Bankrupt Spirit Airlines has declined a new merger offer from rival budget carrier Frontier Airlines. Frontier presented its debt-and-stock merger proposal on Jan. 7 and has engaged with Spirit’s board and executives since then. In an email this week, Frontier executives expressed that their merger plan is superior to Spirit’s own plan to emerge from bankruptcy, stating concerns about Spirit being highly leveraged and losing money under its standalone plan.
Frontier’s new merger proposal includes offering Spirit’s debtors $400 million and a 19% stake in Frontier, along with requesting $350 million in new funding from Spirit creditors. Spirit executives deemed Frontier’s proposal as risky, costly, and financially insufficient, but indicated willingness to consider a revised offer that addresses their concerns.
The two airlines had previously considered merging before Spirit’s bankruptcy filing. JetBlue Airways’ all-cash offer disrupted a prior merger agreement between Frontier and Spirit in 2022. Following the blockage of JetBlue’s acquisition of Spirit by a federal judge, Spirit filed for bankruptcy protection in November.
Spirit anticipates exiting Chapter 11 bankruptcy this quarter and has a court date on Feb. 13 to finalize its restructuring plan. The airline has been implementing cost-cutting measures, such as reducing jobs and selling aircraft, to navigate its financial challenges. Both Frontier and Spirit have been adapting their business models post-pandemic to address rising costs and changing consumer preferences.
Frontier and Spirit have eliminated cancellation and change fees for certain tickets, introduced bundled perks with tickets, and explored new offerings like premium seating sections. The airlines are striving to compete against larger rivals in the U.S. market and adapt to evolving industry dynamics.
