Frontier Airlines Makes Bid for Spirit, Again. Spirit Isn’t Interested

Frontier Airlines announced Wednesday that it is making a bid for Spirit Airlines, after the ultra-low-cost carrier filed for bankruptcy in November. 

“This proposal reflects a compelling opportunity that will result in more value than Spirit’s standalone plan by creating a stronger low fare airline with the long-term viability to compete more effectively and enter new markets at scale,” said Frontier chairman Bill Franke. “We stand ready to continue discussions with Spirit and its financial stakeholders and believe that we can promptly reach agreement on a transaction”

Since submitting a proposal, Frontier said both parties had been in talks with Spirit’s board and management team. 

“We continue to believe that under the current standalone plan, Spirit will emerge highly levered, losing money at the operating level, and this would not be a transaction we would pursue. As a result, time is of the essence.” wrote Franke and Frontier CEO Barry Biffle in a letter to Spirit’s counterparts. 

Spirit filed for Chapter 11 bankruptcy months after its proposed merger with JetBlue collapsed. Frontier had previously made an offer to acquire Spirit, but that offer was rejected by Spirit’s shareholders after JetBlue made an all-cash offer valued at $3.8 billion at the time which included a higher break-up fee. 

Spirit Isn't Interested

However, Frontier is facing some resistance from Spirit’s bondholders. In a regulatory filing posted Wednesday, Spirit said Frontier’s plan would “deliver less value” than its existing plan to exit bankruptcy and continue operating as a standalone carrier. 

“The Company has determined, barring new developments, not to further delay its planned emergence from Chapter 11,” Spirit said in the filing. Under Spirit’s current plan, creditors would receive $840 million in secured notes and own all of Spirit’s equity.

A bankruptcy court hearing for Spirit is scheduled for February 13.

Spirit’s plan as a standalone carrier includes reforms to its network, loyalty program and a proposal to offer free snacks and Wi-Fi on board. The carrier previously said it is aiming to exit Chapter 11 bankruptcy by the first quarter.

In a letter to Frontier’s chairman and CEO dated January 11, Spirit chairman Mac Gardner and CEO Ted Christie said a combined airline could be “a potent competitor in the marketplace.” 

But the two added that Frontier’s new offer was an “extremely material reduction” from what it offered to Spirit last fall. The two carriers had been in talks to merge again, but those talks collapsed shortly before Spirit filed for bankruptcy. During those talks, Frontier offered to take up $580 million in debt and give 26.5% equity.

Hard Times for Ultra-Low-Cost Carriers

Both Spirit and Frontier have struggled with profitability since the pandemic, as travelers opt for premium seats and international destinations. 

Spirit and Frontier have also made significant changes to their business models in recent months. Spirit announced in July that it would roll out more premium seating, and Frontier has started adding first class seats to its cabins. Both carriers also removed change and cancellation fees and started offering bundled airfares.

Spirit recently announced that it would cut 200 jobs in an effort to cut costs as it looks to exit bankruptcy.