Frontier Airlines and Spirit Airlines announced in a joint news release Monday a nearly $3 billion deal that will create the fifth-largest carrier in the United States.
In their joint news release, they said the $2.9 billion deal, as a budget carrier, will provide more low-cost flying fares to more travelers in destinations across the U.S., Latin American and the Caribbean. This will likely tighten competition against traditional carriers.
The merger is expected to close in the second half of this year, “Subject to satisfaction of customary closing conditions, including completion of the regulatory review process and approval by Spirit stockholders,” the release said. According to Newsweek, the name that the merged airlines will fly under will be determined at a later point in time.
The deal will likely face scrutiny from federal antimonopoly regulators, as the Biden administration has taken a tougher approach on big corporate mergers in an effort to encourage competition, the Associated reported.
“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,” Spirit CEO Ted Christie said in a statement.
The move comes as the airline industry continues to struggle due to the COVID-19 pandemic, which has caused air travel to take a downturn, with staffing shortages and other impacts, such as soaring costs due to a combination of rising wages, fuels prices and airport charges.
Spirit and Frontier said they anticipate adding 10,000 jobs at the merged airline and the additions of thousands more jobs at the companies’ business partners by 2026. The release also said, “It is expected that all current team members will have an opportunity to be a part of the combined airline.” The release also noted they are looking to expand their offerings with more than 350 aircraft on order.
“This combination is all about growth, opportunities and creating value for everyone, from our guests to our team members to the flying public at large,” Mac Gardner, Chairman of the Board of Spirit said.
He added, “we’re a perfect fit, our businesses share similar values, including our longstanding commitment to affordable travel.
The proposal to form a new no-frills carrier controlled by Frontier Airlines pushed up shares of Spirit as much as 18.7%, though several analysts pressed the airlines over possible difficulties in obtaining regulatory approval.
“In a competitive industry like ours, the lowest costs always win,” Frontier Chief Executive Barry Biffle told analysts. “These low costs will, in turn, enable us to keep our fares low for customers.”
