Spirit Airlines has reiterated its refusal to merge with fellow budget airline Frontier Airlines, marking yet another rejection in Frontier’s third attempt to acquire Spirit. The Floridian airline asserts its determination to focus on its own recovery plan to emerge from bankruptcy and strengthen its financial standing.
The latest proposal from Frontier entailed a $400 million debt offering coupled with a 19% share in Frontier Group Holdings Inc., Frontier’s parent company. This offer echoes previous attempts that Spirit had summarily dismissed. In response to Spirit’s decision, a Frontier representative stated, “We remain convinced that the combination of Spirit and Frontier would have created more value than Spirit’s standalone plan.” However, he added, “We are disciplined acquirers and are focused on delivering for Frontier shareholders at a time when our airline is performing well in a dynamic market environment.”
This week’s offer was quickly declined by Spirit, much like a similar proposal from late last month. Spirit noted it had proposed a counteroffer earlier this month, which Frontier did not accept. The airline is scheduled for a court hearing concerning its reorganization plan on Thursday, with expectations to finalize its restructuring in the first quarter.
The history of acquisition attempts traces back to 2022 when Frontier initially tried to combine forces with Spirit. However, it was outbid by JetBlue Airways. JetBlue’s proposal, valued at $3.8 billion, was subsequently challenged by the Justice Department. Their concern that the merger could lead to increased prices for Spirit’s cost-conscious consumers led to a legal blockage, with a federal judge backing the Justice Department’s stance in January. Consequently, JetBlue and Spirit discontinued their merger endeavors two months later.
Spirit, heralded as the leading budget airline in the United States, filed for Chapter 11 bankruptcy protection in November. This filing followed a negotiation with its bondholders to facilitate its financial restructuring. The airline has faced significant setbacks, losing upwards of $2.5 billion since 2020, compounded by impending debt responsibilities exceeding $1 billion due in 2025 and 2026.
Meanwhile, shares of Frontier Group experienced a 3% decline before trading commenced on Wednesday, reflecting market reactions to the ongoing acquisition discussions.
This unfolding narrative not only highlights the competitive dynamics within the discount airline sector but also sets the stage for broader industry implications. As Spirit continues to navigate its financial recovery, its strategic decisions might well impact the competitive landscape of the U.S. budget carrier market.
The journey of Spirit Airlines serves as an insightful case study on resilience in the face of formidable challenges, with its resolution to proceed independently potentially reshaping the narrative of budget air travel amidst a climate of economic and operational uncertainties.
