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Frontier Airlines buying Spirit in USD3B low-cost carrier deal

AP – The parent company of the budget carrier Frontier is buying Spirit Airlines in a USD2.9 billion cash-and-stock deal that will create the nation’s fifth largest carrier.

The deal is valued at USD6.6 billion when accounting for the assumption of debt and other liabilities.

The companies said yesterday the transaction will provide more low-cost fares for more travellers to destinations in the United States (US), Latin America and the Caribbean. Frontier Group Holdings Inc and Spirit Airlines Inc also anticipate USD1 billion in annual consumer savings and are looking to expand their services with over 350 aircraft on order.

The carriers may be in for a very close look by antimonopoly regulators. The Biden administration has signalled a tougher line against big corporate mergers.

Yet airlines have suffered a devastating stretch during the pandemic despite assistance from the US, and are in a weakened position heading into 2022.

Existing Frontier shareholders will own approximately 51.5 per cent and existing Spirit stockholders will own approximately 48.5 per cent of the combined airline. The transaction is expected to close in the second half of the year.

Spirit shareholders will receive 1.9126 shares of Frontier plus USD2.13 in cash for each existing Spirit share they own. This implies a value of USD25.83 per Spirit share at Frontier’s closing stock price of USD12.39 on Friday.

Shares of Frontier, based in Denver, slipped almost three per cent before the opening bell yesterday. Shares of Spirit, based in Miami, jumped about 12 per cent.

A Frontier Airlines jetliner at Denver International Airport. PHOTO: AP