Frontier Airlines has reportedly restarted merger talks with Spirit Airlines just weeks after its smaller rival started to look at the prospect of entering Chapter 11 bankruptcy protection due to rising debts.
Neither Frontier nor Spirit have confirmed the news that merger talks have resumed but the Wall Street Journal has cited anonymous sources who are said to be familiar with the matter.
According to the sources cited by the WSJ, merger talks are still at an early stage, and it remains unclear whether any agreement will comes from the negotiations.
In February 2022, Frontier and Spirit announced a merger deal that would have created the fifth-largest airline in the United States and the largest ultra-low-cost carrier in the country.
The merger was designed to drive $1 billion of annual savings with the two carriers maintaining their existing business model of offering low-cost fares for budget conscious travelevers.
That plan was, however, quickly disrupted by JetBlue, which, just two months later, made a surprise and uninvited bid to acquire Spirit in an effort to consume the Florida-based carrier’s fleet of Airbus single-aisle aircraft in order to drive its own growth.
Spirit’s board of directors rejected JetBlue’s higher bid to acquire the airline on several occasions over fears that the deal would never get past competition regulators, but, in the end, JetBlue’s over-inflated offer won the support of Spirit’s shareholders.
After rejecting the merger with Frontier, it wasn’t long before the Department of Justice opened a probe into the rival bid by JetBlue and before long, the merger deal was being challenged in federal court.
In January, the court sided with the DOJ and blocked the acquisition over fears that the merger would lead to higher airfares for many Americans who rely on low-cost airlines.
The ruling could ultimately result in higher airfares despite the judge’s best intentions, given that Spirit is facing the very real threat of bankruptcy.
In recent months, Spirit has attempted to partially reinvent itself with new “premium” offerings and bundled fare types that offer passengers free seat selection and checked luggage. Despite these changes, however, the airline continues to hemorrhage money.
In the second quarter, Spirit reported a net loss of $192 million, and CEO Ted Christie warned that losses are expected to be even higher in the third quarter. The embattled carrier has blamed aggressive pricing in the low-cost airline segment, as well as overcapacity throughout the industry.
