Spirit Airlines is in bankruptcy, and continues to hemorrhage cash. They haven’t had the product or routes that people have wanted to buy post-pandemic. They’ve seen increased costs, and they’ve had supply chain issues with aircraft engines.
They had a lifeline from JetBlue in the form of a merger, with JetBlue massively overpaying, but that was blocked by the Department of Justice. Rather than preserving the ‘ultra-low cost’ sector of the airline industry, it’s been put in jeopardy.
Frontier Airlines, which previously had made an offer for Spirit that was topped by JetBlue, has made another offer. And – bizarrely – Spirit has rejected it.
- Frontier would issue $400 million in debt and allocate 19% of its stock to Spirit’s senior secured noteholders, 2025 and 2026 convertible noteholders, and other stakeholders.
- The total estimated value of this offer was pegged at $2.162 billion, with a potential increase to $2.901 billion if anticipated synergies materialized.
- Spirit creditors would also complete a $350 million rights offering before the transaction’s closing.
Spirit is a money-loser at this point, with margins below negative 20%. There’s little reason to acquire the pilots and planes – Frontier hasn’t had profitable places to send its own aircraft. They’ve had their own challenges, but have managed to stem losses and turn a modest profit (a far cry from their industry overperformance before the pandemic).
However, Frontier is better-managed than Spirit. If they can buy the assets inexpensively they’ll better utilize them, running Spirit as a real low-cost carrier. Bill Franke and Barry Biffle are not the executives you want on top of a business and premium focused airline (Franke’s entire career has been destruction of passenger experience) but they’re ruthless about cost – Frontier for instance conducts flight attendant training at a truck stop off the freeway in Wyoming because it’s cheaper than using their Denver headquarters.
Spirit doesn’t appear to have much of a plan for rehabilitation because ‘stop flying money-losing routes and back off of the fee-based model that used to work’. Neither of those performed well for the airline prior to its chapter 11 filing.
Frontier articulates a rationale to:
- Create a true low-cost alternative to the Big Four, creating the fifth largest carrier in the U.S., with a projected fleet of over 400 aircraft and 100 million passengers annually.
- Create a major competitive presence with more comprehensive network, increasing connectivity.
- Better financial stability, with half the leverage entailed by Spirit’s standalone plan ((8.9x 2025 EBITDAR vs. 4.1x). Of course those are based on Frontier’s projections which may not materialize.
- Synergies from loyalty program scale (great for the co-brand card business) and cost savings from airport infrastructure optimization.
This deal should pass regulatory scrutiny, under a Trump rather than Biden administration – not only because the former is expected to take a lighter touch with anti-trust, but also because they can blame their predecessor for Spirit’s predicament.
Spirit, though, claims that creditors do better under their standalone turnaround plan. And they complain that Frontier previously offered more money – $580 million in take-back debt and 26.5% of equity in the combined company in 2024 (before Spirit filed bankruptcy), versus $400 million in debt and 19% of equity now. Spirit suggested the expectation of $350 million in new equity from Spirit stakeholders was unreasonable.
They argue that as a standalone entity, creditors get $840 million versus $400 million. 19% of Frontier’s current, pre-transaction market cap, is $332.5 million – a shortfall of $107.5 million (however successful completion of the transaction would entail a higher Frontier Airlines stock value, closing this gap, and Spirit’s projections for its own bankruptcy emergence are dubious).
Spirit’s board also deemed delaying bankruptcy emergence to negotiate with Frontier as too risky.
The bankruptcy process was already advanced, with a confirmation hearing approaching in three weeks.
- The parties are not far off here! Spirit’s creditors are likely better off with some combination, under new management, than with the standalone turnaround plan.
- I would have assumed they see this and are negotiating for more rather than actually walking away.
- Yet Spirit’s bondholders indicated they would not extend the NDAs, effectively preventing further negotiations. There must still be a way to get this deal done!
