Spirit Airlines Rejects Another Merger Offer From Frontier Airlines, Execs Open to Sweetened Offer

(Dania Beach, Florida & Denver, Colorado) Spirit Airlines (OTCMKTS: SAVEQ) and Frontier Airlines (NASDAQ: ULCC) disclosed in separate filings today (Jan. 29) that on January 7, Frontier proposed an acquisition of Spirit – the latest in a yearlong series of efforts to accomplish a merger – which Spirit Airlines subsequently rejected, deeming the offer of $400 million in take-back debt and 19% of Frontier Airlines shares to Spirit Airlines’ debt holders – a proposal totaling some ~ $2.1 billion, per Simple Flying – as “woefully insufficient financially.”

Photo of a Spirit Airlines airliner courtesy of Spirit Airlines.

Frontier’s new merger plan also proposed that Spirit creditors provide $350 million in new funding, per CNBC.

Spirit’s executives called Frontier’s proposal “risky and costly,” but said that they would consider a sweetened offer, according to CNBC.

Spirit filed for bankruptcy in November of last year after years of losses and a failed sale to JetBlue due to regulatory hurdles.

Frontier is now attempting to convince Spirit’s bondholders that they will fare better if the two budget airlines combine rather than Spirit trying to survive alone after exiting Chapter 11.

“We continue to believe that under the current stand-alone plan, Spirit will emerge highly levered, losing money at the operating level, and this would not be a transaction we would pursue,” Frontier Chairman Bill Franke and Chief Executive Officer Barry Biffle wrote to their counterparts at Spirit on Tuesday (Jan. 28), per The Wall Street Journal. “As a result, time is of the essence.”

Photo of a Frontier Airlines Airbus A320 neo airliner courtesy of Frontier Airlines.

Frontier has said that a would-be merger would create the fifth largest U.S. carrier, and enable the would-be larger carrier to compete with larger airlines that dominate the commercial airline industry, per the WSJ.

Spirit CEO Ted Christie and Chairman Mac Gardner told Frontier on Jan. 11 that they agreed the two airlines together would be a “potent competitor,” but said Frontier’s offer was worse than what the two companies had discussed last year; the Spirit executives said they had discussed the proposal with advisers to the company’s bondholders and the bondholders rejected it, according to the WSJ.

Frontier and Spirit first announced a deal to merge in 2020, but a higher all-cash offer from JetBlue (NASDAQ: JBLU) derailed the plan – JetBlue’s planned acquisition of Spirit was ultimately blocked by a federal judge last year, prior to Spirit filing for bankruptcy protection this past November.

Spirit said it expects to exit Chapter 11 bankruptcy this quarter and has a Feb. 13 court date to finalize its plan, which wipes out debtor shareholders, according to CNBC. The company’s recent cost-cutting schemes have including slashing some 200 jobs and selling some of its Airbus (PAR: AIR) planes

Shares of Frontier closed up 5.27% at $8.19 today, while Spirit stock, which is currently traded in the over-the-counter marketplace, rose 21.9% to $0.545.

**Not investment advice; The FLY Report is not a registered investment advisor.