Frontier and Spirit - 2.0

"We were on a break!"

In what we’re calling the least surprising surprise of 2025, Frontier has made a bid to acquire Spirit Airlines out of bankruptcy.

Long the “will they, won’t they” couple of U.S. aviation, the two ULCC airlines were close to a similar tie-up in 2022 when JetBlue swooped in. Despite warnings from Spirit leadership on the likelihood of a JetBlue merger passing DOJ muster, the shareholders liked the price offered by JetBlue, and the rest is history.

Today, the revised offer from Frontier is just a smidge lower in value than originally offered (read: a lot lower) — so low, in fact, that Spirit management has rejected it in favor of their own exit plan. Of course, in Chapter 11, it’s not the airline’s management who chooses the airline’s exit plan.

This week, we decided to look at how the tie-up between Frontier and Spirit is increasingly inevitable. The two airlines, once loosely splitting the ULCC landscape between east and west, have been quickly running out of room to grow and still avoid one another. Overlap on the two networks has gradually increased to a point where a third of the airlines’ capacity now directly overlaps.

Considering neither of the ULCC airlines is exactly profitable (as airlines, not as aircraft sale lease-back traders), the tie-up makes even more sense. In fact, what some have mistakenly considered as the end of the ULCC model has simply been a function of these two overdoing it.

A lot of pricing power can be found overnight by removing a competitor on 33% of your network - a lot of sorely needed pricing power.

Which gets to our prediction: This merger will happen. It's not a stunning prediction, I know, but wait, there’s more. This merger will happen not just because Spirit needs a white knight but because Frontier needs a way out of its own existential problems. That’s right, Frontier needs this merger just as much as Spirit.

We think Spirit knows it, too.

That means a bit of a cat-and-mouse game of the two airlines trying to convince the grown-ups on the creditors’ committees who should get the bigger piece of cake.

Our published research

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