After Latest Merger Bid, Spirit Airlines Tells Frontier: Try Again

Frontier Airlines has made another bid for Spirit Airlines, but the offer failed to sway the South Florida-based ULCC as it proceeds through a Chapter 11 restructuring.

In an initial response, Spirit CEO Ted Christie and Chairman Mac Gardner said the Jan. 7 proposal—made three weeks before a bankruptcy court hearing to confirm Spirit’s reorganization plan—“represents an extremely material reduction in value compared to our 2024 agreement in principle.” Spirit is working to exit its streamlined Chapter 11 process in the first quarter.

This is the third round of merger talks for the two budget airlines, having first announced an agreement to combine in 2022. Unseated by JetBlue Airways in a resulting bidding war, Frontier tried again once the JetBlue-Spirit deal was blocked on antitrust grounds, resuming conversations with Spirit in summer and fall 2024. However, talks stopped when Frontier identified “several significant liquidity holes” and other uncertainties, the airline said. Spirit filed for bankruptcy protection in November 2024.

An improved revenue environment is now one factor helping to mitigate some of what Frontier viewed as too large a risk the last time around.

While concerned with the timing of the latest offer, Spirit is also nonplussed by its terms—under which its stakeholders would have received 19% of the equity of the combined company and $400 million of take-back debt. The previous deal offered 26.5% of the equity and $580 million of take-back debt, a deal “Spirit’s board and management were willing to push forward expeditiously,” assuming other acceptable terms, Christie and Gardner said. Additionally, Frontier’s newest proposal sought an incremental $350 million equity investment from its creditors, Spirit noted, “effectively requiring them to fund their own debt position in the combined company.”

A back-and-forth has taken place over several weeks, with Spirit pushing its court hearing from Jan. 29 to Feb. 13 as it considered the proffered terms. But advisors to Spirit’s bondholders found the proposal “so insufficient as not to merit a counter,” the carrier said, and it ultimately determined the deal was “both inadequate and unactionable.” As Frontier held firm on its terms, Spirit’s board concluded that any further delay of its confirmation hearing and emergence from Chapter 11 would present too much risk.

“Should you wish to make a revised proposal that is in fact capable of closing and addresses the material deficiencies catalogued here and in our many communications, we would be happy to consider it and again work to activate our stakeholders to do so as well,” Christie and Gardner wrote on Jan. 28.

Frontier believes its offer—funded by newly issued debt and common stock—provides more value than Spirit’s standalone restructuring plan is capable of achieving on its own. Before factoring in projected synergies of $600 million from the combination, Frontier values its proposal at $2.1 billion. The airline also cites Spirit’s “prior discussions” with the U.S. Justice Department and Transportation Department as giving confidence for regulatory approval.

A Jan. 24 email from Frontier CEO Barry Biffle, shared in new filings, sheds light on the reasons for pursuing a deal at this stage.

“Under the current standalone plan, you will emerge highly levered, losing money at the operating level and this would not be a transaction we would pursue,” he writes to Spirit. Should the carrier emerge standalone as planned, “we think the company is so weak and highly levered as to attract predatory competitive attacks,” Biffle adds, citing concerns that Spirit could be “quickly weakened to the point that a merger is not a prudent risk.” The sooner Frontier can take control of the combined companies, the sooner it can stabilize the operation, he says.

“If you pursue the current standalone plan, it will be some time before we could contemplate reengaging, if at all,” Biffle writes.

Despite Spirit’s publicly announced position, Frontier has reiterated its interest and belief in the value of the deal on the table. But time is of the essence, it says.

“This proposal reflects a compelling opportunity that will result in more value than Spirit’s standalone plan by creating a stronger low fare airline with the long-term viability to compete more effectively and enter new markets at scale,” said Bill Franke, Frontier’s chairman and managing partner of Indigo Partners LLC in a Jan. 29 statement. “We stand ready to continue discussions with Spirit and its financial stakeholders and believe that we can promptly reach agreement on a transaction.”