Certainly consumers would be better off with a stronger, national ultra-low cost carrier under leadership that knows how to run one. I suspect the biggest issue is timing and losing control of the bankruptcy process by delaying the carrier’s emergence, even if it emerges not much better off. They’re still losing hundreds of millions of dollars per quarter.
In disclosed correspondence, Frontier Chairman Bill Franke noted to the parties that they’ve all acknowledged the “compelling industrial logic” of the combination. Frontier CEO Barry Biffle says they would not pursue a transaction with Spirit after emergence from bankruptcy. This is probably the best outcome for Spirit. My major concern for Frontier is servicing higher debt levels and absorbing higher labor costs.
I think there is still a good chance it will happen, the rejection seems like a negotiating tactic for Spirit to get a better offer from Frontier.
Spirit had ugly planes, atrocious service, uncomfortable cabins, and a broken business model. This is what the Biden administration insisted wasn’t allowed to change. They sanctified a money losing business plan that Jet Blue would have fixed. Now they get 100% of nothing — no competition was preserved and the oligopolists will buy up their assets, leaving the market less competitive than it was and less competitive than it would have been if the market had been allowed to freely operate. There will be no consequences for the regulators leaving our transportation system worse and our country poorer. Good riddance. Hopefully we can suffer the collateral damage and unforced errors of the past four years and get back on track.
I haven’t had a reason to fly any of the three. One would think some combo of the three would be profitable.
Listen, usually I would be all for more competition, but in this case, even I will make an exception. Let’s thrown all the shit in one pile: Spirit, Frontier, Allegiant, Avelo, Sun Country. Rename it ‘Swass’ after the way one feels flying any of those folks.
Then, since (Mormon) David Neeleman started both jetBlue and Breeze, just combine them, too. Personally, I’d go with jetBooze. For those who follow VFTW religiously, I hope you’ll ‘get’ the LDS emphasis (see Gary’s recent post from January 25, 2025, on the Breeze pilot convicted of bigamy).
So, yeah, we’re in for an age of ‘de-regulation,’ corruption, and a lot of mergers and acquisitions–that is, of course, unless your ‘woke’ or pick a fight with ‘god-king,’ then all bets are off.
FYI? Nobody who reads this blog flys this trash airline.
Would the new airline be called “Front-it”?
@Adam
Speak for yourself. Not regularly, but when the Big Three fail you, and you’re stuck in Puerto Vallarta, facing an overnight stranding at that hellhole, even you’d hop on a last-minute Spirit flight to escape.
Desperate? Nothing but drama on here. For those that think Spirit sucks? It’s all perspective. However that flight operation is one of the safest in the industry. Keep that in mind. The pilots are trained well.
@1990 it must be exhausting to whine, complain, and just be shitty as much as you do on this blog every damn day. You must travel just to get away from all the people that can’t stand you at home.
I’ve flown Spirit a few times & Frontier once & while I realize I was lucky, both have been as perfect experiences as possibe!
Happened that the last time I flew (United), we were gated next to a Spirit arrival and I saw 1st hand what at least one of Spirit’s financial problems must be: The cargo hold was practically empty. Virtually no one was paying for a checked bag. I don’t know squat about running an airline but seems to me a key to being profitable would to fill the cargo hold with frieght business.
To all the negative people on here. Mitch is 100% right
What you call consumers, I call trailer trash. I don’t want them in the same airport as me. don’t even want them on the same planet as me. If they want to travel, drive or take Greyhound.
@Mitch You misspelled your own name, again–Starts with a ‘b’!
@BjSmith So, your solution is to ‘complain’ about others ‘complaining’–nice!
Fellas, feed me–I’m hungry for more. The more personal the attack, the better. Assume away!
Spirit shows no chance of surviving as a stand alone airline. This is about management worrying about their jobs. Eventually this acquisition will likely take place, particularly if it gathers approval from the Unsecured Creditor (and other) Committee(s). AA management in vein tried to stop the merger with USAir and eventually gave in.
A combined bigger network along with a more LCC product offering, a differentiation from legacy airlines but shucking the $49 fares might bring success.
