A Frontier Airlines plane near a Spirit Airlines plane at the Fort Lauderdale-Hollywood International Airport on May 16, 2022 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images
Bankrupt Spirit Airlines said it turned down a new merger offer from rival budget carrier Frontier Airlines.
Frontier said Wednesday that it has met with Spirit’s board and executives since it made its debt-and-stock merger proposal on Jan. 7. Frontier executives said in a email to counterparts at Spirit this week that their plan is better than Spirit’s own plan to emerge from bankruptcy.
“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,” wrote Frontier Chairman Bill Franke and CEO Barry Biffle in a Tuesday email to Spirit Chairman Mac Gardner and CEO Ted Christie. “As a result, time is of the essence.”
Christie and Gardner told their Frontier counterparts that they were rejecting the offer, calling the terms “inadequate and unactionable,” according to a letter shared in a securities filing on Wednesday.
Frontier’s new merger plan offered Spirit’s debtors $400 million and a 19% stake in Frontier. It also proposed Spirit creditors provide $350 million in new funding, Spirit said.
The Spirit executives called Frontier’s proposal “risky and costly, with no certainty as to either timing or outcome” and “woefully insufficient financially.”
They said, however, that they would consider a sweetened offer.
“Should you wish to make a revised proposal that is in fact capable of closing, and addresses the material deficiencies catalogued here and in our many communications, we would be happy to consider it and again work to activate our stakeholders to do so as well,” they wrote.
The two carriers were in talks for a possible combination before Spirit filed for bankruptcy.
Frontier and Spirit first announced a deal to merge in 2022, but a higher JetBlue Airways all-cash offer derailed that plan. JetBlue’s planned acquisition of Spirit was blocked by a federal judge last year, and Spirit filed for bankruptcy protection in November.
In both deals, the airlines argued they needed to combine to better compete against larger rivals.
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. It has raced to cut costs in recent months, including by slashing some 200 jobs and selling some of its Airbus planes.
Budget carriers like Frontier and Spirit have struggled post-pandemic, as costs like salaries have risen and consumers have opted for trips abroad on carriers with options for roomier and more expensive seats. Larger rivals that control much of the U.S. market have also made inroads with basic economy fares, which aim to compete with the bare-bones tickets that were at one time the backbone of Frontier and Spirit.
Spirit has also been particularly challenged by a Pratt & Whitney engine recall that grounded dozens of its jets.
Both Frontier and Spirit have been working to upend their business models that were marked by low fares and fees for add-ons from seat assignments to cabin baggage.
The airlines last year did away with cancellation and change fees for some of their tickets and started bundling perks along with tickets. Frontier last year said it would start offering a premium section at the front of the plane.
