Struggling low-cost carrier Spirit Airlines is reportedly in early-stage merger negotiations with other low-cost carrier Frontier Airlines' parent the Frontier Group, according to a Wall Street Journal (WSJ) report on October 23, 2024. The report cited people familiar with the matter.
Both Spirit and Frontier declined to comment on the matter.
If substantiated, the deal will likely be part of Spirit restructuring its debt and other liabilities in a bankruptcy, the report said. Spirit recently extended to refinance its loyalty bonds until the end of the year as well as using the entirety of its $300 million revolving credit facility. The airline said it expected to end the year with around $1bn in liquidity.
It comes after the airline's failed $3.8bn merger with JetBlue earlier in the year after the US Department of Justice blocked the merger in January before it was subsequently cancelled by the companies in March.
TD Cowen analysts Tom Fitzgerald and Helane Becker said in a report: “If the two parties merge, we expect 2025 to be consumed by regulatory review and Spirit's restructuring with 2026 and beyond focused on the integration. Spirit will also be working through the GTF-engine groundings.”
The analysts added that if Spirit continues without merging, it will likely shrink its fleet throughout next year.
“A national high utilisation ultra-low-cost carrier takes away the dynamic of two spill carriers chasing the same cost-conscious traffic,” the analysts continued. “The combined entity will likely be in a stronger position to compete in the Southeast and Caribbean which is negative for American, Southwest, and JetBlue.”
They added that Frontier's pilots wages are lower than Spirits and a merger would likely bring it “in line with Spirit's pay scale”.
Rumours have circulated in the industry that the airline will soon file for bankruptcy.