What is Chris DeMuth talking about? JetBlue (at the time at least) was a poorly run airline massively overpaying for Spirit. The merger was illegal. Spirit knew it was illegal, but greedy shareholders drooled over JetBlue’s baseless every increasing offer. Spirit should have merged with Frontier the first time around. Blame shareholders, not the government.
The Biden DOJ accelerated the demise of Spirit by blocking the merger of two money-losing airlines which would somehow “harm ticket buyers”…just laughable.
Both Frontier and Spirit are awful airlines. Customer service is non existent. Employees from outside contractors are often faced with angry passengers and Spirit hires them because there is no legacy cost except losing a repeat customer when the contract employee loses his/her cool with a passenger. Spirit lost me when they charged me $5 to print a boarding pass at the airport. Airline travel was once the safest transport. With DEI hires of controllers that is no longer the case. The industry says they need 17,000 new pilots. I sincerely pray they are.not DEI hires.
The act of rejecting an offer doesn’t automatically “kill” a possible deal.
“Rename it ‘Swass’ after the way one feels flying any of those folks.”
Has “WorldStar! Airlines” been taken?
@DesertGhost – no, what’s more challenging is refusing to extend the NDAs. Perhaps they’ll go sign new ones!
@1990 comment about being Mormon, like what the heck does that have to do with anything from Gary and the original content here? Do we say oh yah right and such and such a Catholic who ran said airline …..! Totally off topic and btw I’ve met some very nice people that just happen to be LDS!
@J. BEETON… that’s right…blame everything on non-white males with yourntedious DEI comment. Are you THAT scared of losing your white male status in America? Afraid that if someone else is given the same opportunity they’ll outperform, outthink and outshine you? Because if it wasn’t for Bubba hiring Bubba, you’d be screwed. Right?
You’re as racist as you sound.
In business, Never Accept the First Offer!!!!
The creditors & bond holders are the ones calling the shots at Spirit. It’s not a matter of them taking a hair cut, it’s how much of a haircut can they tolerate!! Spirit has little chance of surviving on its own. The analysis developed by Frontier is pretty clear.
As for Frontier, it formulated a counter offer (including white knights and black knights) way before making the “initial” offer. It knows it threshold, and if its smart, it sticks with it.
Time for the two parties to dance the tango….consolidation is in the air!!
If approved by the DOT, don’t be surprised if JetBlue looks for a dance partner with Alaska/Hawaiian.
Well said, Mitch. If that dumb ass 1990 had to keep his mouth shut more than 5 minutes, he’d explode. Oh, and before he responds to my comment, I’m trying to be helpful to 1990. He’s just to ignorant and self absorbed to realize how stupid he makes himself sound to the average person. I won’t be responding, I’m just stating the facts in hope that 1990 learns something today. Best to you all.
Sorry to ‘average’ @mike s for not getting back to him within 5 minutes. I’ll try harder next time.
Why the hell you have to have the police on the article’s picture??? We all know what you doing, Gary.
@Rob
Not attacking (or defending) LDS. You must not have see the other post on VFTW, which I referenced above. My ‘call-back’ was probably too niche.
@Chris Demuth et. al.
I disagreed at the time with DOJ’s decision to block the Jet Blue / Spirit merger, and that decision does look worse now.
But to be fair, the final decision was made by a judge, and by Jet Blue opting not to offer more significant concessions to try to settle. Jet Blue embarassed and sabotaged itself. Their own accidentally released docs showed they anticipated increasing fares 24 to 40% on Spirit-served routes. IMO they should have made a case that the avg passenger would get an equivalent or better value without being nickle-and-dimed with fees and abandoned when they misconnect (and Jet Blue should have genuinely planned the merger accordingly). In addition to presenting convincing evidence that Spirit was headed to bankruptcy. They failed to make that case.
**If approved by the DOT, don’t be surprised if JetBlue looks for a dance partner with Alaska/Hawaiian.**
The first thing that Alaska “Proudly All Boeing” Airlines would do would be to dump all of the JetBlue Airbus fleet (which is all of the fleet, pretty much). See: Virgin America.
