Frontier is buying Spirit Airlines in a $2.9 billion cash-and-stock deal that will create the nation’s fifth-largest carrier.
The companies said Monday that the transaction will provide more low-cost fares for more travelers to destinations in the U.S., Latin America and the Caribbean.Frontier Group Holdings and Spirit Airlines also anticipate $1 billion in annual consumer savings and are looking to expand their services with more than 350 aircraft on order.
In addition, Frontier and Spirit are looking to add more jobs.The companies foresee adding 10,000 direct jobs and thousands of additional jobs at their business partners by 2026.
The tie-up is valued at $6.6 billion when accounting for the assumption of debt and other liabilities.
“This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public,” Spirit CEO Ted Christie said in a statement.
Scrutiny from regulators The carriers may be in for a close look from antitrust regulators.The Biden administration has signaled a tougher line against big corporate mergers.Yet airlines have suffered a devastating stretch during the pandemic, despite three rounds of federal assistance they received from the U.S.
government totaling more than $54 billion , and are in a weakened position heading into 2022.That could strengthen Frontier’s and Spirit’s case that joining forces is necessary for them to survive, bolstering competition.
Frontier shareholders will own 51.5% of the combined airline, and Spirit stockholders will own 48.5%.The transaction is expected to close in the second half of the year.
It still needs approval from Spirit shareholders.
The combined company is expected to have annual revenues of $5.3 billion, based on last year’s results.Its board will include seven members named by Frontier and five members named by Spirit.Frontier Chair William Franke will serve as chairman of the combined company.
Shares of Frontier, based in Denver, slipped 2.2% before the opening bell Monday.Shares of Spirit, based in Miami, jumped 12.5%.
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