Frontier buys Spirit Airlines in cash-and-stock deal

Ultra-low-cost airlines, designed to lower costs and fares by offering a more basic flying experience, have revolutionized the airline industry in recent years. The deal announced Monday would bring together two of the largest airlines, which the airlines say would allow them to compete more aggressively with bigger rivals.

“This transaction aims to create an aggressive competitor for ultra-low rates to better serve our guests, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly rates for the flying public” , said Spirit’s President and Chief Executive Ted, Christie.

The companies valued the deal at $6.6 billion, including the acquisition of net debt and operating leases.

The consolidation comes as the travel industry continues to push its way to pre-pandemic levels, despite increased costs, labor shortages and disruptions caused by Covid-19.

Airlines focused on offering cheap fares to vacationers, as both Spirit and Frontier do, have added capacity more quickly than larger rivals hampered by a slower recovery in corporate and international travel, and have returned to ambitious growth plans. But they face additional competition from larger airlines such as American Airlines Group Inc.

who are increasingly after the same group of customers.

At the close of the deal, Frontier will own approximately 51.5% of the combined company, and its chairman, William Franke, will become chairman of the combined company’s board of directors. Shares of Spirit rose more than 12% in premarket trading Monday after the deal was announced, while Frontier shares fell more than 2%.

Mister Franke has been eyeing a combination between Spirit and Frontier for years. He was the chairman of Spirit when Frontier went up for sale in 2013, and pitched fellow directors of Spirit about buying the carrier. He eventually resigned from Spirit and Indigo Partners LLC, his private equity firm, that year purchased Frontier from Republic Airways Holdings for $36 million in cash, as well as assumed debt and leases.

Franke and Barry Biffle, the CEO of Frontier, have transformed Frontier into an ultra-low cost competitor to Spirit. Analysts, investors, bankers have since speculated about a merger between the two airlines. Before the pandemic, in 2019, Spirit and Frontier were the seventh and eighth U.S. carriers in traffic, according to US government figures.

Some airlines handled flight cancellations better than others last year, according to WSJ’s annual airline rankings. WSJ’s Allison Pohle explains what caused some of the major cancellations. Photo illustration: Ryan Trefes

The two airlines said they will be able to grow faster together than they would apart, allowing them to offer additional low-cost services on underutilized routes in the US, Latin America and the Caribbean and hire an additional 10,000 employees by 2026.

Still, the deal must get past regulators, who have taken an aggressive stance on antitrust enforcement under the Biden administration. The Justice Department filed an antitrust lawsuit last year against a partnership between American Airlines Group and JetBlue Airways Corp.

describing their partnership as a back door to industry consolidation and claiming that the airlines’ partnership would suppress competition and lead to higher fares.

The Justice Department has been concerned for years about a reduction in airline competition and is under pressure from antitrust lawyers to do more to prevent it. The Obama administration initially contested American’s merger with US Airways in 2013, but settled the matter and allowed the deal in exchange for concessions from the airlines.

In 2016, the Alaska Airlines division allowed Virgin America Inc. in a $2.6 billion deal, but required Alaska to significantly scale back a partnership with American in order to continue.

mr. Biffle, the CEO of Frontier, said during a meeting with analysts and investors that the merger announced Monday will benefit consumers — an argument the companies plan to make with antitrust regulators.

“This is not about reducing competition and raising rates,” he said.

The management team, branding and headquarters of the combined company will be determined by a committee headed by Mr. Franke prior to the closing of the deal. The deal is expected to close in the second half of this year, pending regulatory approval.

Spirit shareholders will receive 1,9126 Frontier shares, in addition to $2.13 in cash for each share of Spirit they own, the companies said. At Frontier’s closing price on Friday of $12.39, that represents a value of $25.83 per share for Spirit, representing a 19% premium over Friday’s closing price.

In addition to the deal, both Spirit and Frontier also released their latest quarterly results on Monday. Like other airlines, the two low-cost carriers said the Omicron variant hurt their fourth-quarter results.

Vacation travel helped U.S. airlines bring in more revenue late last year than any quarter since the pandemic began to wreak havoc on travel demand in 2020. But major airlines lost money, saying the new variant and a spate of cases have temporarily dimmed their prospects.

Spirit said disruptions in December due to staff shortages and the Omicron variant hit about $30 million in adjusted earnings before interest, taxes, depreciation and amortization.

write to Alison Sider at and Will Feuer at

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