Low-cost US carriers Frontier Airlines and Spirit Airlines (S64) (SAVE) announced plans to merge and create an ultra-low fare airline.
The $6.6 billion deal was announced in a joint statement on February 7, 2022, and will see current Frontier Airlines equity holders owning around 51.5% of the combined carrier, while existing Spirit equity holders will own approximately 45.8%, “on a fully diluted basis, providing both Frontier and Spirit equity holders with substantial upside potential”.
After the merger, the board of directors will consist of 12 directors, including the chief executive officer (CEO). Seven members will be selected by Frontier Airlines and the remaining five by Spirit Airlines (S64) (SAVE).
“Frontier’s controlling stockholder has approved the transaction and related issuance of shares of Frontier common stock upon signing of the merger agreement. The combined company’s management team, branding, and headquarters will be determined by a committee led by Mr. Franke prior to the close,” the statement adds.
Both parties predict that after the merger, which is due to be closed in the second half of 2022, the combined airline will deliver as much as $1 billion in annual consumer savings. It will also be capable of offering 1,000 daily flights across routes to 145 destinations. The fused carrier will offer ultra-low services by adding new routes to underserved destinations in the United States, Latin America, and the Caribbean.
The new venture will also boost its aircraft fleet by adding more than 350 commercial planes and aims to own the largest fleet of Airbus A320 family jets across the US.
Given the potential growth of the combined company, both Frontier and Spirit expect annual revenues to reach approximately $5.3 billion based on 2021. The merged airline also hopes to strengthen its financial profile and “to deliver annual run-rate operating synergies of $500 million once full integration is completed.”
The merger should also create 10,000 jobs by 2026.
According to Spirit Airlines CEO Ted Christie, the move is expected to create “an aggressive ultra-low fare competitor”, which will “increase competitive pressure” and result in more “consumer-friendly” fares.
“We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent Guest service,” Christie added.