Spirit Airlines has once again turned down a takeover proposal from budget competitor Frontier Airlines, as it opts to concentrate on its own strategy to navigate through bankruptcy and improve its financial standing.
The recent offer, similar to previous bids, included provisions for Spirit stakeholders to receive $400 million in newly issued debt along with a 19% ownership stake in Frontier Group Holdings Inc., the parent company of Frontier.
In a statement on late Tuesday, Frontier expressed its belief that merging with Spirit would have generated more value compared to Spirit’s current independent approach. However, the company emphasized its commitment to its own shareholders during a favorable market period.
Frontier’s latest offer had been swiftly dismissed by Spirit, which stated that it had proposed a counteroffer to Frontier, but that too was declined. Spirit is scheduled for a court hearing regarding its reorganization plan this Thursday.
The airline expects to finalize its restructuring efforts during the first quarter of the upcoming year. Frontier’s initial merger attempt with Spirit dates back to 2022 but was unsuccessful as JetBlue outbid them. Subsequently, the Justice Department intervened to block JetBlue’s $3.8 billion offer, citing concerns over potential fare increases for customers relying on low-cost flights. A federal judge supported the Justice Department’s stance in January, leading to JetBlue and Spirit abandoning their merger attempt two months later.
Filed for bankruptcy protection in November, Spirit is the largest low-cost airline in the U.S. and reached an agreement with bondholders prior to this move. Since early 2020, the airline has incurred losses exceeding $2.5 billion and is bracing for significant debt obligations that exceed $1 billion due in 2025 and 2026.
Other major U.S. airlines have attracted some of Spirit’s price-sensitive customers by offering their versions of low-fare tickets. Additionally, prices for leisure travel in the U.S.—which is crucial to Spirit’s business—suffered a decline this past summer due to an oversupply of new flight options.
In the stock market, shares of Frontier Group experienced a 5% drop during afternoon trading on Wednesday, reflecting the uncertainty surrounding the ongoing discussions with Spirit Airlines.
