Spirit rejects proposed Frontier merger plan

Spirit Airlines is to remain a standalone entity after its upcoming bankruptcy conclusion, the low-cost carrier has confirmed, having rejected a merger offer from Frontier and marking the second time a potential merger has been taken off the table.

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As Spirit Airlines looks set to emerge from its Chapter 11 bankruptcy reorganisation proceedings early this year, Frontier Airlines has submitted another merger proposal it believes will “unlock additional value creation opportunities”. However, Spirit has rejected the proposal.

On 7 January 2025, Frontier submitted what it termed a “compelling proposal” to merge with Spirit Airlines following the former’s bankruptcy filing on 18 November 2024. However, Spirit revealed in a 29 January regulatory filing that it was rejecting a proposition it believed would “deliver less in value to the Company’s stakeholders than what was contemplated in the Company’s existing Plan”.

Under the terms of the proposed transaction, Frontier’s new merger plan offered Spirit’s debtors $400 million for a 19% stake in Frontier. However, Spirit’s creditors would also be required to invest $350 million in equity, something it said they “were not willing to do based on the terms of the proposal”. Furthermore, Spirit believed the proposed plan “is uncertain as to timing and completion, including the need for regulatory and court approvals”.

Frontier, however, believes that the proposed transaction would provide “meaningful value to Spirit financial stakeholders, in excess of Spirit’s standalone restructuring plan,” with the combined airlines’ activities to benefit from “very significant synergies”.

Chair of Frontier’s board of directors Bill Frank ventured that the proposed merger would create “a stronger low fare airline with the long-term viability to compete more effectively and enter new markets at scale,” while Frontier CEO added that the combined airline would “be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service”.

In a letter to Sprit’s Chair and CEO, Frontier reasserted its conviction that “under the current standalone plan, Spirit will emerge [from its bankruptcy reorganisation] highly levered losing money at the operating level, and this would not be a transaction we would pursue” – citing timing as being “of the essence”. However, Spirit remains assured that, “barring new developments,” it does not want to enter into any arrangement that might “delay its planned emergence from Chapter 11”.

Spirit voluntarily filed for Chapter 11 restructuring in November 2024, reaffirming in its most recent regulatory filing that it expects to emerge from this process within the first quarter of 2025. It is expected Spirit will reveal further details of its new routes later this week.

A previous potential merger between the two parties was rejected by Spirit shareholders in July 2022. More recently, a potential Spirit / JetBlue merger collapsed in March 2024, with a US federal judge raising anti-trust concerns.

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