Spirit Airlines and Frontier Airlines announced this morning (7) a definitive merger agreement whereby the companies will combine, forming a large-scale international low-cost carrier.
In the statement issued by the companies, Frontier and Spirit say they expect to «change the industry for the benefit of consumers by bringing more ultra-low fares to more travelers in more destinations in the United States, Latin America and the Caribbean.»
The combined company’s stronger financial profile will allow it to accelerate investment in innovation and growth and compete even more aggressively, especially against the dominant «Big Four,» they continue.
William A. Franke, chairman of Frontier’s board of directors and managing partner of Indigo Partners, Frontier’s majority shareholder, noted that Indigo has a long history with Spirit and Frontier, and is proud to partner with them to create a disruptive airline. «We have worked together with the Board of Directors and management team of both companies to arrive at a combination of two complementary businesses that together will create the most competitive ultra-low fare airline in the U.S. for the benefit of consumers.»
«We are thrilled to join forces with Frontier to further democratize air travel,» said Ted Christie, President and CEO of Spirit. «We look forward to joining our talented teams to shake up the airline industry while continuing our commitment to providing excellent passenger service,» he added.
«Together, Frontier and Spirit will be America’s greenest airline and offer more ultra-low fares to more people in more places,» said Barry Biffle, Frontier’s President and CEO. «I couldn’t be more excited for our team members, customers, partners, the communities we serve and our shareholders.»
Indigo Partners – the controlling holding company of the new combined airline – expects to offer more than 1,000 daily flights to more than 145 destinations in 19 countries through complementary networks. It also seeks to expand its fleet with more than 350 aircraft on order – much of that backlog is being added by Frontier with the order placed by Indigo Partners in Paris 2019 – and add 10,000 jobs by 2026.
The company would have annual revenues of approximately $5.3 billion based on 2021 results, and post-merger, the new company expects to realize annual operating synergies of $500 million upon completion of the integration, which will be driven primarily by efficiencies of scale and procurement savings across the company, with approximately $400 million in one-time costs.
The combined airline is expected to have a strengthened financial profile, with a cash balance of approximately $2.42 billion at the end of 2021 on a combined basis.
The transaction values Spirit at a fully diluted equity value of $2.9 billion, and a transaction value of $6.6 billion when taking into account the assumption of net debt and operating lease liabilities.
The new airline’s Board of Directors will consist of 12 directors, seven of whom will be appointed by Frontier and five by Spirit. Franke will serve as Chairman of the Board of Directors of the combined company.
The merger is expected to be finalized in the second half of 2022, and the combined carrier’s management team, brand and headquarters will be determined by a committee led by Bill Franke.
