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A Day Of Highs & Lows: A Recap of The Spirit-Frontier Merger Announcement

LONDON – It has been a crazy day in the U.S airline industry today as Spirit and Frontier Airlines announced a merger.

This has come with some highs and lows throughout this five to six-hour period.

The Overall Announcement


In big news for the American low-cost market, Spirit Airlines & Frontier Airlines have announced a merger, under which the companies will combine.

The $6.6bn cash and stock deal for this merger will aim to drive competition and expand services to underserved small and mid-sized cities across the U.S.

Commenting on the deal was William A. Franke, the Chair of Frontier’s Board of Directors:

“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 this was Ted Christie, the CEO and President of Spirit:

“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.”

Both sides outlined a lot of benefits behind this merger including:

  • 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.

On top of this, the two sides are expected to hire 10,000 people by 2026 as well as thousands of additional bobs at the companies’ business partners.

In all, this is a big step for American travel, and will no doubt continue to put pressure on its low-cost and legacy competitors going into the future.

Our Analysis Of The Merger


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.

Lawyers To Investigate The Deal


In a further revelation from today’s Spirit-Frontier merger, the law office of Brodsky & Smith is investigating the Board of Directors at Spirit Airlines.

This is due to “possible breaches of fiduciary duty and other violations of federal and state law in connection with the company’s agreement to be acquired by Frontier Group Holdings Inc.”

Under the terms of the merger agreement, Spirit shareholders 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 as seen on Feb 4.

The investigation is to see whether Frontier is paying too little for the company and whether the Spirit board failed to conduct a fair process, especially with the deal being well below the 52-week high of $40.77 for Spirit’s shares.

Bad Timing: Frontier Reports IT Outage


In not really great timing, all Frontier Airlines flights have been grounded nationwide amid an IT failure, according to reports.

The Federal Aviation Administration (FAA) has issued a ground stop on all ground flights until further notice.

This of course comes in really bad timing following the announcement of its merger with Spirit Airlines.

It is also a second lot of bad news today, especially with the merger deal already being investigated by lawyers.

Frontier has issued a statement on this outage saying: “Earlier today, we experienced a technology issue which led to some flight delays and cancellations.  The issue was identified and has been resolved. We are working to restore our flight schedule for the balance of the day.”

According to FlightAware, around 21% of flights for the day have been canceled, which is over 100.

Overall


Today has been a bit of a mixed bag for both sides. From Frontier’s IT failures to Spirit’s Board of Directors being investigated by lawyers, this announcement could have been more effective.

What we do know is that this merger has disrupted the way the U.S airline industry will work going into the future, and will no doubt position these two carriers to grow onwards and become an even more significant player in the low-cost world.

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