If Spirit goes under, and assuming their airplanes have been maintained, perhaps United or another carrier would be interested in obtaining some narrow body airplanes of a type it already operates.
1990. You don’t have the perspective of an airline professional. When I see people on these forums spouting off garbage, I call it out. There are a lot of good people that work at Spirit and that rely on those jobs to provide for their families. And for people to come on here and disparage the companies they work for as if it’s somehow their fault is complete nonsense. The employees don’t interact policy they carry it out whether they like it or not. I pointed out in a post prior to the one you read, Spirit is a very safe airline and perhaps the safest in the country. All I’m trying to say is people should be careful what they say about a company. And I wasn’t complaining about other people complaining. Just pointing out nonsense. It’s easy to hide behind the computer and say what you did.
Such arrogance from the wannabe so called higher echelons elite.
You make me nauseated
You don’t like the Color of the planes wah wah wah
Cry me a river!!
Just want to let you know
Spirit BY FAR is one of the SAFEST AIRLINES you can fly on
I know first hand
One of their high skilled pilots
In 2 INCIDENTS THROUGH THEIR HIGHER SKILLS AND TRAINING SAVED OUR LIVES FROM NEAR COLLISION!!
Give it a rest people!!
As far as CEO from Spirit
You need to RECOGNIZE
what you’re loosing here
Stop being so greedy
Despite what the other people
Don’t count their opinions
There are MORE PEOPLE THAN YOU CAN IMAGINE
Who depend on and yes
Love this airline
CUSTOMERS ARE #1
You need more DEDICATED PEOPLE IN MANAGEMENT
Not just out for their OWN BENEFIT
@carletonm
Both Hawaiian and JetBlue are Airbus fanboys. Also, Boeing can’t deliver MAX jets as agreed. The new airline (B6+AS+HA) would need all the airframes it can wrap it hands around. To rely on one sole supplier doesn’t work anymore. Even WN and Ryanair are carping about Boeing.
A small side note: AS forced Boeing to take back the MAX jet with the blown door.
All business aside my fear is many of spit airlines will come onboard the legacy carriers and become a dangerous nuisance in the sky
@BjSmith
Hiding, no more!
Nothing wrong with Spirit’s crews—decent, hard-working people, like most airlines. Wish they got paid more.
From a passenger perspective on Spirit, I have never felt unsafe, though for ‘comfort’ I do not ‘prefer’ the airline—the seats are stiff, don’t recline, tight legroom, not enough ‘Big Front Seats,’ no meaningful amenities, gotta pay extra for everything, but as they say ‘you get what you pay for’ and unless it’s an expensive last-minute fare, usually the prices are very affordable.
Like I said above (referring to ‘escape’ from PVR), sometimes Spirit is the only option under the circumstances.
A sweet spot in my opinion are Spirit’s flights from FLL to the Caribbean, which are excellent for a 1-3 hour flight to a holiday somewhere nice. Perhaps, the service is better since the company is based out of SE FL.
At one point, Spirit flew from FLL-SEA and FLL-LIM, which I do not recommend ‘toughing it out’ on their a321 for 5-6 hours. Brutal.
Here’s the bigger issue with Spirit specifically and LCC’s generally: the ‘cheap’ fares on Spirit (and Frontier, Allegiant, etc.) attract an ‘odd’ clientele—some of whom regularly misbehave onboard, which is upsetting to other passengers (and I’m sure the crews, too). This does happen on other airlines (even the Big Three), but I’ve had a disproportionate number of bad experiences due to fellow passengers on the LCCs and ULCCs.
Clearly, my comments above (in jest, obviously, ‘Swass,’ like, c’mon) offended you (and others), which is fine, because VFTW is usually not a ‘serious’ place, and banter like this (‘user engagement’) directly and indirectly assists Gary to fund his site with more clicks and views. Who knows, maybe he got a few credit card referrals out of the extra back-and-forth. Good for him! Support the ‘community’ *wink*