Spirit Airlines has turned down a proposal from Frontier Airlines‘ parent company to acquire the airline as it emerges from bankruptcy, effectively ending another attempt at merging with this competing low-cost carrier. Frontier Group Holdings Inc. (Nasdaq: ULCC) had offered to buy the Dania Beach-based airline (NYSE: SAVE) by issuing $400 million in debt and providing Spirit’s stakeholders with a 19% ownership stake in the combined company.
Moreover, the Denver-based airline required Spirit’s stakeholders to complete a $350 million equity rights offering by February 13, with the proceeds designated for repaying Spirit’s existing debtor-in-possession financing.
“While we are pleased with the strong results Frontier has been able to deliver through the execution of our business strategy, we have long believed a combination with Spirit would allow us to unlock additional value creation opportunities,” said Barry Biffle, CEO of Frontier in a news release. “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.”
According to Spirit’s SEC filing submitted today, Frontier made an offer on January 7. The Denver-based airline stated that it has engaged in discussions with members of Spirit’s board of directors, its management team, and representatives of Spirit’s stakeholders since the proposal was made.
“Our board has concluded that continuing to delay our confirmation and emergence process carries too many risks for the company and its stakeholders and would be irresponsible,” Spirit said in a letter to Frontier.
Frontier and Spirit initially announced plans to combine in 2022, but the $2.9 billion deal was scrapped by a competing $3.8 billion offer from JetBlue Airways. However, a federal judge later blocked JetBlue’s (Nasdaq: JBKU) proposed acquisition of Spirit, and the low-cost air carrier filed for Chapter 11 bankruptcy in November.
The Wall Street Journal also reported last October that Spirit was exploring a potential merger with Frontier before it filed for bankruptcy.
Spirit has already cut over 80 routes from its future schedules, furloughed hundreds of pilots and sold 23 used Airbus A320ceo and A321ceo aircraft for $519 million in an effort to boost liquidity and profitability.
Last year, Spirit added two additional airline classes — Go Big and Go Comfy — that offer premium selections such as complimentary baggage, snacks and Wi-Fi for its highest tier. It also increased its checked bag weight allowance to 50 pounds and eliminated fees for flight changes and cancellations.
