On Monday February 7, Frontier Airlines and Spirit Airlines announced that the two companies would be merging to create America’s fifth largest airline. Frontier Airlines will be purchasing Spirit Airlines for $2.9 billion in cash and stock.
“We are thrilled to join forces with Frontier to further democratize air travel,” said President and CEO of Spirit Ted Christie in a press release. “This transaction is centered around creating an aggressive ultra-low [priced] 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.”
The merging airlines are looking to aggressively compete against the “dominant ‘Big Four’ airlines,” said William A. Franke, the chair of Frontier’s Board of Directors and managing partner of Frontier’s majority shareholder, Indigo Partners. He said that Indigo has a long history with both Spirit and Frontier and is proud to partner with them in creating an airline to disrupt the bigger names.
The agreement for the merge, which has been unanimously approved by the board of directors from both companies, states that Spirit equity holders will receive 1.9126 shares of Frontier and $2.13 in cash per each existing Spirit share they own. This would mean that Spirit shares would hold a value of $25.83 each at Frontier’s closing stock price of $12.39 on February 4.
This represents a premium of 19% over the closing prices of Spirit on February 4th and a 26% total premium based on the 30 trading-day volume-weighted average prices of Spirit and Frontier. According to the transaction, Spirit has a fully diluted equity value of $2.9 billion.
Upon the closing of this deal, existing Frontier shareholders will own about 51.5% of the companies’ partnership, while existing Spirit shareholders will own about 48.5% of the merged airline.
In the long run, Frontier has stated that consumers will “win with more ultra-low fares to more places.” The merger is expected to offer more than 1,000 daily flights to over 145 destinations in different countries.
The merged companies will also subsequently expand their aircraft inventory, with more than 350 planes currently on order to ensure more ultra-low fares. New routes to underserved communities across the U.S., Latin America, and the Caribbean, will also ensure better accessibility to ultra-low fares.
Spirit and Frontier also expect to add 10,000 direct jobs and thousands of additional jobs through the companies’ business partners by 2026. According to the press release, the merger will also be America’s “Greenest Airline,” possessing the youngest, most modern, and most fuel-efficient fleet, which will feature the largest number of A320neo family aircraft of any other airlines in the U.S.
Once the merging of companies has taken place, they pairing will have strengthened their financial profile, drawing together a combined cash balance of approximately $2.4 billion between them as of the end of 2021.
I doubt this will make it so my knees do not hit the seat in front of me… Better off flying Southwest