WOW: Frontier Airlines & Spirit Airlines Merging

WOW: Frontier Airlines & Spirit Airlines Merging

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There’s some major consolidation coming to the ultra low cost airline industry in the United States, and this seemingly came out of nowhere.

Spirit Airlines & Frontier Airlines merger details

Frontier Airlines and Spirit Airlines have announced a definitive merger agreement under which the companies will combine, creating America’s largest ultra low cost carrier. It’s argued that:

  • The airlines have highly complementary route networks, and will offer more than 1,000 daily flights to over 145 destinations in 19 countries across the United States, Latin America, and the Caribbean
  • Consumers will win with $1 billion in annual savings
  • The airlines will drive competition and expand service to underserved small and mid-sized cities across the United States
  • The combined fleet will be the youngest, most fuel efficient, and greenest in the United States
  • This combination will provide more stability and better opportunities for 15,000 employees, and 10,000 jobs will be added by 2026
  • The stronger financial profile of a combined company will empower it to accelerate investments in innovation and growth, and compete even more aggressively against the “big four” airlines

In terms of how this deal would work:

  • Spirit equity holders would receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own
  • This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on February 4, 2022, representing a premium of 19%
  • The transaction values Spirit at a fully diluted equity value of $2.9 billion, and a transaction value of $6.6 billion, when accounting for the assumption of net debt and operating lease liabilities
  • Upon closing of the transaction, existing Frontier equity holders would own approximately 51.5% of the company, and existing Spirit equity holders would own approximately 48.5% of the company
Frontier Airlines & Spirit Airlines plan to merge

The two airlines are no doubt very complementary

In many ways a merger between Frontier Airlines and Spirit Airlines makes sense, as the airlines are very complementary:

  • Both exclusively operate Airbus-family aircraft, so their fleets are very similar
  • Their business models are similar, as both are ultra low cost, and have comparable fee structures and passenger experiences (perhaps with the exception of Spirit’s Big Front Seat)
  • Their hubs are complementary — some hubs overlap, so they could become even more powerful, while they also have some unique hubs, like what Frontier has in Denver, and what Spirit has in Fort Lauderdale

If the two companies combine as one, there are no doubt synergies to be had. This is a bit different than when Alaska bought Virgin America, which seemed to primarily be to prevent JetBlue from acquiring Virgin America. The airlines had different fleets, different passenger experiences, and largely overlapping route networks.

There would be lots of synergies to this merger

Is this merger good for consumers, though?

While I can see how this merger could be good for both airlines, would it be good for consumers? Obviously the airlines are trying to highlight the great benefit of this merger for consumers and employees, as the companies are hoping to get regulatory approval.

However, personally I fail to see how this will be good for consumers. Frontier and Spirit are two of the most aggressive low cost carriers, and in many ways they keep one another in check. Sure, there are savings to be had on a corporate level (“consumers will win with $1 billion in annual savings”), but I don’t feel like that’ll necessarily be passed on to consumers.

The reality is that these are two low cost carriers that compete fiercely with one another, and they don’t really have many other direct competitors. Allegiant is the only other large ultra low cost carrier, but Allegiant also has a different business model, operating a lot of point-to-point flights in underserved markets.

I’m curious to see if the airlines face issues getting regulatory approval for this deal. The Biden administration is taking a tougher look at consolidation and partnerships in the airline industry (the American & JetBlue partnership is currently being challenged by the DOJ), though at the same time I don’t think there are necessarily grounds on which this merger could be prevented.

Combined the two airlines will have fewer than 300 planes, so they’re still significantly smaller than the other big players.

Will this merger face regulatory issues?

Bottom line

Frontier Airlines and Spirit Airlines have announced plans to merge, creating the largest ultra low cost carrier in the United States. The two airlines are no doubt complementary, so there are lots of synergies to be had. At the same time, these are two of the most competitive ultra low cost carriers in the country, and eliminating one of them is bad for competition.

What do you make of the Frontier & Spirit merger?

Conversations (62)
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  1. FlyerDon Guest

    Having been through three mergers I can tell you the employees never benefit from them. Crew bases close or get greatly reduced. Senior employees bump junior employees to less desirable bases and bid the trips you used to fly. Somebody’s operations/dispatch center is going to close, training centers might be consolidated, some group will have to learn a new flight planning system, I could go on and on. I just hope Frontier doesn’t do to...

