased routes, the combined airline would look to hire about 10,000 workers by 2026.
The deal may face more scrutiny from regulators than previous corporate mergers since the Biden administration has criticized anticompetitive consolidation.
“Our country depends on competition to drive progress, innovation, and prosperity,” Assistant Attorney General Jonathan Kanter, who leads the Justice Department’s antitrust division, said last month. “We need to understand why so many industries have too few competitors, and to think carefully about how to ensure our merger enforcement tools are fit for purpose in the modern economy.”