Bankrupt Spirit Airlines Inc. has turned down a new acquisition proposal from Frontier Airlines’ parent company, while expressing openness to a long-discussed merger between the two budget airlines. Recently, Frontier Group Holdings Inc. met with Spirit’s leadership to discuss a proposal valued at approximately $2.2 billion, which would be financed through new debt and stock issuance from Frontier. The aim is to persuade Spirit’s bondholders that this plan is a better alternative to bankruptcy restructuring, which Frontier claims would lead to “an unprofitable airline with a high debt load.” However, Spirit deemed the offer “inadequate and unactionable.” In a regulatory filing, Spirit indicated it would continue to pursue a restructuring plan through bankruptcy but would be willing to consider a revised offer that addresses its concerns.
These previously undisclosed discussions began with a letter from Frontier on January 7, reigniting a long-standing interest between the two pioneers of low-cost air travel. Frontier attempted to acquire Spirit in 2022, but JetBlue Airways Corp. intervened with a more lucrative offer. After the JetBlue deal was blocked due to antitrust issues, Frontier renewed its pursuit of Spirit, although talks fell apart last year. Both airlines believe that merging could strengthen their operations amid significant challenges in the ultra-low-cost market, which has faced increased competition from larger carriers since the pandemic. In response to changing consumer preferences for premium offerings, both Frontier and Spirit have been adjusting their business models. Frontier Chairman Bill Franke stated that a merger would provide “long-term viability to compete more effectively.” The airline is ready to continue negotiations and is optimistic about reaching a new agreement.
Spirit filed for Chapter 11 bankruptcy protection in November after its business suffered following the failed JetBlue acquisition. The new bid arrives as Spirit aims to exit bankruptcy, which it anticipates will occur in the first quarter. A hearing to confirm its reorganization plan has been postponed to February 13 to allow the airline time to evaluate the proposal. Spirit’s bankruptcy plan would transfer control of the airline to its bondholders, eliminating existing shareholders’ equity without compensation. The latest Frontier offer was rejected partly because it would necessitate a $350 million equity investment from noteholders. Additionally, the proposal would require regulatory and court approvals, along with a $35 million backstop fee. Spirit’s CEO Ted Christie and Chairman Mac Gardner described Frontier’s offer as “risky and costly, with no certainty as to either timing or outcome and woefully insufficient financially.
