Frontier Airlines has made public that it yet again wants to acquire embattled ultra-low-cost rival Spirit Airlines in a $400 million deal that would create the fifth-largest airline in the United States and the first low-cost carrier capable of taking on the dominant Big Four carriers.
The proposal comes just months after Denver-based Frontier Airlines unilaterally walked away from merger talks with Spirit Airlines that had being taking place in secret over the course of Summer and Fall 2024.
Shortly after Frontier abandoned the potential merger with Spirit for the second time, the Florida-based carrier reached a deal with bondholders to enter into a pre-packaged Chapter 11 bankruptcy process.
It has now been revealed that Spirit had delayed the process of exiting Chapter 11 bankruptcy in order to consider Frontier’s new offer.
In a letter dated January 28, 2025, Spirit Airlines chief executive Ted Christie, however, said Frontier’s offer was way below what had been tabled in late 2024 and, as such, was “woefully insufficient.”
“Unfortunately, despite the clear guidance we and others have provided for three weeks as to the Proposal’s many deficiencies, you have addressed virtually none of them,” Christie wrote in a letter to Frontier CEO Barry Biffle.
“Our Board has concluded that continuing to delay our confirmation and emergence process carries too many risks for the Company and its stakeholders and would be irresponsible>’
Frontier and Spirit first announced a potential merger in February 2022, but the deal was disrupted by a rival offer by JetBlue that massively overvalued Spirit’s worth and convinced shareholders to abandon the agreement with Frontier.
That merger, however, quickly became bogged down in an antitrust lawsuit brought by the Department of Justice, who argued that the deal would harm competition and increase the cost of flights for consumers.
Surprisingly, the DOJ prevailed in federal court, and JetBlue accepted defeat, walking away from the merger agreement in early 2024.
Frontier then entered a second round of extensive negotiations to acquire Spirit in the summer of 2024, but despite reaching an advanced stage, Frontier eventually decided to end talks, because the terms of that deal could have put the future of Frontier in jeopardy.
For this third attempt at acquiring Spirit, Biffle says that Frontier’s offer “would result in a transaction that is more favorable to the Spirit creditors and stockholders than the one outlined in Spirit’s current proposed Plan of Reorganization.”
In response, Christie said that merging the two airlines “has logic and could create a potent competitor in the marketplace,” but that the board was concerned at the timing of the offer, given that it would require the two airlines to act incredibly quickly.
The offer that Frontier tabled in mid-2024 was valued at $580 million, as well as
Spirut’s stakeholders receiving 26.5% of the equity of the combined company. That offer has now been reduced to $400 million and 19% in equity.
Frontier says that the new offer takes into account business risks that it has identified with Spirit’s gloomy financial performance.
