Spirit Airlines and Frontier Airlines have announced a definitive merger agreement. The carriers highly complementary networks will offer over 1,000 daily flights to more than 145 destinations across the U.S., Latin America and the Caribbean.
On Monday (February 7, 2022), Spirit Airlines announced that they will merge with Frontier Airlines, creating what they believe will be 'America’s most competitive ultra-low-cost carrier (ULCC)', with a highly complementary network that will serve over 145 destinations across the U.S., Latin America and the Caribbean. The combined airline is expected to deliver $1.0 billion in annual consumer savings and offer over 1,000 daily flights across 19 countries. The new airline will continue to expand with over 350 new aircraft on order. By 2026, Spirit and Frontier expect to add 10,000 direct jobs and support thousands of additional jobs at the companies’ business partners. Frontier and Spirit plan on being ‘America’s Greenest Airline’, by providing nationwide access to sustainable and affordable air travel. The merged company will have the youngest, most modern and fuel-efficient fleet in the U.S., with the largest fleet of A320neo family aircraft of any other carrier in the country.
In Monday’s announcement, Frontier Airlines’ Chairman of the Board of Directors and Managing Partner of Indigo Partners, William A. Franke, said,
“We worked jointly with the Board of Directors and senior management team across both carriers to arrive at a combination of two complementary businesses that together will create America’s most competitive ultra-low fare airline for the benefit of consumers.”
Also commenting on the merger agreement, Spirit Airlines’ President and CEO, Ted Christie, said,
“We are thrilled to join forces with Frontier to further democratize air travel. 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.”
Combined, the new company will deliver annual revenues of approximately $5.3 billion (based on 2021 results). Once full integration is accomplished, the airlines expect to deliver annual run-rate operating synergies of $500 million, primarily driven by scale efficiencies and procurement savings, with approximately $400 million in one-time costs. Under the agreement, Spirit equity holders will receive 1.9126 shares of Frontier, plus $2.13 in cash for each existing Spirit share they own. This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on February 4, 2022, representing a 19 percent premium over the February 4th closing price of Spirit, and a 26 percent premium based on the 30 day weighted average prices of Frontier and Spirit.
Upon closing of the merger, existing Frontier equity holders will own approximately 51.5% and existing Spirit equity holders will own approximately 48.5 percent of the combined carrier. The transaction is expected to close during the second half of 2022
Source(s): Spirit Airlines, Frontier Airlines