Frontier Airlines is making a second attempt to merge with bankrupt Spirit Airlines, which filed for bankruptcy late last year amidst struggles faced by budget airlines. The parent company of Frontier Airlines, Frontier Group Holdings Inc., announced on Wednesday a proposed deal involving newly issued Frontier debt and common stock.
Spirit Airlines has not yet responded to the request for comment regarding the proposed merger. Frontier had previously tried to merge with Spirit in 2022 but was outbid by JetBlue. However, the Justice Department intervened, suing to block the $3.8 billion JetBlue deal, citing concerns about potential price increases for Spirit customers reliant on low fares. A federal judge ruled in favor of the Justice Department in January, leading JetBlue and Spirit to abandon their merger bid two months later.
Spirit Airlines, the largest U.S. budget airline, filed for Chapter 11 bankruptcy protection in November after reaching agreements with bondholders. The airline has faced significant financial losses, exceeding $2.5 billion since the beginning of 2020, with upcoming debt payments surpassing $1 billion in 2025 and 2026.
Major U.S. airlines have capitalized on Spirit's challenges by attracting budget-conscious customers with their own budget ticket options. Additionally, the summer of this year saw a decline in fares for U.S. leisure travel due to an oversupply of new flights.
Frontier Airlines remains optimistic about the potential merger, believing it will create a stronger low-cost airline capable of competing more effectively and expanding into new markets. Frontier's Chair, Bill Franke, expressed confidence in the proposal, stating readiness to engage in further discussions with Spirit and its financial stakeholders to finalize the transaction.
Following the announcement of the proposed merger, shares of Frontier Group experienced a slight increase before the market opening on Wednesday.
