Spirit Airlines has declined a merger proposal from Frontier Group Holdings, choosing instead to pursue its own restructuring plan to emerge from Chapter 11 bankruptcy. The decision underscores Spirit’s commitment to an independent path forward, despite ongoing financial challenges.
Frontier’s proposal, submitted earlier this month, offered Spirit shareholders $400 million in debt and a 19% stake in Frontier, valuing the deal at approximately $2.16 billion. Spirit’s management, however, determined that the offer was financially inadequate and raised concerns about the timing and likelihood of the deal’s completion. In a letter to Frontier, Spirit CEO Ted Christie and Board Chair Mac Gardner stated that advisors to Spirit’s bondholders found the proposal “so insufficient as not to merit a counter.”
This marks Frontier’s second attempt to merge with Spirit. In 2022, the two airlines announced plans to combine, aiming to create the fifth-largest airline in the United States. However, that deal was called off in favor of a higher bid from JetBlue Airways. The subsequent merger with JetBlue was blocked by a federal judge in early 2024 due to antitrust concerns, leading to its eventual termination.
Facing prolonged financial losses, mounting debt, and increased competition, Spirit filed for Chapter 11 bankruptcy protection in November 2024. The airline has since been working on a restructuring plan and expects to emerge from bankruptcy in the first quarter of 2025. As part of its cost-cutting measures, Spirit announced plans to eliminate approximately 200 positions across various departments, aiming for $80 million in annualized cost reductions.
Despite the rejection, Frontier remains optimistic about the potential benefits of a merger. Frontier CEO Barry Biffle stated that a combined airline would be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service. Analysts have noted that a successful merger could establish a nationwide discount airline more capable of attracting price-sensitive passengers.
The ultra-low-cost carrier segment has faced significant challenges in the post-pandemic era, as travelers increasingly prefer to pay extra for more comfortable journeys. Both Spirit and Frontier have been navigating these shifting consumer preferences while contending with financial pressures and competitive market dynamics.
As Spirit moves forward with its restructuring efforts, the airline industry will be closely monitoring its progress and the potential for future consolidation within the ultra-low-cost carrier market.
