By Natalie Mojica
Spirit and Frontier Airlines announced on Feb. 7 they will merge to create the fifth largest airline in the U.S. Together, the airlines will carry more than a thousand flights daily to over 145 destinations spanning over nineteen countries.
“Together, Frontier and Spirit will be America’s Greenest Airline and deliver more ultra-low fares to more people in more places,” said Barry Biffle, president and CEO of Frontier.
Spirit and Frontier aim to be more aggressive against the Big Four carriers—American Airlines, Delta Air Lines, Southwest Airlines, United Airlines. The two airlines plan to take on the competition with cheaper tickets.
“We are thrilled to join forces with Frontier to democratize air travel further,” said Ted Christie, president and CEO of Spirit. “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.”
Frontier agreed to acquire Spirit for $2.9 billion in cash and stock. The merger is valued at $6.6 billion. Under the terms of the union, Frontier has a 51.5% stake in the new company, but the share payout will go to Spirit shareholders.
The future chairman of the new company, William A. Franke, expects the Biden administration will approve the merger without hesitation. While together both carriers form a much stronger company with more resources, they still would control less than 10% of the market.
While Spirit and Frontier made improving the consumer experience at a lower cost the selling point for the merger, past airline mergers have usually resulted in higher fares and fees and worse customer service. Even though Spirit and Frontier are famous for their low fares, they are also infamous for having some of the highest numbers of customer service complaints, which can worsen through the merger.
So far, the Justice Department has yet to comment on the merger announcement. Experts like Sam Weinstein, a former attorney in the Justice Department’s antitrust division, suspect the merger is susceptible to more critique than Franke lets on but not enough to reject the union altogether. Weinstein says, “The government could take the view [that] these are the two most important of the ultra-low-cost carriers, and we don’t want to see them merged, but I doubt that would happen.”
Executives from Spirit and Frontier expect the deal to be approved in the latter half of the year when Franke will head a committee to decide the new company’s name, management team, and corporate base.