    Having been through three mergers I can tell you the employees never benefit from them. Crew bases close or get greatly reduced. Senior employees bump junior employees to less desirable bases and bid the trips you used to fly. Somebody’s operations/dispatch center is going to close, training centers might be consolidated, some group will have to learn a new flight planning system, I could go on and on. I just hope Frontier doesn’t do to Spirit what USAir did to American.

  2. Fabrizzio Guest

    I hope things are going to be better with spirit, they are similar in a lot of ways anyways perfect couple for each other

  3. CMC Guest

    Most of the time, competitor eliminations, um, "mergers" are good for shareholders and few others. The promise of "10,000+ new jobs" is a joke as that never happens. More likely is the "elimination" of thousands of jobs. That's history and will be fact. As for savings of a billion dollars, that will go to shareholders, not employees or consumers. Again, fact/history. They will be able to bring pricing higher and charge for more things while...

    Most of the time, competitor eliminations, um, "mergers" are good for shareholders and few others. The promise of "10,000+ new jobs" is a joke as that never happens. More likely is the "elimination" of thousands of jobs. That's history and will be fact. As for savings of a billion dollars, that will go to shareholders, not employees or consumers. Again, fact/history. They will be able to bring pricing higher and charge for more things while giving AA an even worse product to aim towards.

    The really sad thing here is that the folks running F9 are the ones that used to run NK for years and they are the ones that created all the charges/fees/charge-for-everything mentality. These are also the people who did the really poor taste marketing (go look up spirit milf sale) and the like. Spirit has done a lot to change their image and create a really reliable and decent product. Frontier couldn't care less about that. It's the Ben Baldanza attitude of "who cares what they think....save 'em a buck and they'll be back..." I'd hate to see that attitude go back to Spirit. They've done a good job of cleaning things up.

    /rant
    If you look at how bad UA became, they have roots back to US Airways which was America West running the show. AA is clearly America West and we see what happened to them. Now here at F9, you've got influence at the top that was former America West as well. To my knowledge, the only major airline that doesn't have the America West infestation is Delta and look at the product they have!
    /rant/

  4. Eskimo Guest

    Didn't we all see this coming?
    Indigo had it planned all along.

  5. Chris P Bacon Guest

    The moaning about lack of competition harming consumers comes up in every merger. Yet it's safe to say that even with 4 major carriers, 2 midsized carriers, and 3 ULCCs, airfares have been steadily trending down since deregulation. I would go so far as to say that there's no major industry where the average consumer pays less today than the did in 1980. There's not a ton of overlap between these two today. Merging will...

    The moaning about lack of competition harming consumers comes up in every merger. Yet it's safe to say that even with 4 major carriers, 2 midsized carriers, and 3 ULCCs, airfares have been steadily trending down since deregulation. I would go so far as to say that there's no major industry where the average consumer pays less today than the did in 1980. There's not a ton of overlap between these two today. Merging will of course eliminate that overlap, but those assets can be redeployed into new markets, keeping the other carriers on their toes.

  6. Andrew W. Guest

    Spirit took a few years to finally get it together: big front seat, better mileage plan, credit card, improved service (although still has bad name recognition). Frontier is simply awful. Given that Frontier is acquiring Spirit this cannot be good...

  7. dander Guest

    No more airline mergers. If they do let them merge, then no more government cheese when times are tough

  8. Vince McMahon Guest

    The combined airline can install in cabin cameras to monetize the rights to video of in-flight fights among passengers.

  9. Frank Guest

    Frontier merging with American Airlines would be a better fit. They could use the same catering and customer service out of Miami.

  10. Anon Guest

    I’m surprised American Airlines didn’t get in on all the fun and merge with both of them!

    After all, American Airlines has been going in the same direction as Spirit and Frontier over the years!

  11. Cj Guest

    Two bad airlines combined into 1. Horrible customer service on both snd I avoid if at all possible.

  12. Kiwi Guest

    Indigo partners are very savvy at running LCC and ringing every out of the business and will certainly look at the numbers and if the Big front seat makes more money extend it to the combined airline. Real world data speaks mountains more than hypothetical models Much the same way CO management changed its tune on economy+ post merger.

  13. AlanD Guest

    I’ve foreseen this for years and I think I even have a comment on here predicting it during the pandemic. I suspect the Spirit name may live on despite the negative association. For anyone who has known F9 only since they became an ULCC, the name is just as poisoned. I doubt they’d consider a new name?

    I suspect F9’s very popular animals will remain on tails and be added to the NK fleet....

