In a deal that would unify two of the largest low-cost
carriers in the United States, Frontier Airlines on Monday announced an
agreement to purchase Spirit Airlines for about $2.9 billion in cash and stock.
The boards of directors of each airline, both of which are
public, unanimously approved the proposed deal, according to the carriers.
Spirit stockholders would receive a bit more than 1.9 shares
of Frontier for each Spirit share they hold plus $2.13 in cash. Shareholders of
each airline must approve the deal, and the carriers expect closing in
"the second half" of 2022.
Neither airline focuses on the business travel market, though
Frontier in U.S. Securities and Exchange Commission filings has suggested that
"we believe our low fares do attract a significant number of small
business travelers who may be more sensitive to travel costs."
Still, even before the Covid-19 pandemic, Frontier's clientele
was dominated by leisure traffic. In the seven months from August 2019 through
February 2020, about 89 percent of Frontier's customers were leisure travelers,
according to a March 2021 Frontier SEC filing.
Once finalized, the carriers indicated they expected to
offer more than 1,000 daily flights to more than 145 destinations in 19
countries.
The deal will need the approval of the U.S. Department of
Transportation and Department of Justice. Cowen senior research analyst Helane
Becker in a research note suggested regulators "should not have issues"
with the deal.
Frontier last year went
public through an initial public offering. The carrier in December 2013 was
acquired by an investment fund managed by Indigo Denver Management Co. It had
filed for an IPO in 2017 but abandoned those plans in the summer of 2020.