LONDON – Today’s announcement from the Frontier & Spirit Airlines’ merger has no doubt come as quite a surprise within the industry.
There are all sorts of questions now into what this will mean for the U.S airline industry and how this will shake things up going forward.
From the announcement today, we know that this will provide:
- Deliver $1 billion in annual consumer savings.
- Offer more than 1,000 daily flights to over 145 destinations in 19 countries, across complementary networks.
- Expand with more than 350 aircraft on order to deliver more ultra-low fares.
- Increase access to ultra-low fares by adding new routes to underserved communities across the United States, Latin America and the Caribbean.
- Deliver even more reliable service through a variety of operational efficiencies.
- Expand frequent flyer and membership offerings.
- Total fleet of 283 aircraft.
So, of course, what we want to know is how will this shift the market, especially as we await the new name of this merger.
The Fifth Largest Carrier in the United States…
As seen in their investor presentation, this merger will make the group the fifth-largest carrier in the U.S.
By 2026, the fleet in the group will increase from the current 283-strong figure right now to 493 (Frontier, 2022).
This represents a 75% increase in the fleet by that point, especially with the 350 aircraft that are still on order at present.
This figure of course doesn’t have anything on the likes of Southwest Airlines who have a fleet of 735 jets, but of course, is a step in the right direction towards hitting such numbers (Planespotters, 2022).
The more aircraft, the more routes it can provide combined.
Pressure Against The Low-Cost Carriers
The combined company also states that it will still have the lowest costs compared to the likes of Allegiant, Southwest, Alaska, and JetBlue (Frontier, 2022).
One benefit of course within this merger is that both carriers operated a single-aircraft family, which subsequently brings costs down across the board.
Whilst Southwest does this with their Boeing 737 family, Airbus aircraft have typically been more beneficial in terms of such cost savings than Boeing.
With the likes of American, Delta & United operating a variation of mixed-fleets, this is why such adjusted CASM + net interest is higher on that front.
That being said, however, whilst there will be increased scheduled flights under the combined company, in some areas of the U.S, it won’t be as majorly covered as the likes of the Big Four.
But again, this is a step in the right direction for this combined company.
Pressure Against The Legacy Carriers
Based on the graph above, it remains clear that this combined company is going to supersede the big four being American, Delta, United, and Southwest (Frontier, 2022).
This is due to the fact the combined two carriers would provide an ultra-low-base fare of only $54, with it only rising to as large as $108, which is still cheaper on that front.
The big four carriers are around 80% more expensive per passenger relative to the combined two carriers that will merge together in this respect.
For it to be lower than big competitor Southwest would also be marked as quite a big win for the new low-cost firm.
On the legacy carrier front, this would be something to worry about, especially with the COVID-19 pandemic encouraging lower consumer spending and opting more for the low-cost market.
The only issue, however, is that when we do come out of the crisis officially and demand restores to pre-pandemic levels, then this could of course change and consumer spending would return to normal.
Consolidation in the wake of COVID?
On this slide in their investor relations, it’s noticed that they said this merger will offer more stability, potentially hinting at the fact consolidation was needed in the theme of COVID.
It could very well offer stability, especially in the perspective that 10,000 extra jobs are on offer to be filled by 2026.
Such a statement could offer the perspective that whilst we have been through the worse period of COVID, there is still that level of uncertainty as we look ahead.
Therefore, merging two successful brands together would be the correct step in order to make sure it doesn’t deteriorate at all.
Even then, it could just be an idea of thinking for the future, as opposed to the current short-term environment at the moment.
What remains clear is that this Spirit-Frontier merger is quite a disruptive announcement, as it will no doubt change the way that the U.S airline industry will look.
On all eyes are now on the combined company to come up with the branding for this new and improved carrier.
If it isn’t going to be an absolute restart, the question then poses to which branding will disappear. Spirit or Frontier?
One thing we do know for sure is that this merger is smart, and with the plans outlined for growth, it’s definitely realistic and has the opportunity for maximum success going forward.
- Frontier (2022), Creating America’s Most Competitive Ultra-Low Fare Airline, https://ir.flyfrontier.com/static-files/b78990b3-61dd-4547-b7ed-293a1947390a [Last Accessed 7/2/22]
- Planespotters (2022), Southwest Airlines Fleet Details And History, https://www.planespotters.net/airline/Southwest-Airlines [Last Accessed 7/2/22]
- Field, J. (2022), Spirit Airlines & Frontier Airlines Announce Merger, AviationSource, https://aviationsourcenews.com/news/spirit-airlines-frontier-airlines-announce-merger/ [Last Accessed 7/2/22]