Frontier Airlines renews merger offer to Spirit Airlines, on the brink of insolvency. However, the fellow budget airline revealed it had turned down the offer.
On Wednesday, Frontier executives gave the public a glimpse into their latest effort to get Spirit Airlines to agree to a merger proposal. In an email, Frontier executives said their merger proposal is better than any other plans their counterparts may have devised to escape bankruptcy. The email also inferred that time is ticking for the embattled Spirit Airlines.
In a cosigned email to Spirit Airlines, Frontier CEO Barry Biffle and Chairman Bill Franke suggested that they see tough times ahead for this potential partner. The email read, “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.”
However, Spirit CEO Ted Christie and Chairman Mac Gardner responded in a letter shared on Wednesday. The duo suggested they had no personal reasons not to consolidate their business with Frontier Airlines. However, Gardner and Mac considered the merger terms “inadequate and unactionable.” Spirit then proceeded to spotlight some of the financial negotiations running in the backend of one of the following aviation partnerships.
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Frontier offers Spirit’s debtors 19% of its shares and $400 million. In addition, the strategic alliance will require Spirit creditors to contribute a fresh stimulus of $350 million. Spirit executives insisted the proposed deal is risky, costly, and has no objective timeline. Basically, Spirit is asking Frontier Airlines to review the proposed conditions for potential business consolidation.
This would not be the first time these two airline industry names have tried to establish a merger. Frontier and Spirit first announced an impending deal to merge in 2022. However, Spirit got an even juicier acquisition offer from JetBlue Airways that same year. Unfortunately, both of these aviation partnerships fell through in 2022. A federal judge blocked the strategic alliance of Spirit and JetBlue last November.
Despite having a notable market share in the US airline industry, reports indicate that Spirit has struggled with bankruptcy since 2019. Between 2019 and now, Spirit has been in and out of financial negotiations. Spirit’s selling point in the travel market has always been cheap airfares. However, that playbook is becoming irrelevant with the competitive landscape created by larger airline industry rivals.
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In addition to the competitive landscape created by larger airlines offering flyers better experiences, another factor has been affecting Spirit’s recent performance in the travel market. Regulatory approval on several Pratt & Whitney engines powering the Spirit fleet has grounded scores of their aircraft. Naturally, the airline is losing market share and customers to competitors due to regulatory approvals.
Hopefully, something productive will materialize for Spirit this year as Frontier Airlines renews its merger offer.