American budget carriers Frontier Airlines and Spirit Airlines will merge to create the fifth-largest American carrier.
As part of the deal that is worth US$2.9 billion deal that is anticipated to conclude by the end of 2022, Frontier Airlines will hold a controlling stake in the yet-to-be-named new carrier. The deal has to pass antitrust regulation and gain Department of Justice (DOJ) approval.
The merger could generate a further 10,000 direct jobs by 2026. In addition, the new carrier intends to provide over 1,000 daily flights to over 145 individual destinations.
“In a competitive industry like ours, the lowest costs always win,” Frontier Airlines Chief Executive Barry Biffle told analysts. “These low costs will, in turn, enable us to keep our fares low for customers. Spirit is very strong in the East. Frontier is very strong in the West. That’s going to drive more customers onto our existing flights, which means more low fares to more people.”
“The transaction is centered around creating an aggressive low-fare competitor that will better serve guests, expand career opportunities for our team members and create value for our shareholders,” Ted Christie, Spirit CEO told analysts on a call discussing the deal on Monday. “We believe we are a perfect fit with Frontier. Our businesses share similar values, including our long-standing commitment to affordable travel.”
Both carriers have orders with Airbus for new aircraft and have indicated they would be unlikely to cancel any of the ordered planes. Colorado-based Frontier Airlines would hold a 51.5% stake in the combined entity, while Spirit Airlines’ shareholders would receive $25.83 per share, a premium of 18.8% on last Friday’s close.
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