Spirit Airways and rival Frontier Group are discussing a merger once more, greater than two years after the 2 ultra-low-cost carriers failed to shut a deal.
On Wednesday, the businesses revealed their discussions in a safety submitting. Spirit, which filed for chapter safety final yr, stated it has rejected an “inadequate and unactionable” acquisition supply from Frontier, however would contemplate a revised proposal that addresses its considerations.
Frontier had provided Spirit stakeholders $400 million in debt and a 19% stake in Frontier earlier this month, valuing the transaction at about $2.16 billion.
Spirit stated the supply is inferior to the one the 2 corporations had mentioned final yr earlier than its chapter submitting. It additionally sought an assurance that the deal would shut and Frontier wouldn’t stroll away.
“Should you wish to make a revised proposal that is in fact capable of closing, and addresses the material deficiencies… we would be happy to consider it and again work to activate our stakeholders to do so as well,” Spirit wrote.
The Florida-based airline had signed a cash-and-stock cope with Frontier in 2022 to kind a brand new no-frills airline, however JetBlue Airways jumped into the fray with an all-cash supply, sparking a bidding battle for Spirit.
JetBlue finally prevailed within the takeover battle however the deal was scrapped final yr, after a US choose blocked it on anti-competition considerations.
Spirit filed for chapter in November after grappling with extended intervals of monetary losses, unsuccessful merger efforts and substantial debt. On Wednesday, the airline stated it expects to finish its restructuring course of within the first quarter.
Extremely-low-cost carriers, which excelled at maintaining bills down and providing no-frills journey, have struggled because the pandemic as a result of a run-up in working prices in addition to a surge in demand for premium journey. They’re now being pressured to revamp their enterprise fashions to entice extra prosperous vacationers with extra comfy and greater seats on their planes.
Some analysts have advocated a merger between Spirit and Frontier, saying it could enable them to compete extra successfully with greater rivals.
Frontier stated a merger can be higher for long-term viability, making the mix the fifth largest airline in the USA and producing a minimum of $600 million in operational financial savings. It argued that the deal would supply higher worth to Spirit’s stakeholders than the corporate’s present restructuring plan.
It additionally expects an “expedited” evaluation of the deal from regulators.
“As a combined airline, we would be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service,” Frontier CEO Barry Biffle stated in an announcement.
Frontier shares rose 6% to $8.24.
