Bankrupt budget airline decides on rival's purchase…

Bankrupt budget airline decides on rival's purchase offer

A lot has changed in the year since a federal judge blocked JetBlue Airways (JBLU) from acquiring fellow low-cost carrier Spirit Airlines (SAVE) for $3.6 billion because of antitrust concerns.

After a series of unprofitable quarters, Spirit filed for Chapter 11 bankruptcy protection in November 2024. While the carrier is continuing operations on both domestic and international routes as usual, questions around its future hang heavy.

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While the low-cost airline, operating out of Florida since 1992, has a strong brand and extremely loyal customer base, the way forward with over $1 billion in deferred debt would require both a major restructuring and investors willing to take it on.

Four Spirit Airlines airplanes are seen lined up at an airport. Spirit has called Frontier's latest proposal 'insufficient."
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Frontier says it made 'compelling proposal' to buy Spirit

One possibility that has repeatedly been floated is a merger with Frontier Airlines (FRON) . On Jan. 29 the Denver low-cost carrier said it "made a compelling proposal to combine with Spirit through the issuance of newly issued Frontier debt and common stock."

The airline first made an offer to buy Frontier in 2022 but was ultimately outbid by a larger offer from JetBlue. That merger was called off, and Frontier has made a second attempt at a tieup when the Trump administration is promising looser regulation for the aviation industry.

"We have long believed a combination with Spirit would allow us to unlock additional value-creation opportunities," Frontier Chief Executive Barry Biffle said in a statement. "As a combined airline, we would be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service."

In a separate filing, Spirit said the offer was first made on Jan. 7 and consisted of paying $400 million in take-back debt as well as offering 19% of Frontier Airlines shares to Spirit creditors for a total valuation of $2.1 billion.

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Spirit execs: Frontier proposal insufficient

While the two airlines have been holding closed-door talks to discuss the details of the proposal over the last three weeks, Spirit CEO Ted Christie and Chairman H. McIntyre Gardner have issued a statement saying that the proposal was "woefully insufficient" and talks with Frontier have failed to address its "many deficiencies."

"Please note that we have discussed the new Frontier proposal with the advisers to our bondholders," Christie, as reported by Simple Flying, reportedly told Frontier. "We are told they believe your current proposal is so insufficient as not to merit a counter."

Christie also said that the last time the airline held closed-door talks with Frontier, in summer 2024, Frontier's proposal included $580 million in take-back debt and 26.5% equity.

The current proposal is less than the previous one but comes when Spirit is in a more precarious position after filing for bankruptcy.

The biggest concern Christie raised was that the proposal did not address the $350 million in debtor-in-possession financing that Spirit requested to bridge the immediate gap as it works through bankruptcy.

Frontier's documents presuppose that this would be worked out with creditors before the merger is completed.

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