Spirit and Frontier Airlines eye merger, Bloomberg News reports

Dec 16 (Reuters) – Bankrupt Spirit Aviation Holdings is in discussions to merge with Frontier Group Holdings, Bloomberg News reported on Tuesday, citing people familiar with the matter.

Spirit has long pursued a merger with Frontier. The two carriers have been in discussions since at least 2022, yet a definitive agreement has remained out of reach.

Frontier’s shares rose more than 9% in after-hours trading.

Ultra-low-cost carriers are contending with higher operating costs across the board and tougher competitive pressure from larger U.S. airlines that can match fares more aggressively, add capacity on key routes and use loyalty programs to defend market share.

A deal could be announced as soon as this month, the report said, though talks are ongoing and may still collapse without an agreement.

Both Spirit and Frontier declined to comment.

In August — just days before Spirit filed for its second bankruptcy — Frontier Chairman Bill Franke met with Spirit CEO Dave Davis and Chairman Robert Milton, industry sources told Reuters.

Earlier, during Spirit’s first bankruptcy in January and February, the airline rejected at least two merger proposals from Frontier, including a $2.16 billion offer. Spirit argued at the time that the bid fell short of previously discussed terms and sought assurances that Frontier would close the deal rather than walk away.

Industry executives and analysts widely see a merger with Frontier as Spirit’s most viable path forward. In October, Spirit confirmed it was evaluating all strategic options, including a potential sale or merger, to maximize shareholder value.

Frontier’s leadership under former CEO Barry Biffle had been cautious about a full acquisition, on concerns that absorbing Spirit could strain its balance sheet, according to industry sources.

However, the reported talks between the two carriers come a day after Frontier announced the exit of longtime chief executive Biffle, handing over interim charge to insider James Dempsey.

Since August, Spirit has cut headcount, reduced flying, pulled out of 14 airports and shed commitments on more than 80 aircraft leases as it pursues a broader cost-cutting plan.

The airline on Monday secured an additional $100 million in emergency financing to support its operations and restructuring efforts while under bankruptcy protection.

(Reporting by Abhinav Parmar and Rajesh Kumar Singh; Editing by Alan Barona and Shailesh Kuber)