Spirit and Frontier Merger Would Create 5th Largest U.S. Airline

Skift Take

The rumors have come true with Spirit Airlines and Frontier Airlines unveiling plans to merge Monday. The deal would create a U.S. budget juggernaut and the country’s fifth largest airline but likely faces a tough approvals process from the pro-competition Biden administration.

Edward Russell

Spirit Airlines and Frontier Airlines have unveiled plans to merge in a deal that would create the fifth largest carrier in the U.S. and a budget juggernaut to be reckoned with.

Under terms unveiled on Monday, the $6.6 billion cash and stock deal would create an airline serving more than 145 destinations in 19 countries with more than 350 aircraft. Frontier shareholders would own 51.5 percent of the resulting company despite Spirit being the larger airline. The merger has been approved by the boards of both carriers, but is subject to regulatory approval. The airlines hope to close the transaction in the second half of 2022.

There have long been rumors of a possible Spirit-Frontier combo. The two budget airlines — known as “ultra low-cost carriers” in the industry — both come from the Indigo Partners flock; a private equity firm known for creating a certain breed of successful discounters. Indigo built Spirit into the airline it is today before selling the company in 2013 when it acquired Frontier, which itself went public in 2021. Both airlines fly complementary Airbus A320 family jets and seek to stimulate travel with cheap, point-to-point flights.

The combined carrier would be the fifth largest in the U.S., catapulting the airlines ahead of Alaska Airlines and JetBlue Airways. Spirit-Frontier would have a 6.3 percent share of U.S. passengers based on 2019 numbers, according to U.S. Bureau of Transportation Statistics data. The airline would remain behind American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines that control more than three-quarters of the U.S. market.

“This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests … and increase competitive pressure, resulting in more consumer-friendly fares for the flying public,” said Spirit CEO Ted Christie in a statement.

Both Spirit and Frontier have recovered faster from the coronavirus pandemic than many of their competitors owing to the strength of leisure traffic. In 2021, the airlines flew just 2 percent less passenger capacity than they did two years earlier, Cirium schedule data show.

The combo is the first major airline deal of President Biden’s administration. Speaking in January, the president spoke out against monopolies in key industries and said “capitalism without competition is not capitalism, it’s exploitation.” A Spirit-Frontier merger, while creating a stronger budget airline, would also eliminate one competitor from the already highly-consolidated U.S. airline market.

In a signal of its pro-competition stance, the U.S. Justice Department challenged a partnership between American and JetBlue in court in September.

This story is developing and will be updated. Check back for updates.