Frontier Airlines disclosed that it recorded $1 million in total costs related to its failed merger with Spirit Airlines during the first six months of 2023.
According to its United States (US) Securities and Exchange Commission (SEC) filing for Q2 2023, Frontier Airlines “recorded less than $1 million and $1 million in expenses related to the proposed Merger within transaction and merger-related costs” in Q1 and H1 2023, respectively. The costs represented “merger-related retention bonus expense for all eligible employees who were subject to CARES Act compensation restrictions”.
During the same six-month period in 2022, the company’s merger-related costs were $20 million, including the same retention bonus expenses, as well as banking, legal, and accounting fees.
Frontier Airlines noted that if Spirit Airlines merges with another entity or enters into a written merger agreement within 12 months after the two low-cost carriers terminated their merger contract, the latter will have to pay the former $69 million.
Still, Frontier Airlines continued to move on from the merger, which fell apart once JetBlue presented a larger bid to Spirit Airlines’ shareholders, and managed to end Q2 2023 with a $71 million net profit. Its H1 2023 result was a net income of $58 million, compared to a loss of $108 million in the same period during 2022.
“Our earnings before tax delivered our highest post-pandemic, pre-tax margin on 36 percent capacity growth and 35 additional aircraft compared to the 2019 quarter, and we delivered a five percent improvement in non-fuel adjusted unit costs over the prior year quarter,” said Barry Biffle, the president and chief executive officer (CEO) of Frontier Airlines.
Much like other airlines in the US, Biffle pointed out that the airline’s employees managed to navigate “challenging conditions presented by June [2023] weather”.
“We are focused on delivering Low Fares Done Right, including sustaining our cost advantage over the industry as we grow the airline,” Biffle concluded.
Frontier Airlines and Spirit Airlines ended their merger agreement in June 2022. It was initially agreed in May 2022. After JetBlue proposed a more attractive cash offer to Spirit Airlines’ shareholders, Frontier Airlines’ executives, including Biffle, published an open letter stating t JetBlue’s proposal was “illusory” and lacked “any realistic likelihood of obtaining regulatory approval”.
Still, Spirit Airlines’ shareholders approved the merger in late July 2022.
In June 2023, JetBlue agreed to give Frontier Airlines all of Spirit Airlines’ slots and gates at New York LaGuardia Airport (LGA) after their merger in an attempt to appease the US Department of Justice (DOJ).
The DOJ and JetBlue are set to go to court in October 2023 over the merger with Spirit Airlines.