    I’ve foreseen this for years and I think I even have a comment on here predicting it during the pandemic. I suspect the Spirit name may live on despite the negative association. For anyone who has known F9 only since they became an ULCC, the name is just as poisoned. I doubt they’d consider a new name?

    I suspect F9’s very popular animals will remain on tails and be added to the NK fleet. I wonder what color the livery will be though?

    I really hope the Big Front Seat continues versus F9’s “stretch” seats. I’d prefer to see F9’s FF program continue than the modern Free Spirit though.

    If regulators easily approve this deal, I wouldn’t be surprised to see AA gobble up AS by the end of 2022.

  14. Adam Simmons Guest

    I'm confused by this article. Either the two airlines have highly complementary networks (and thus little overlap) OR they compete vigorously. They can't do both.

    1. Anthony Clark Guest

      One statement “the two airlines have highly complimentary route networks” is being issued by the airlines hoping to get approval for the merger. The other statement “they compete vigorously” is being issued by the author of this article which is critical of the proposed merger.

    2. Chris P Bacon Guest

      But only one can be true. I think the truth is much closer to "highly complimentary route networks" than it is to "they compete vigorously". There are markets which they compete in, but there just aren't that many of them.

  15. shza Member

    The apocalypse is nigh.

  16. Tom Guest

    How about my 66,890 miles plan?

    1. William Nelson Guest

      Ya what about my points

  17. Tom Guest

    How about the sky miles plan

  18. stogieguy7 Diamond

    As stated in the article, these two airlines do indeed compliment each other. Given this, I can't possibly see how a merger would be anti-competitive in this particular case. Currently, they only compete head to head in a few markets - and even there, saying "head to head" is misleading because their scheduling is different. Combining the two not only bolsters the combined airline's footprint, but it will likely improve one of their weaknesses: very...

    As stated in the article, these two airlines do indeed compliment each other. Given this, I can't possibly see how a merger would be anti-competitive in this particular case. Currently, they only compete head to head in a few markets - and even there, saying "head to head" is misleading because their scheduling is different. Combining the two not only bolsters the combined airline's footprint, but it will likely improve one of their weaknesses: very thin flight schedules. Right now, if your Frontier or Spirit flight is cancelled, you're screwed for at least 24 hours. They literally can't do much else to help you aside from putting you on the next flight. This and legroom issues are the two reasons I'd never fly either of them. By merging, they can at least go a long way toward mitigating the issues they have when problems arise. As for legroom, that surely won't improve and I won't fly them - but most people aren't 6'5".

  19. henry Guest

    any word on which will be the surviving brand? I was always under the impression that spirit was the bigger airline?

    it is odd that even spirit and frontier, which pack em in like sardines and charge for everything, still aren't as cheap as european ulcc's (wizz, ryanair, vueling, easyjet, eurowings, etc). When i was studying over there, 15 euro international flights were not uncommon

    1. Never In Doubt Guest

      Spirit is the larger airline. They carried ~19m passengers in 2020, Frontier carried ~13m. In 2019 the numbers were much larger (of course) but the ratio was about the same.

    2. Adam Simmons Guest

      EZY would be most upset at your calling them a ULCC! EZY in particular vigorously targets the business market, much more so than Wizz or RYR. Ironically, though, RYR has a better seat pitch!

  20. D3kingg Guest

    If they acquired some 787s on a fire sale that would get interesting. Are people willing to pay a $495 ancillary fee for a lie flat seat on a long haul flight ?

  21. dn10 Guest

    One issue with Frontier today is they don't have the density on the routes to offer more than 1-2x a week, if the spirit acquisition can help them beef up the route density, it could be a win for consumers.

    1. fsxflyhigh Guest

      I agree. In my mind one of the biggest issue is route frequency. Having increased frequency and more robust backups in place makes a smoother operation and more reliable brand in the event of cancels or misconnections. If you miss your flight on United you might have to wait 3 hours...on NKS or FFT it may be next week. Instead of small fish competing against each other they can merge and become true competition for the big fish.

  22. Tyler Lemon Guest

    If the Big Front Seat product stays, I love this. And I would call in Frontier as Spirit has similar customer service, but their reputation is where it can never recover.

    1. Steve Diamond

      I hope it is the spirit brand that remains. I love flying the big front seat and dont mind Spirit. It is not bad if you know how to do it and pay for the needed extras.

