Denver-based Frontier Airlines’ bid for Spirit would create nation’s fifth-largest carrier

Denver-based Frontier Airlines is making a bid to buy Spirit Airlines in a merger worth $6.6 billion, a deal that would create the nation’s fifth largest carrier.

“It’s a great day for Colorado,” said Barry Biffle, president and CEO of Frontier, which has been a fixture in the state since the 1950s. “Everybody wins.”

Frontier offered almost $3 billion to purchase Spirit. Together, the discount airlines would operate more than 1,000 daily flights and 283 aircraft, flying to 19 different countries, according to their new website. The site says the companies have 350 new aircraft on order.

Monday’s announcement means Coloradans will gain more access to “exotic places,” considering Spirit’s established presence in the Caribbean, Central America, and South America for over a decade, Biffle said in a Monday telephone interview. Frontier currently serves 120 destinations, and Spirit hits more than 60 locations.

Alternatively, more international travelers will also have the opportunity to visit the Centennial State, Biffle added.

The two companies aim to create “America’s most competitive ultra-low fare airline,” they wrote in a joint news release on Monday. A decision hasn’t been made yet on which brand the combined airline would identify with, Biffle said.

Frontier and Spirit anticipate that the combined airline will create an additional 10,000 jobs by 2026. The merger will also result in “America’s Greenest Airline,” the companies said. They claim that the fleet will be the “most modern and fuel-efficient fleet” in the U.S.

The deal is estimated to close in the second half of this year if approved by Spirit shareholders and federal regulators. The Biden administration has taken a tough stance on larger corporate mergers, last year issuing an executive order that highlighted consolidation in the airline industry. That prompted the Transportation Department to consider rules to better benefit customers, such as the clear disclosure of certain fees.

The Justice Department has tried to block mergers before. In 2013, American Airlines’ merger with US Airways garnered a DOJ challenge, which was later settled. And last year a partnership between American Airlines and JetBlue Airways drew an antitrust suit.

If the deal is approved, Frontier equity holders will own 51.5%, with Spirit equity holders making up 48.5%.

It will be run by 12 directors, including the CEO – seven named by Frontier and five by Spirit. William Franke, chair of Frontier’s board, will serve in the same role in the combined company. Franke is a managing partner of Indigo Partners, a private equity firm that invests in budget airlines.

According to the New York Times, Indigo has a controlling interest in Frontier’s parent company, Frontier Group Holdings, and held a controlling interest in Spirit from 2006 to 2013. Under Indigo’s leadership, Spirit went public in 2011, and Frontier went public last year. The Times also reports the private equity firm has advised and invested in Tigerair in Singapore, Volaris in Mexico and Wizz Air in Europe. Biffle, Frontier’s chief executive, was a top Spirit executive from 2005 to 2013.

The companies’ leaders hope the proposed merger means more leverage to compete with the “Big Four” U.S. airlines: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.

“We are thrilled to join forces with Frontier to further democratize air travel,” said Ted Christie, president and CEO of Spirit, in a statement, adding that the union will “shake up the airline industry.”

The coronavirus pandemic rattled the aviation industry, with consumer demand tanking in 2020 as government orders mandated would-be travelers to stay at home. Passenger traffic in April 2020 was 96% lower than it was one year prior, the U.S. Government Accountability Office reports.

Airlines are now in recovery mode, with average fares still “well below” 2019 levels, according to Airlines for America. While new ticket sales are climbing, corporate and “long-haul” international travel remains curtailed, the trade association reports. COVID-19 outbreaks have also caused flight cancellations as ill crew members led to staffing shortages.

The Wall Street Journal’s 2021 Airline Scorecard found that Frontier had the second-fewest flight cancellations, falling just behind Delta. However, Spirit almost hit the bottom of the list, ranking eighth out of nine.

Both airlines took public relations hits last year in regards to customer service. Colorado Attorney General Phil Weiser singled out Frontier in January for the number of complaints his office had received about the airline. And in August bad weather combined with staffing shortages caused Spirit to cancel hundreds of flights, including 40% on one day, leaving a lot of travelers scrambling to find new flights home.

Still, Frontier and Spirit are actually deploying more capacity for air passenger transportation in the first quarter of this year, compared to the first quarter of 2019, A4A details. The two companies, along with Allegiant Air, are growing the fastest in systemwide scheduled available seat miles – an industry measurement that the Bureau of Transportation Statistics defines as equal to one aircraft seat carried one mile.

The team at the Denver International Airport “will be closely monitoring the process to fully analyze the impact” of the merger, public information officer Stephanie Figueroa said Monday. Because the merger requires regulatory approval, the team will await further details in the coming weeks, the spokesperson continued.

Out of 115 full-service contact gates at DIA, Frontier occupies nine, while Spirit has two, Figueroa said.

The airport reports that it generates more than $33.5 billion for the region annually. “Denver has proven to be one of the most resilient markets in terms of recovery from the pandemic and this position has been supported by competitive operating costs” at the airport, Figueroa added.

Stock prices for both airlines rose on the news Monday. Spirit closed the trading day at $25.46, a 17% increase, while Frontier Group Holdings Inc. closed at $12.82, up about 3.5%.