In a deal that would unite two of the largest low-cost carriers in the United States, Frontier Airlines on Monday announced an agreement to buy Spirit Airlines for about $2.9 billion in cash and stock.
The boards of each airline, both public, unanimously approved the proposed deal, the carriers said.
Spirit shareholders would receive just over 1.9 Frontier shares for every Spirit share they own plus $2.13 in cash. Each airline’s shareholders must approve the deal, and the carriers expect to close in the “second half” of 2022.
Neither airline is focused on the business travel market, although Frontier in U.S. Securities and Exchange Commission filings suggested that “we believe our low fares attract a significant number of light travelers businesses that may be more sensitive to travel costs”.
Yet even before the Covid-19 pandemic, Frontier’s customer base was dominated by leisure traffic. In the seven months from August 2019 to February 2020, approximately 89% of Frontier customers were leisure travelers, according to a March 2021 filing from Frontier SEC.
Once finalized, the carriers said they plan to offer more than 1,000 daily flights to more than 145 destinations in 19 countries.
The deal will need to be approved by the US Department of Transportation and the Department of Justice. Cowen’s senior research analyst Helane Becker in a research note suggested regulators “should have no problems” with the deal.
Last year, Frontier 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.