On Monday, two low-fare airlines announced plans to merge in a $6.6 billion agreement that would create the fifth largest airline in the United States.
Spirit and Frontier airlines make a combined 1,000 daily flights to over 145 destinations across the United States in over 19 countries in Latin America, and the Caribbean, including major cities, according to a statement. The merger is expected to close in the second half of 2022.
“We worked jointly with the Board of Directors and senior management team across both carriers to arrive at a combination of two complementary businesses that together will create America’s most competitive ultra-low fare airline for the benefit of consumers,” said William A. Franke, the Chair of Frontier’s Board of Directors and the managing partner of Indigo Partners, Frontier’s majority shareholder.
The combined airline is anticipated to deliver $1 billion in annual customer savings and expand with more than 350 aircraft in order to deliver more “ultra-low fares”. They also said they expected to hire another 10,000 workers by 2026 to add to their current combined 15,000 employees.
It is not clear which airline will lead or manage the merged company.
“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. We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent guest service,” said Ted Christie, President, and CEO of Spirit.
According to the joint statement, the merge is also expected to deliver “more reliable services through a variety of operational efficiencies, and expand frequent flyer membership offerings.” An estimated $5.3 billion in annual revenue is anticipated of the merged company based on 2021 results.
Once fully implemented, the merger is expected to deliver annual run-rate operating synergies of $500 million, primarily driven by scale efficiencies and procurement savings across the enterprise with approximately $400 million in one-time costs.
Under the agreement, the new airline will be comprised of 12 directors, including the CEO and seven of whom will be named by Frontier, and Spirit will name five. The board would be headed by William A. Franke, the chairman of Frontier and the managing partner of Indigo Partners, a private equity firm that invests in budget airlines.