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

Frontier Airlines has once again issued a formal proposal to acquire Spirit Airlines… I can’t say that I’m surprised, and I think this is probably the best bet for the two airlines.

Frontier looks to buy Spirit, take on the “big four”

In November 2024, we saw Spirit file for Chapter 11 bankruptcy protection, as the airline hadn’t turned a profit since before the pandemic. The carrier has been an attractive acquisition target over the past few years, though.

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In February 2022, Frontier announced plans to acquire Spirit, to create a national ultra low cost carrier. However, following that, JetBlue also expressed interest in acquiring Spirit — not to maintain the company’s business model, but rather to be able to grow, and become a competitor to the “big four” US carriers (American, Delta, Southwest, and United).

In July 2022, JetBlue announced plans to acquire Spirit in a $3.8 billion deal, as the company outbid Frontier. However, the Department of Justice under the Biden administration decided to challenge this merger, arguing that it was bad for competition. A trial was held in late 2023, and in early 2024 it was announced that a judge ruled to block the merger.

This left Spirit in an awful situation, with massive debt, as the airline continues to hemorrhage money, with billions in cumulative operating losses over recent years. Spirit simply doesn’t have an independent future.

So there’s now an interesting update. In recent weeks, discussions have once again resumed about the possibility of Frontier acquiring Spirit. The goal is to create “America’s first at-scale, low-cost competitor” to the big four. Frontier notes that the materials in Spirit’s bankruptcy court filings “demonstrate that Spirit’s standalone plan will likely result in an unprofitable airline with a high debt load and limited likelihood of success.”

In a letter dated January 7, 2025, Frontier outlined its desire to acquire Spirit, with the following rationale:

We strongly believe that now is the time to form the country’s first, at-scale, low-fare carrier by combining our two businesses. A Frontier / Spirit combination will bring unmatched benefits:

Stronger competitive position due to much needed scale: the combined Frontier / Spirit will be better positioned for long-term viability as a more effective competitor in our existing and new markets. The combined company will be the fifth largest airline in the U.S., growing to 100 million passengers and over 400 aircraft within a few years.

Value proposition: by combining our operations, we will be able to improve our loyalty and frequent flyer programs and offer a diversified product — including premium options — and thereby create a stronger platform for accelerated, long-term growth. Additionally, the combination will allow more reliable service through operational efficiencies, including airport infrastructure optimization, further enhancing the travel experience for our customers.

Offering more low fares to more consumers: the combined business will greatly increase our presence in numerous major markets in the U.S. and offer significant network connections, creating thousands of new markets and enabling consumers to save billions compared to the prices charged by the Big Four.

Here’s how Bill Franke, Chair of Frontier’s Board of Directors, describes this proposal:

“This proposal reflects a compelling opportunity that will result in more value than Spirit’s standalone plan by creating a stronger low fare airline with the long-term viability to compete more effectively and enter new markets at scale. We stand ready to continue discussions with Spirit and its financial stakeholders and believe that we can promptly reach agreement on a transaction. We are hopeful we can achieve a resolution that delivers significant value for consumers, team members, communities, partners, creditors and shareholders.”

Meanwhile here’s how Barry Biffle, Frontier’s CEO, describes this proposal:

“While we are pleased with the strong results Frontier has been able to deliver through the execution of our business strategy, we have long believed a combination with Spirit would allow us to unlock additional value creation opportunities. As a combined airline, we would be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service.”

This deal seems like the best bet for both airlines

I think this merger has huge upside for both the airlines, and for consumers. There would be synergies to a deal like this, and the airlines have highly complementary fleets and route networks.

Let me be blunt — this is likely Spirit’s only “real” path forward, short of just chunks of the company being sold off (aircraft, gate space, etc.). Spirit is losing money at an unsustainable rate, and even if the company emerges from bankruptcy, it wont have long before it’s in trouble again.

While Frontier has also struggled with profitability, the situation hasn’t been as bad as at Spirit, and Frontier has also been much faster to make updates to its business model. I think there’s power to scale, and I think the combined airline could be a lot more competitive than a smaller, independent Frontier.

Ultra low cost carriers in the United States have an uphill battle. They still have a cost advantage, but not as much as in the past, given labor costs and other considerations. Furthermore, even the most profitable legacy carriers are barely making money actually transporting passengers, but rather they’re making their money from other things, like their loyalty programs. It’s much harder for smaller and less premium airlines to tap into that.

Bottom line

Frontier Airlines has once again issued a formal proposal to acquire Spirit Airlines, as Spirit goes through Chapter 11 bankruptcy proceedings. Spirit doesn’t have a viable, independent future, given the rate at which the company is losing money, with no signs of that changing.

This deal is no doubt the best path forward for Spirit. Meanwhile for Frontier, I also think there’s merit to being a national competitor to the “big four,” as there’s power to scale. It’s still going to be an uphill battle, given how the industry has evolved, but I think it could work.

What do you make of the prospect of Frontier acquiring Spirit?