Frontier Revisits Merger With Spirit

I’m pleased to see that Frontier Airlines is again exploring a merger with Spirit Airlines that could create a more powerful, nationwide budget carrier.

Report: Frontier And Spirit In Mrrger Talks Once Again

Even as Spirit Airlines explores bankruptcy, The Wall Street Journal reports Frontier and Spirit are again exploring a merger, though no announcement is imminent. In fact, it is far more likely that Spirit will enter bankruptcy protection in a necessary move to restructure crippling debt.

Even so, discussions have resumed between the two carriers after a judge determined JetBlue and Spirit could not merge. Any deal would be contingent upon Spirit successfully renegotiating its debt and restructuring its balance sheet, whether in Chapter 11 protection or out.

This Is A Merger I Could Support…

I’m generally averse to airline mergers of any kind because I think that consumers tend to lose, but we see so-called “ultra-low-cost-carriers” struggling in the USA post-pandemic world as consumers drift to full-service carriers, often at comparable pricing via basic economy fares.

And even I see value in them. Remember that recent Spirit carry-on bag incident I wrote about? Well, I had to get from Chicago to Newark and United wanted over $300 for a walk-up ticket. Spirit was $142 and I only had a personal item. For a 1.5-hour flight, I was happy to save the money and fly Spirit.

But Spirit finds itself in a very different and weakened state and consumers appear to be both rejecting Spirit and more carefully packing, such that the ancillary revenue continues to drop as consumers wise up to the business model and leave larger carry-on bags at home.

Speaking more broadly, we see great success with this sort of business model in Europe, with Ryanair and EasyJet offering valuable connectivity and competition against European legacy carriers. I don’t understand what makes US markets so different, but I see a place for budget carriers and I see the latest desperate attempts by both Spirit and Frontier to become more “premium” or “full service” as going against the business model they need to distinguish themselves from network competitors.

CONCLUSION

While I don’t know what the future holds for budget carriers like Frontier or Spirit in the USA, I think there is a valuable place for them in the market and that the complementary route networks, aircraft overlap, and the need to scale operations to achieve profitably all make a marriage between the two far more likely and worthy than the JetBlue – Spirit tie-up.

In the end, these carriers hold other accountable and open up air travel to more folks. That is a good thing.

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