Frontier Airlines and Spirit Airlines, the two largest low-cost airlines in the US, have agreed to merge to create the country’s fifth largest airline. The boards of both companies approved the deal this weekend, before the CEOs of both airlines announced the deal in New York City.
The $6.6 billion deal is structured with Frontier Airlines controlling 51.5 percent of the merged airline, while Spirit owns the remaining 48.5 percent.
The name of the combined airline, who will become CEO, and the location of the airline’s headquarters are yet to be determined. The new airline’s chairman will be Bill Franke, the current chairman of Frontier and managing partner of parent company Indigo Partners. In a press release announcing the agreement, Franke said the combined airline will “create America’s most competitive ultra-low fare airline for the benefit of consumers.”
The name of the combined airline, who will become CEO, and the location of the airline’s headquarters are yet to be determined.
For Franke, the deal is the latest in a career in which he invests in and oversees low-cost airlines around the world, including Spirit. From 2006 to 2013, Indigo Partners had a stake in Spirit, with Franke serving as president of the airline before stepping down when Indigo sold its position in the airline. Shortly afterwards, Indigo bought Frontier Airlines from Republic Airways for $145 million.
Since that acquisition, Denver-based Frontier has steadily expanded its route network with new destinations and additional flights, often targeting cities where larger airlines such as Southwest have a strong presence. In almost all cases, Frontier comes in with low fares to gain a foothold with travelers looking for cheaper tickets.
Spirit, based in Miramar, Florida, has also grown aggressively over the past decade and plans to continue that strategy, once paired with Frontier.
“This transaction aims to create an aggressive competitor for ultra-low rates to better serve our guests,” Spirit CEO Ted Christie said in a statement regarding the agreement.
According to the Department of Transportation, Spirit and Frontier had 2.8 percent of revenue from passenger miles flown by U.S. airlines in 2013. By 2019, their combined market share had nearly doubled to 5.4 percent, while the four largest US airlines, American Airlines, Delta Air Lines, United Airlines and Southwest Airlines, accounted for 73.9 percent of revenue in passenger miles.
Since both airlines only fly Airbus aircraft and neither dominate any particular market, a merger between Spirit and Frontier makes sense on paper. Still, President Joe Biden’s administration has made it clear to corporate America that it will investigate potential mergers much more aggressively than the Trump administration. The carriers expect the deal to be completed in the second half of this year.