In this article ULCC
SAVE
Frontier Airlines and Spirit Airlines, the two largest discount carriers in the U.S., have agreed to merge in a deal valued at $6.6 billion, creating what would become the fifth-largest airline in the country. The merger gives Denver-based Frontier Airlines a 51.5% controlling stake in the combined airline. Spirit investors will receive 1.9126 shares of Frontier plus $2.13 in cash for each share they own, giving Spirit shareholders an implied value of $25.83 per share, which is a 19% premium over the value of Spirit shares at the end of last week, the companies said. "This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public," Spirit President and CEO Ted Christie said in a statement announcing the deal. Spirit is based in Miramar, Florida. The boards of both companies approved the deal over the weekend. It would be the first merger of large U.S. airlines since Alaska Airlines' combination with Virgin America in 2016.
Spirit's shares surged 14% in morning trading, while Frontier's were up 1%. Frontier Chairman Bill Franke, a longtime discount airline investor and executive, will chair the combined company, which he said "will create America's most competitive ultra-low fare airline for the benefit of consumers." The companies didn't announce the new name of the combined carrier, the CEO or location of the airline's headquarters. Those questions will be answered by a committee led by Franke after the transaction closes, which is expected in the second half of the year, pending regulatory and shareholder approval. Labor unions were informed early Monday, the airlines said. Pilots at Frontier and Spirit are represented by the same union, as are the two airlines' flight attendants. The deal comes as carriers are still struggling to recover from the pandemic. Fast-growing discount airlines such as Spirit and Frontier that focus on price-sensitive leisure travelers have been able to weather the crisis better than their larger-carrier competitors, which are more reliant for revenue on international and business travel, two segments that have lagged in the recovery. For Franke, the deal is the latest in a career of making investments in and overseeing low-fare airlines around the world, including Spirit. From 2006 through 2013, Indigo Partners held a stake in Spirit, with Franke serving as chair of the airline before he resigned when Indigo sold its position in the carrier. Shortly after that move, Indigo bought Frontier Airlines from Republic Airways for $145 million.
Spirit Airlines aircraft are seen parked at the end of a runway at Orlando International Airport on the sixth day the airline has cancelled hundreds of flights. Paul Hennessy | LightRocket | Getty Images