Spirit Airlines has rejected a merger proposal from Frontier Airlines, calling the offer “woefully insufficient financially.” The proposal, made on January 7, included $400 million in take-back debt and 19% of Frontier Airlines shares to Spirit’s debtholders, amounting to at least $2.1 billion. However, Spirit’s management found the terms inadequate.
Frontier assumed that Spirit’s creditors would complete a $350 million rights offering to retire debtor-in-possession financing after emerging from Chapter 11 bankruptcy. Excess liquidity was expected to bolster the combined entity’s balance sheet.
Ted Christie, CEO of Spirit Airlines, and McIntyre Gardner, chairman of the board, highlighted previous discussions where Frontier offered more favorable terms: $580 million in take-back debt and 26.5% equity. They expressed dissatisfaction with Frontier’s failure to address core issues like the drawn $300 million revolving credit facility.
Despite exchanges and presentations from Frontier, Christie and Gardner reiterated that many deficiencies remained unaddressed. These included demands for new funding from creditors and uncertainties regarding merger risks and costs.
Barry Biffle, CEO of Frontier Airlines, noted that waiting until Spirit exits bankruptcy would leave it highly leveraged—a situation unattractive for a transaction. He emphasized the need for immediate control over both companies to stabilize operations.
Frontier argued that merging would create a low-cost carrier capable of competing with major airlines in the U.S., but acknowledged execution risks in Spirit’s independent plans. Despite this rejection, Spirit indicated openness to reconsider if material deficiencies were addressed.
The two airlines previously attempted a merger in 2022 but were outbid by JetBlue. However, legal challenges halted the JetBlue-Spirit merger by early 2024 due to concerns about consumer impact on low-cost travel options within the U.S.
