Discount Airlines Frontier and Spirit Merge in $6.6 Billion Deal

Fort Lauderdale, United States - February 17, 2016: A Spirit Airlines Airbus A320 with the registration N641NK landing at Fort Lauderdale Airport (FLL) in the United States.
Boarding1Now / iStock.com

Spirit Airlines and Frontier Group announced a definitive merger agreement on Feb. 7, under which the companies will combine in a deal valued at $6.6 billion, “creating America’s most competitive ultra-low fare airline.”

In wake of the news of the merger between the two budget carriers, Spirit shares jumped about 11% and Frontier Group stock fell about 3% in premarket trading, CNBC reported.

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The stronger financial profile of the combined company will enable it to compete even more aggressively, “especially against the dominant ‘Big Four’ airlines, among others,” according to the press release put out by Frontier. The “Big Four” airlines are made up of American Airlines, Delta, Southwest and United.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, existing Frontier equity holders will own 51.5% and existing Spirit equity holders will own approximately 48.5% of the combined airline, according to the release.

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“We are thrilled to join forces with Frontier to further democratize air travel,” Ted Christie, President and CEO of Spirit, said in the release. “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. We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent Guest service.”

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William A. Franke, the Chair of Frontier’s Board of Directors and the managing partner of Indigo Partners, Frontier’s majority shareholder,  will be Chairman of the Board of the combined company. The Board of Directors for the new airline will have 12 directors (including the CEO), seven of whom will be named by Frontier and five of whom will be named by Spirit, according to the release.

The merger is expected to close in the second half of 2022, and the combined company’s management team, branding and headquarters will be determined by a committee led by Franke prior to close.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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