In a deal valued at $6.6 billion, Frontier will maintain a controlling stake of 51.5 percent while Spirit will hold the remaining 48.5 percent, the company said Monday.
Frontier, a Denver, Colorado-based airline, and Spirit, which is based in Miramar, Florida, are the two largest low-cost carriers in the U.S.
The new name and headquarters for the new company haven’t yet been announced, but the new management team will determine those elements in the second half of the year.
“We are thrilled to join forces with Frontier to further democratize air travel,” said Ted Christie, president and CEO of Spirit, in a statement.
Even more ultra-low fares! Spirit to combine with Frontier, creating America’s most competitive ultra-low fare airline. Together, we’ll invest in innovation & growth bringing more ultra-low fares to travelers in the U.S., Latin America & the Caribbean.https://t.co/S31kp6UvFc pic.twitter.com/yhumBxK4Js— Spirit Airlines (@SpiritAirlines) February 7, 2022
Meanwhile, Frontier President and CEO Barry Biffle focused on the sustainability advantage of the combined carriers, calling the combination “America’s greenest airline.”
Spirit chairman Bill Franke will serve as chairman of the board for the merged company, which expects to add as many as 10,000 new direct jobs and more through its partners, with no layoffs expected.
In a joint statement, Christie said “We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent guest service.”
The combination would put them behind only the four major U.S. carriers in terms of the number of miles flown by passengers, or revenue seat miles, and ahead of Jetblue and Alaska Airlines.
The new carrier will maintain the ultra-low fare strategy that both companies made their name with.
While both carriers have shaken up the market with their low-cost structure, according to 2019 passenger data from the Department of Transportation, their combined share is only 5.4 percent of all travelers, while the four majors account for 73.9 percent of revenue passenger miles.
Pending regulatory approval, Spirit shareholders will receive 1.9126 shares of Frontier plus $2.13 in cash for each Spirit share they own. That indicates that Spirit shareholders’ share would carry a value of $25.83 per Spirit and a premium of 19 percent over the Spirit’s closing share price at the end of trading last week.
The new airline will have a dozen board of directors that includes seven from Frontier and the rest from Spirit.
Another operational synergy both carriers will look to leverage is their Airbus-only fleets.
Pre-trading this morning, Spirit shares climbed about 11 percent, and Frontier’s fell nearly 2 percent.