Will Frontier and Spirit Airlines Finally Seal the Merger Deal?

What is it about the bittersweet transition from summer to autumn that compels lonely souls to ruminate on dashed love and what could have been?

We’re talking about airlines, of course.

On Wednesday, The Wall Street Journal reported that Frontier Airlines and Spirit Airlines have renewed their yearslong on-again, off-again merger flirtation. Perhaps the umpteenth time’s the charm for these two ultra-budget lovebirds? 

Failure to Launch

To recap: After playing merger footsie for years, Frontier in 2022 placed an official bid to acquire the perpetually beleaguered Spirit Airlines in a deal valued at around $2.9 billion. Spirit agreed, only to get cold feet once JetBlue swept in with a competing offer, sparking a bidding war that ultimately culminated in JetBlue announcing its intention to acquire Spirit for $3.8 billion. But the US Justice Department took issue with the merger, and a federal judge blocked it on antitrust grounds earlier this year. Shares of Spirit began a long descent before rallying lately upon rumblings of a rekindling with Frontier (that’s the nice thing about love triangles — there’s always a fallback option).

The discussions come at a crucial time for Spirit:

• Spirit remains in ongoing discussions with bondholders about a possible bankruptcy filing, though last week it received a lifeline after a credit card processor agreed to delay a debt refinancing deadline, the WSJ reported.
• The airline now has until around Christmas to refinance $1.1 billion of bonds, or else it could lose the ability to process credit card transactions. Last week it also drew down all of its $300 million revolving credit facility.

Shares of Spirit soared over 45% on the news Wednesday. Its share price is now down roughly 80% year-to-date. Sources told the WSJ that any deal with Frontier would likely be a part of Spirit’s overall debt restructuring as it goes through bankruptcy proceedings.

If at First You Fail…: The DOJ won its case against the JetBlue-Spirit acquisition by arguing it would decrease competition in the budget airline space (JetBlue, for its part, argued that the combined airline could help increase competition with the industry’s Big Four). A Frontier-Spirit merger could face the same regulatory challenges, though the industry’s landscape has shifted somewhat this year. Major airlines have found ways to compete in the ultra-budget space, while Spirit, shockingly, has committed to offering more premium experiences and seating. Whether it’s enough to overcome regulatory concerns is uncertain — but, whatever the outcome, we urge airlines to give another inch or two of legroom.