Frontier makes a second bid for Spirit as budget airlines struggle
NEW YORK (AP) — No-frills, budget airlines often lead the industry in customer complaints, according to government data, so if one were to disappear would it be missed by travelers?
That is a question U.S. regulators will be asking after Frontier Airlines said Wednesday that it wanted to buy Spirit Airlines, which sought bankruptcy protection late last year.
Spirit said almost immediately that it’s not interested in the sale, and an attempted merger between the two airlines came to nothing in 2022, yet Frontier has not indicated it is ready to take ‘no’ for an answer.
Other discount airlines are on much better financial footing than Spirit, but they too are lagging far behind the full-service airlines when it comes to recovering from the COVID-19 pandemic. Most industry experts think Frontier Airlines and other so-called ultra-low-cost carriers will fill the vacuum and that there is still plenty of competition to prevent prices from spiking.
And the most profitable U.S. airlines have begun winning over a larger share of travelers scouring for deals with new ticket offerings.
Frontier Group Holdings Inc., the parent company of Frontier Airlines, said Wednesday that the proposed deal would include newly issued Frontier debt and common stock.
Frontier tried to merge with Spirit in 2022 but was outbid by JetBlue. However, the Justice Department sued to block the $3.8 billion JetBlue deal, saying it would drive up prices for Spirit customers who depend on low fares, and a federal judge agreed in January. JetBlue and Spirit dropped their merger bid two months later.
Spirit filed for bankruptcy protection in November. The biggest U.S. budget airline, Spirit filed a Chapter 11 bankruptcy petition after working out terms with bondholders. The airline has lost more than $2.5 billion since the start of 2020 and faces looming debt payments totaling more than $1 billion in 2025 and 2026.
The biggest U.S. airlines have snagged some of Spirit’s budget-conscious customers by offering their own brand of bare-bones tickets. And fares for U.S. leisure travel — Spirit’s core business — sagged this past summer because of a glut of new flights.
Frontier is optimistic that it can get a deal done this time around.
“This proposal reflects a compelling opportunity that will result in more value than Spirit’s standalone plan by creating a stronger low fare airline with the long-term viability to compete more effectively and enter new markets at scale,” Frontier Chair Bill Franke said in a statement. “We stand ready to continue discussions with Spirit and its financial stakeholders and believe that we can promptly reach agreement on a transaction.”
Frontier said that since it submitted its offer, it has had talks with members of Spirit’s board, management team, and representatives of Spirit’s financial stakeholders.
In a regulatory filing, Spirit said that it had received a proposal from Frontier earlier this month and after reviewing it, found that the offer would be less beneficial to its shareholders that its existing plan. It said that barring any new developments, it would move forward with its own plans to exit Chapter 11 bankruptcy protection.
Shares of Frontier Group rose 6% Wednesday.
By MICHELLE CHAPMAN
AP Business Writer
