Frontier Proposes Acquiring Spirit (Again): This Probably Makes Sense

Well Ben, I think they should merge and then Jetblue should merge with the Frontier/Spirit. Then they could really challenge the "big four"

Or after Frontier acquires Spirit, Alaska follows its earlier acquisition of Hawaiian with an acquisition of JetBlue to create an airline that’s relevant beyond WA, OR, CA, and HI…

This is not a surprise that they want to try again and this time I think it will happen. Both airlines together need to upgrade the passenger experience in the process, an area that both have faltered with.

yes , this is the next-best scenario for F9 and NK. Growing larger and cutting costs makes sense to become a larger competitor.

The best scenario would be for one or both of the two carriers to have viable, profitable business plans before they merged. Neither do which is why this will be a merger that will cost money and still might not achieve a competitively stronger position.

The ULCC sector doesn't work as a business strategy in the US because the legacy carriers match everything the ULCCs can do as a subset of the service they provide which includes higher fares and more premium services delivered more reliably.

F9 needed NK to shed debt in bankruptcy and that will happen. F9 will have to figure out how to carve out a future for the ULCC sector in the US but NK should make it out of bankruptcy and to a future as part of a larger company.

and that merger will probably be the only one the US airline industry sees in the next 4 years.

the most negative impact will be to WN and AA which is trying desperately to fix its ULCC culture but operates more like a ULCC for most of its customers than a premium legacy carrier.

Front-Spirit could easily compete with the Big 4 post-merger if they offer First Checked Bag free on all their fares. This would attract pax from other airlines and reduce the passenger fights onboard their own metal by 95%.

It made sense 3 years ago too!

The graph of airlines size makes me like the idea of an Alaska-JetBlue linkup as well.

I have been told by a restructuring expert who has seen Spirit’s turnaround plan that they have no realistic chance of recovery.

A merger with Frontier is the only thing that makes sense for their survival.

And Spirit has some really great people working for them so I hope it works out.

As of this hour, NK has rejected F9's proposal which just means the negotiating is taking place.

NK likely does not have a viable standalone future - but then perhaps neither does B6.

NK is in chapter 11 which means someone is going to get a haircut. F9 is likely the only airline that can buy NK which means they do have a considerable amount of strength as they push for a deal.

Spirit will ultimately have no choice. There's no evidence that the airline will ever turn a profit again and possibly can't be cash flow positive. Management may huff and puff (basically to try to save their own jobs) but they will need to make a deal. Now the question is how is Frontier then going to deal with the disaster of Spirit.

It is now being reported on sites like Reuters, and Business Insider that Spirit just rejected Frontiers proposal again.

Lots of stupidity floating around here, F9 for making the offer and NK for rejecting it. The negotiations are going to be like a slap fight on the short bus. Entertaining in its own way, but yet still a little embarrassing to look at. The best option is that both die. As for the "consumers" affected, my feelings are summarized quite well by the great Jello Biafra: "Kill kill kill kill kill the poor".

Spirit is jockeying for position..Never Accept the First Offer...and Frontier has already calculated this in their deal making. It's the creditors of Spirit who hold the cards at the moment. Not if they want to take a haircut, but how big a haircut they are willing to absorb.

Frontier is offering economy of scale which is needed in a shifting airline environment where:
- customers are requesting better service which ULLC airlines fail to provide in their current business model
- the current ULLC formula (rock bottom fares) isn't generate enough revenue to cover greater employee labor costs
- the Big Three can duplicate most of the ULLC with a mouse and a few lines of code sucking off revenue
- Southwest is moving from LLC to legacy format with assigned seating, amenities, etc.
- Should Frontier & Spirit consolidate; expect JetBlue to look for a dance partner (looking at you Alaska/Hawaii)

I would image JetBlue will be looking for a dance partner soon. If the NEA was to return, it isn't enough for long term survivability.

What JetBlue would provide in an Alaska/Hawaii merger:
- greater access to NYC & BOS & DCA
- greater coverage at LAX
- east coast coverage to complement the west coast & Pacific coverage of AS/HA
- leverage to fill in the midwest gap via Chicago or St Louis or Kanas City
- existing European footprint proving more inter-continental leverage
- Better utilization of the AS/HA wide bodies via Europe & Caribbean
- extensive coverage of the Caribbean
- ability to compete with the Big Four and the ULLC Two

Your phraseology, "NK **likely** does not have a viable standalone future" makes far more sense than the author's apparent assertion that Spirit absolutely has no future as a stand-alone carrier. None of us knows for certain if Spirit can survive alone. Things certainly don't look good at this point, but anything is possible - even if it looks very unlikely.

seems they operate mainly out the same routes. Not sure the effort or cost to merge the two, assuming large cost, they will surely pass the cost to customers. I think frontier could do without merger to spirit and spirit can be absorbed by another airline to offer more flights to price conscience customers.

It is being reported that NK has rejected the offer for the second time.

The bigger question if a merger happens is how will Frontier absorb Spirit's pilot and flight attendant contracts? I'm not sure Frontier can afford it.

At the time of the VX merger battle, I remember musing that a four-way tie-up between AS, B6, HA, and VX being ultimately probable in the long run - they all occupy/occupied non-overlapping niches (with the partial exception of AS/VX) and while AS/B6 were the biggest of the group, they all only added up to a single "major" carrier.

Regardless of Frontier vs JetBlue being the acquirer, this really makes the DOJ look stupid for blocking the earlier merger.

I'm wondering if e.g. B6 doesn't come back into the picture.

Of course, given the whole situation I also legitimately wonder if it doesn't transpire that NK is simply worth more dead than alive.

Part of Spirit's problem is their clientele...Not many people are looking to get on a plane with those type of people, much less pay for it. On the flip side, Spirit offered free, jerry Springer type entertainment. Knock em out fights, baby mama drama, and dude where does my bag go type of comedy...

Hopefully if the merger happens the airline goes a bit more "mainstream" in its customer base. Air Asia's "Now everyone can fly model" isn't such a great idea in the US...

That’s why Judge’s go to law school (and you didn’t) and make those decisions.