    2. Rachael Guest

      I really hope the frontier rewards plan stays (100k elite) and that they keep big front seats! Also hope the add WIFI option on all flights!!!
      Excited but nervous of this merger and what 2023 will hold if it is approved.
      Only time will tell.

  23. Nige Guest

    These are “bus person” airlines. Anyone even thinking that this news should be ashamed.

    1. Jason Guest

      This is actually a huge deal. I've flown them and they were fine. My aunt and uncle just flew them last night to get to LAX in time for their connection on Air tahiti nui business class to Tahiti and to the St Regis Bora Bora. Only nonstop to get to LAX and saved them a ton of time. hardly "bus people". Snobbery such as this looks bad on people.

    2. Nige Guest

      But that’s because you’re so common you don’t realize how disgusting Spirit and their fliers are.

    3. Jason Guest

      Have you flown Spirit? Who do you think you are?

  24. SMR Guest

    What about good for the pilots. This would probably be a lose-lose for the pilot groups.

    What happens to JetBlue? They may end up merging with Allegiant and that would NOT be a good for consumers. Guaranteed

    1. Scott Guest

      Seriously? jetblue merging with allegiant? Come on.

    2. Chris P Bacon Guest

      Both pilot groups belong to ALPA. Both flight attendant groups belong to AFA. Both unions have bylaws regarding mergers between 2 airlines that they both represent. There won't be one group screwing the other over as we have seen in other mergers.

  25. Steve Guest

    If it's the Frontier brand that stays behind, then you can kiss the Big Front Seat and wifi that Spirit is rolling out goodbye.

    Just like when Southwest bought AirTran, this is a competition killer, pure and simple.

    1. Steve Diamond

      Yup im worried about losing my favorite deal in travel, the big front seat.

  26. Alex Guest

    Great news! One less airline to avoid ;)

  27. Jim Guest

    So long as the US aviation market doesn't end up oversaturated with ULCCs (think of how unpleasant it is to fly anywhere within Europe nowadays), go nuts. There is no shortage of competition in that sector, even though most of it is unviable in the medium to long term.

    1. Henry Guest

      I don't find the experience to be unpleasant in Europe even with EasyJet, airline staff is generally more polished and professional than in the US, security goes faster, boarding is more orderly and efficient, and passengers are more respectful, - they don't try to carry oversized luggage- as an added bonus, they are also quieter, dress better and are thinner, seat experience is quite comparable... so overall I prefer the experience in Europe. The main...

      I don't find the experience to be unpleasant in Europe even with EasyJet, airline staff is generally more polished and professional than in the US, security goes faster, boarding is more orderly and efficient, and passengers are more respectful, - they don't try to carry oversized luggage- as an added bonus, they are also quieter, dress better and are thinner, seat experience is quite comparable... so overall I prefer the experience in Europe. The main difference is that tickets are much cheaper.

    2. Adam Simmons Guest

      Too right! One of my most unpleasant flying experiences was in a redeye United 757 from SFO to NYC in a horrible seat with virtually no legroom.

    3. Jeff Guest

      I think this experience is more of a function of European culture rather than European airlines.

  28. Anthony Diamond

    Route maps seem complementary, and a bigger company may be better able to invest in amenities like loyalty programs, and ultimately compete in a wider variety of markets. I can see it being OK for consumers

  29. Alonzo Diamond

    At the end of the day, the consumers have spoken. Most folks want no frills and point to point transpiration at a very low cost. That's why Frontier and Spirit flights continue to be mostly filled and popular. Merger may not get approved but again, this is what the consumer wants.

    1. jedipenguin Guest

      I'd be more inclined to fly a ULCC if they removed the seats.

    2. polarbear Member

      I think Ryanair tried - but could not get approval for standing passengers ...

      :-)

  30. George Romey Guest

    What we will get out of this are airlines acting even more like credit card mills and forgetting about what was their core business. In other words, dirt cheap fares that fill every seat, even lower standards of customer care, endless credit card pitches each flight, more "air rage", crowded dirty airports (even the airline clubs aren't much better than the gate areas) and an overall miserable experience.

    1. Jason Guest

      Clearly you've never flown Spirit. They operate out of a nice new terminal in Fort Lauderdale. I flew in a big front seat. Flight was on time - early actually. flight attendants were friendly, service was quick. there were no credit card pitches. Overall it was a good experience. Last night my aunt and uncle flew them from Louisville to LAX. Only nonstop in the market. They flew in the big front seats. They were...

