Spirit Enters A New Frontier

✈️🤝 Frontier Airlines and Spirit Airlines agreed to a $6.6 billion merger yesterday. If approved, the two largest domestic low-cost carriers would combine to create the fifth-largest airline in the US.

• The deal is structured so that Frontier controls 51.5% of the merged airline, with Spirit holding the remaining 48.5%. The new company will be chaired by longtime discount airline exec Bill Franke.
• The two airlines didn’t announce a new name, CEO, or headquarters location for the combined entity. Those will be revealed after the transaction closes, which is expected in the second half of this year pending regulatory and shareholder approval.
• In 2013, Spirit and Frontier had 2.8% of the revenue passenger miles flown by US airlines, per the Department of Transportation. By 2019, their combined market share nearly doubled to 5.4%.

+Zoom out: The Justice Department has expressed concern about a reduction in airline competition in recent years. It’s challenged the handful of industry M&As over the past decade, requiring certain concessions from airlines before allowing them to proceed.

But the CEOs of Spirit and Frontier characterized their merger as increasing competition by creating another airline that can compete with the ‘Big Four’ – Delta, United, Southwest, and American – which control a combined ~75% of the US airline market share.