Spirit and Frontier Airlines plan to merge

The companies have yet to say which brands they will fly or who will lead the management of the new airline. The combined company will offer more than 1,000 daily flights to more than 145 destinations.

Unified shipping lines will take shortcuts JetBlue (JBLU) and Alaska Air (ALK) in terms of mileage paid by passengers, according to the 2021 census, placing them behind the four major airlines that control about 80% of the nation’s air traffic – American (AAL), Delta (DAL), United (UAL) and Southwest Airlines (LOVE).

“This transaction is focused on creating an aggressive ultra-low-fare competitor to serve our guests even better, expand career opportunities for our team members, and boost pressure.” competition, leading to more consumer-friendly fares,” said Spirit Ted CEO Christie.

Like most of the US airline industry, Spirit and Frontier have struggled with losses over the past two years as air travel plummeted during the pandemic. On Monday, Spirit reported a 2021 loss of $440.6 million, excluding special categories, such as federal assistance available to all airlines. That’s an improvement from the $719.6 million figure it lost on that basis in 2020. Frontier reports that it lost $299 million on that basis in 2021, roughly the same level. its loss in 2020.

But the two airlines’ combined fourth-quarter revenue fell only 2% from their total revenue in the last three months of 2019, before the pandemic. That’s much closer to pre-pandemic levels than at the big four airlines. Much of that is because they rely primarily on leisure travelers, not business travelers, who have returned to slower flights.

Low fare, low approval

The combination would bring together two airlines with very low base fares, but passengers charge extra for almost everything, including carry-on baggage. While their passengers may like cheap fares, many don’t enjoy the experience of flying there.

According to federal statistics, Spirit by far has the most number of passenger complaints per 100,000 passengers, with 13.25 complaints per 100,000 passengers, according to statistics from January to September last year. maintained by the United States Department of Transportation. JetBlue has the second most claims on that basis with 6.85, while Frontier has the third most in the industry with 5.76. Frontier has by far the worst complaint rate for the same period in 2020, when there were 60.24 complaints per 100,000 customers.

Frontier and Spirit also have industry worst customer satisfaction ratingaccording to the US Customer Satisfaction Index.

Legal barriers

Nor is it clear that the merger will be approved by federal antitrust regulators. The Biden administration has taken a much more aggressive approach to antitrust issues. It recently blocked an alliance between American and JetBlue, which could not fully merge. Increasing competition in the airline industry is one of the issues the Biden administration has made as a top priority.

Executives involved in the proposed Spirit-Frontier deal say they believe the deal will bring more competition to the industry.

Bill Franke, Frontier’s chairman of the board and managing partner of Indigo Partners, Frontier’s majority shareholder, said in an interview Monday on CNBC. “It benefits consumers. It benefits employees. It benefits the communities the airlines serve. And at the end of the day, even combined, these two airlines will control little. more than 10% of the market.”

The US airline industry has been vastly reshaped by mergers over the past 25 years. Today’s four largest airlines were formed from one a series of mergers of 10 airlines. This will be the first US airline merger since Alaska Air buys Virgin America in 2016.
Frontier will be the purchasing airline in this agreement, as Morale (ASSIST) shareholders will receive 1,9126 shares of Border plus $2.13 cash per their share. That would represent about 20% of the premium based on Friday’s closing price. But Spirit stock was up just 12% ahead of the market, while Frontier stock fell 2%, indicating investor uncertainty about the deal being finalized.

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