Budget airlines Spirit and Frontier are once again discussing a merger, according to a Bloomberg report.
If the parties can reach an agreement, a transaction could be announced as soon as this month, reports Bloomberg, citing unnamed people familiar with the matter.
Frontier declined to comment, and Spirit said it does not comment on market rumors and speculation.
Spirit is in the midst of a second Chapter 11 bankruptcy reorganization within the past 13 months. In an effort to preserve cash and stem losses, the airline has slashed its flight count by a third since last December, according to Cirium flight data. Spirit is also reducing its fleet and plans to return 87 leased aircraft.
Though making no mention of Frontier, Spirit said on Dec. 15 that it is in negotiations to do a strategic transaction to exit Chapter 11, but that it is also making preparations to reorganize as a standalone airline.
Frontier too is struggling. Like other budget airlines, Frontier is trying to find a formula for sustained post-pandemic profitability in the face of spiking labor costs and the increasing popularity of seats with extra legroom. For the first three quarters of this year, Frontier reported a net loss of $190 million.
On Dec. 15, Frontier announced the dismissal of
longtime CEO Barry Biffle.
A merger agreement between Spirit and Frontier would be their second. The discount rivals entered a deal to join forces in February 2021, but Spirit backed out of the arrangement to accept a higher purchase offer from JetBlue. The proposed $3.8 billion merger was blocked by the Justice Department in January 2024.
An acquisition of Spirit would add about 100 aircraft to Frontier's fleet and could help it gain more might to compete with network carriers Delta, United and American. Though the network airlines' cost structures are higher, they have the ability to ratchet up competition for bargain-hunting customers simply by opening more seats for basic economy.
Bloomberg Intelligence aviation industry analyst Francois Duflot said a merger would be a survival move for Spirit, which continues to burn cash quickly. In October, Spirit reported a $26 million loss before interest and taxes.
For Frontier, Duflot said, purchasing Spirit would be reasonable and opportunistic, but challenges would remain. Frontier needs higher yields to offset costs that have surged since the pandemic. New services, such as Frontier's upcoming addition of first-class seats, will help, but benefits will take time to materialize.
A combined Spirit and Frontier would edge out the Alaska-Hawaiian combination to be the fifth-largest U.S. carrier, according to Cirium data for December.