Spirit Airlines and Frontier Airlines, America’s two biggest ultra-low-cost airlines, have been talking again about merger or takeover, but it doesn’t look like anything is likely to happen soon.
Spirit, which is in Chapter 11 bankruptcy proceedings, has rejected a buyout offer from Frontier, saying it’s too little and doesn’t meet the airline’s needs for covering debts and recapitalizing. But, it says, it agrees with Frontier that a merger would create a “potent competitor in the marketplace,” so the dance may not be over yet.
The latest Frontier offer, which some reports have valued at $2.1 billion appears to Spirit to be much lower—$400 million—once covering debts. Spirit told Frontier its offer was “woefully inadequate” and told Frontier bosses that “Unfortunately, despite the clear guidance we and others have provided for three weeks as to the Proposal’s many deficiencies, you have addressed virtually none of them.”
It’s the third time around for the potential dance partners. The two originally had a 2022 merger agreement that fell apart when JetBlue outbid Frontier for Spirit. The JetBlue deal eventually died when a court ruled in favor of a Federal finding that the merger would be anti-competitive, leaving Spirit at the altar. Spirit and Frontier had talks again last summer but the deal was not completed; Spirit says that Frontier’s newest offer is lower than last summer’s.
If Frontier and Spirit are able to strike a new deal, potentially after Spirit emerges from Chapter 11, they are less likely to face regulatory issues both because of their largely non-overlapping networks and because the new administration in Washington is expected to take a less critical view of mergers.