      Clearly you've never flown Spirit. They operate out of a nice new terminal in Fort Lauderdale. I flew in a big front seat. Flight was on time - early actually. flight attendants were friendly, service was quick. there were no credit card pitches. Overall it was a good experience. Last night my aunt and uncle flew them from Louisville to LAX. Only nonstop in the market. They flew in the big front seats. They were connecting to Air Tahiti Nui business class to Tahiti then on to the St Regis in Bora Bora. Ultimately, the convenience of the nonstop to LAX won them over and they said the flight was totally as expected - smooth and early into LAX. Before disparaging them you should try them. As should others.

    2. Watson Member

      Jason, sounds like you and your family got lucky. Millions of passengers have tried Spirit; their reputation was earned, not fabricated.

    3. Audrey Guest

      I agree with Jadon. I have flown Spirit many times and the experience is often or even usually superior to United or American. The FAs are overall more pleasant and the on-time performance in recent years is much improved- which is just an objective fact. Yes, the seats are smaller, their services are fewer and they don’t have interline agreements, which can certainly be a big deal. But time and time again I’ve found their...

      I agree with Jadon. I have flown Spirit many times and the experience is often or even usually superior to United or American. The FAs are overall more pleasant and the on-time performance in recent years is much improved- which is just an objective fact. Yes, the seats are smaller, their services are fewer and they don’t have interline agreements, which can certainly be a big deal. But time and time again I’ve found their prices, and often schedules also, make them my best option.
      People love to slam Spirit. I don’t know whether most of them have actually flown them or not, but in any case I’ve had plenty of bad experiences with nonULCC airlines. Paying more is no guarantee of a better experience. (That being said, they are also often NOT the cheapest option.)

    4. Audrey Guest

      Sorry - Jason.
      Autocorrect!

  31. KT Guest

    Is the name going to be Dumpster Fire Air

  32. FMLAX Guest

    Ben, to your point: when has an airline merger *ever* actually been good for consumers? I suppose it may make for a more seamless experience, but every other characteristic of flying is consistently made worse by mergers.

    1. Sean M. Guest

      While I'm not pretending to comment on this particular transaction, sometimes the merger of two smaller players (#7 and #8 by passengers flown) improves competition by creating a better resourced competitor to those with larger market shares. Between them, the two carriers carry about 1/5th the passengers that American Airlines alone does.

    2. Anonymous Guest

      Exactly , TMobile and sprint merger is similar to this, smaller companies need to achieve economics of scale to compete with large ones.

    3. Another Lump Guest

      "good for consumers" isn't the only factor. Shareholders, ie you and I who invest in companies through our 401ks and such, need to get a return on their investment. It's also not very good for consumers, or the economy overall, if a weak competitor goes out of business. Finally, it's not like there is some rule for a fixed number of airlines. New airlines start up all the time. Look at Breeze, or the new...

      "good for consumers" isn't the only factor. Shareholders, ie you and I who invest in companies through our 401ks and such, need to get a return on their investment. It's also not very good for consumers, or the economy overall, if a weak competitor goes out of business. Finally, it's not like there is some rule for a fixed number of airlines. New airlines start up all the time. Look at Breeze, or the new airline Ben covered using Alaska as a hub. If we are going to restrict mergers, should we also restrict new airline formation, because we have to have the "right" number of airlines? No, that's silly. If there is profit to be had, no entrants will come in.

    4. Another Lump Guest

      *new, not no

      It would be nice to have an edit comment function!

    5. LSP New Member

      Southwest buying/merging with Airtran was the start of Southwest flying international (and probably started the transition to Hawaii), which has been good for consumers.

    6. Anthony Diamond

      That particular merger also destroyed Airtan's solid presence out of Atlanta, which ceded the Atlanta market even further to Delta. In that case, I think it was due to Southwest simply lying about their intentions in Atlanta versus the merger itself, but it did hurt competition there

    7. Steve Diamond

      Hurt in ATL helped in other cities. I would assume this would be somewhat similar. Certain routes and certain people in one location will be positively impacted probably to the same extent that some will be negatively impacted, so nothing really gained or lost besides a lot of corporate jobs that will be synergized.

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Vince McMahon Guest

The combined airline can install in cabin cameras to monetize the rights to video of in-flight fights among passengers.

2
Adam Simmons Guest

I'm confused by this article. Either the two airlines have highly complementary networks (and thus little overlap) OR they compete vigorously. They can't do both.

2
Alex Guest

Great news! One less airline to avoid ;)

2
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