Frontier Group ULCC -1.43% Holdings Inc. agreed to buy Spirit Airlines Inc. SAVE 0.18% in a deal valued at $6.6 billion that unites two of the country’s largest low-fare carriers.
The consolidation comes as the travel industry continues to claw its way back toward prepandemic levels despite higher costs, labor shortages and disruptions caused by Covid-19. In the latest quarter, the emergence of the Omicron variant disrupted what industry officials expected to be a smooth and profitable holiday travel season.
Upon the deal’s close, Frontier will own about 51.5% of the combined company, and its chairman, William Franke, will become chairman of the combined company’s board.
“This transaction is centered around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public,” Spirit’s president and chief executive, Ted Christie, said.
Shares of Spirit rose more than 12% in premarket trading Monday after the deal was announced, while Frontier stock fell more than 2%.
The combined company’s management team, branding and headquarters will be determined by a committee led by Mr. Franke before the close of the deal. The deal is expected to close in the second half of this year, pending regulatory approval.
Spirit shareholders will receive 1.9126 shares of Frontier in addition to $2.13 in cash for each share of Spirit they own, the companies said. At Frontier’s closing stock price on Friday of $12.39, that implies a value of $25.83 a share for Spirit, representing a 19% premium over the stock’s closing price on Friday.
In addition to the deal, both Spirit and Frontier also posted their latest quarterly results on Monday. Like other airlines, the two low-cost carriers said the Omicron variant hurt their fourth-quarter results.
Holiday travel helped U.S. airlines bring in more revenue at the end of last year than in any quarter since the pandemic began to ravage travel demand in 2020. But major carriers lost money and have said the new variant and a surge of cases have temporarily dimmed their prospects.
Spirit said that disruptions in December caused by staffing shortages and the Omicron variant led to a hit of about $30 million to its adjusted earnings before interest, taxes, depreciation and amortization.
Write to Will Feuer at [email protected]
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