Spirit Airlines

History

2022: Frontier bought Spirit Airlines for $6.6 billion

On February 7, 2022, it became known that Frontier Group Holdings agreed to acquire Spirit Airlines for $6.6 billion in a deal that will lead to the creation of a large airliner in the American market. The transaction will be paid by shares and the buyer's own funds.

As The Wall Street Journal writes in the February 7, 2022 issue, ultra-low-budget airlines, created to reduce costs and fares by providing cheaper services, have changed the air transportation industry in recent years. The deal would create the fifth-largest U.S. airline and allow them to compete more actively with larger rivals.

Frontier bought Spirit Airlines for $6.6 billion

In a competitive industry like ours, the lowest costs always win, "Frontier CEO Barry Biffle told analysts. - These low costs, in turn, will allow us to maintain low rates for customers.

This step comes at a time when the American aviation industry is struggling with the volatility in demand for flights due to new variants of COVID-19. At the same time, costs are rising due to higher wages, fuel prices and airport charges.

SPIRIT payroll spending as a percentage of revenue rose more than 10 points last year from 2019. Higher fees prompted Frontier to leave airports such as Los Angeles and San Jose in California and end service to Washington Dulles and Newark.

The merger, which is expected to conclude in the second half of 2022, is projected to result in a $500 million-a-year synergy, mainly driven by operating savings.

The companies pledged to prevent job cuts and create 10,000 direct jobs by 2026. They also pledged that the merger would deliver annual savings of $1 billion for consumers and offer more than 1,000 daily flights to more than 145 destinations.

Peter McNally, global head of industry, materials and power at research firm Third Bridge, said cost pressures were the biggest threat to profit recovery in the aviation industry.

According to McNally, the combined company will be in an "excellent" position to combat rising operating costs.^[1]

Notes