(Dec 17): Bankrupt Spirit Aviation Holdings Inc is in revived discussions to merge with Frontier Group Holdings, people familiar with the matter said, in a deal that could rescue the deep-discount airline from insolvency at a time of stiff competition from larger US carriers.
A transaction could be announced as soon as this month, said the people, who asked not to be identified because the matter is confidential. The discussions are ongoing and could end without a deal taking place, they said.
Shares in Frontier rose about 10% in US postmarket trading after Bloomberg’s report. Spirit was unchanged and closed on Tuesday at 20 cents in regular trading.
A representative for Spirit said it doesn’t comment on rumours and speculation. Frontier declined to comment.
A merger between the airlines would mark a significant step for Spirit, which filed its second bankruptcy in less than a year in August. A tie-up would also be an acknowledgment that the pioneering deep-discount carriers need greater heft to compete in the current industry environment. The basic economy fares and strong networks of major carriers such as United Airlines Holdings Inc have made it harder for traditional discounters to compete.
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A combined Spirit-Frontier stands to become the fifth-largest airline in the US based on miles flown by paying passengers, moving ahead of JetBlue Airways Corp and Alaska Air Group Inc, according to government data through September.
Spirit has been buffeted by a bruising year for US aviation, which included a government shutdown, trade feuds and network disruptions. The discussions are taking place as Frontier abruptly replaced its longtime leader and chief executive officer Barry Biffle.
Frontier executives have pushed for years for a combination of the two carriers, which once specialised in offering heavily discounted ticket prices while charging travellers for anything else — including printed boarding passes and in-flight water. Both have recently started offering more upscale options in a bid to expand their customer base.
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A merger would help Spirit find a credible exit from Chapter 11 bankruptcy as it burns cash and add about 100 planes to Frontier’s fleet at better lease rates than a year ago, Bloomberg Intelligence analysts Francois Duflot and George Ferguson wrote in a note.
“Yet Frontier’s priority is to boost yields, and its competitive challenge isn’t Spirit — it’s United,” according to the note.
Biffle, who ran Frontier for about a decade, said in August he expected the airline to be the last of the ultra-low-cost carriers standing. Both operators have struggled to keep up with legacy carriers Delta Air Lines Inc and United as consumer sentiment shifts towards full-service flights.
At its heyday in the 2010s, Spirit rose to prominence with cheap ticket prices, shock marketing tactics and optional add-ons — including its infamous carry-on bag fee, an industry first. The carrier made it all work by running an extremely lean operation. It saved money by cramming passengers into one-size-fits-all planes with non-reclining seats and charging extra for anything and everything.
Since then, the carrier has been facing stubbornly higher costs after the pandemic upended its ability to operate as a bargain-bin business. Earlier this year, Spirit filed for Chapter 11 bankruptcy, marking the failure of an earlier restructuring that cut about US$795 million in debt from its balance sheet and required bondholders to inject additional capital.
Florida-based Spirit has been taking steps to reduce labour costs as part of the restructuring.
In November, Spirit announced 150 job cuts across corporate and operational roles. Earlier this year, it furloughed about 1,800 flight attendants and at least 270 pilots.
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Spirit employed roughly 12,800 people at the time of its first bankruptcy filing in November 2024 to restructure about US$1.6 billion in debt.
Spirit rejected an 11th-hour Frontier offer in January, following its first bankruptcy filing. The US$2.2 billion proposal was “inadequate and unactionable”, Spirit said at that time.
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