Frontier Airlines and Spirit Airlines, the country’s two largest low-cost airlines, have announced that they have agreed to merge to form the fifth-largest airline in the United States.
In an announcement released this morning, Bill Franke, the chair of Frontier’s Board of Directors, said the merger of two “complementary businesses” would “create America’s most competitive ultra-low fare airline for the benefit of consumers” and be a disruptive force against the “Big Four” airlines of United, American, Delta and Southwest.
The combined airline will be able to harness the distribution power of the two brands, with Spirit’s strong presence in the East and Frontier’s in the West.
The $6.6 billion cash-and-stock deal is structured with Frontier controlling a majority 51.5% of the merged carrier and Spirit holding the remaining 48.5%. The Board of Directors for the new airline will be comprised of 12 directors, seven of whom will be named by Frontier and five of whom will be named by Spirit.
Franke did not reveal what the new airline would be named or who would run it.
“I've told both Barry [Biffle, CEO of Frontier Airlines] and Ted [Christie, CEO of Spirit Airlines] that I am going to take my time and do it in an orderly way, and they're both comfortable with that,” Franke said on a call with analysts and reporters this morning. “I don't think there's any real urgency to the decision.”
The merger is expected to close in the second half of 2022, subject to completion of the regulatory review process and approval by Spirit stockholders. Frontier’s controlling stockholder has already approved the transaction.
On the conference call this morning, Christie said the combined airline will have the “youngest, most modern and fuel efficient fleet” and that customers will save an average of $20 per seat compared to the larger legacy airlines, in part because “while higher fuel prices impact all airlines, Frontier and Spirit tend to have greater seat density than most of our competitors.”
According to Frontier and Spirit, the merger will deliver enhanced value to shareholders of both companies, delivering annual revenues of approximately $5.3 billion based on 2021 results, and an annual run-rate operating synergies of $500 million once full integration is completed.
Spirit Airlines CEO Ted Christie lauded the merger as a move that would “further democratize air travel” by resulting in “more consumer-friendly fares for the flying public.”
Christie called the merger “a huge win” for travelers, projecting that the combined airline will deliver $1 billion in annual consumer savings and offer more than 1,000 daily flights to over 145 destinations in 19 countries, adding new routes to underserved communities across the United States, Latin America and the Caribbean.
“We’re a perfect fit,” said Mac Gardner, Chairman of the Board of Spirit. “Our businesses share similar values, including our longstanding commitment to affordable travel.”
