A Frontier Airlines plane near a Spirit Airlines plane on 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 recent merger offer from rival budget carrier Frontier Airlines.
Frontier said Wednesday that it has met with Spirit’s board and executives because 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 healthier than Spirit’s own plan to emerge from bankruptcy.
“We proceed to consider that under the present standalone plan, Spirit will emerge highly levered, losing money on the operating level, and this may not be a transaction we’d 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,” in keeping with a letter shared in a securities filing on Wednesday.
Frontier’s recent merger plan offered Spirit’s debtors $400 million and a 19% stake in Frontier. It also proposed Spirit creditors provide $350 million in recent funding, Spirit said.
The Spirit executives called Frontier’s proposal “dangerous and dear, with no certainty as to either timing or end result” and “woefully insufficient financially.”
They said, nevertheless, that they might consider a sweetened offer.
“Must you want to make a revised proposal that’s the truth is able to closing, and addresses the fabric deficiencies catalogued here and in our many communications, we can be blissful to think about it and again work to activate our stakeholders to accomplish that as well,” they wrote.
The 2 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 better JetBlue Airways all-cash offer derailed that plan. JetBlue’s planned acquisition of Spirit was blocked by a federal judge last yr, and Spirit filed for bankruptcy protection in November.
In each deals, the airlines argued they needed to mix to raised 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 chop costs in recent months, including by slashing some 200 jobs and selling a few 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 costlier 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.
Each Frontier and Spirit have been working to upend their business models that were marked by low fares and costs for add-ons from seat assignments to cabin baggage.
The airlines last yr did away with cancellation and alter fees for a few of their tickets and commenced bundling perks together with tickets. Frontier last yr said it might start offering a premium section on the front of the plane.
