2 Budget-Friendly Airline Companies Merging to Create 5th-Largest Airline

The low-fare budget airlines Spirit and Frontier Airlines announced plans to merge Monday in a deal worth an estimated $6.6 billion. The combined company will instantly become the fifth-largest airline in the United States. The two companies have not said which name they will stick with in the future or who would lead the management of the combined Spirit-Frontier.

If the merger goes through, the two would exceed JetBlue and Alaska Airline on the list of most miles flown by paying passengers, reports CNN Business. The only airlines ahead of them are American, Delta, United, and Southwest Airlines. Spirit-Frontier would have over 1,000 daily flights to over 145 destinations.

There is also very little overlap between the two companies, as there are only 519 routes served by both, according to aviation analytics firm Cirium. “This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public,” Spirit CEO Ted Christie said in a statement.

The merger comes as both companies have reported significant losses during the coronavirus pandemic. On Monday, Spirit reported losing $440.6 million in 2021, excluding federal assistance and other items. In 2020, Spirit reported losing $719.6 million. Frontier reported losing $299 million in 2021. However, their combined fourth-quarter revenue was down just 2% from their combined revenue during the last quarter of 2019.

Frontier and Spirit might be cheap, but the two companies are notorious for their poor customer satisfaction. Customers often complain about the extra charges the two add to their low-cost airfare and their unreliable schedule. The U.S. Department of Transportation logged 13.25 complaints about Spirit per 100,000 passengers, far more than JetBlue’s 6.85 complaints per 100,000 passengers.

In fact, on the same day the merger was announced, Frontier had a technology issue that resulted in every Frontier flight being grounded briefly. “Earlier today, we experienced a technology issue which led to some flight delays and cancellations,” Frontier said in a statement. “The issue was identified and has been resolved. We are working to restore our flight schedule for the balance of the day.”

The merger still needs federal approval, which could be difficult. In September, the Biden administration sued to stop American and JetBlue from merging. Frontier and Spirit are already defending their merger, insisting it could bring more competition.

“This is the type of transaction the administration should in fact support,” Bill Franke, chair of Frontier’s board and the managing partner of Indigo Partners, Frontier’s majority shareholder, told CNBC Monday. “It’s beneficial to the consumers. It’s beneficial to the employees. It’s beneficial to the communities that the airlines serve. And at the end of the day, even in combination, these two airlines will control less than 10% of the market.”