Frontier Reignites Bid to Acquire Spirit Airlines

‍DALLAS — Frontier Airlines (F9) wants to revive Spirit Airlines (NK), releasing another offer to merge with the ultra-low-cost carrier (ULCC) to establish a much stronger low-cost offering in the US.

The January 24, 2025 offer is the latest attempt by F9 after its initial bid in 2022 was eclipsed by JetBlue's competing offer. The U.S. Department of Justice (DoJ) blocked that deal, and Spirit has since been facing increasing financial pressure.

Today, with NK in Chapter 11 restructuring, F9 is pushing for consolidation again in the ULCC segment.‍

A History of Missed Deals

Frontier had been trying to acquire NK since February 2022, when it first proposed a merger. The deal was expected to form a budget airline that would be a market giant and able to compete with the more prominent carriers. 

However, JetBlue (B6) outbid F9, and the acquisition battle became long-drawn. B6's $3.8 billion proposal won Spirit's favor, but federal regulators opposed the deal on anti-competitive grounds. A judge blocked the merger in early 2024, and NK was left to fend for itself financially.

As NK's financial troubles worsened, F9 revived talks to acquire the airline in mid-2024. These negotiations were cut short in August when F9 pulled its offer, citing due diligence issues. NK filed for Chapter 11 bankruptcy in November 2024, making its future even more uncertain.

The Latest Offer

As reported by paxex.aero, F9's new offer includes US$350 million in investment from NK's existing debt holders in exchange for 19% ownership of the combined airline and $400 million in debt-equity. This is much lower than the terms discussed in 2024, which included $580 million in take-back debt and 26.5% equity in the combined entity.

Spirit dismissed the offer in a regulatory filing, saying it was "impossible to effectuate" because of its insistence on new funding. The airline also attacked the proposal's form, calling it "risky, costly, and financially insufficient."

According to NK's answer, the proposal is "materially less" than the financial recovery plan agreed upon last summer and does not pay off any of the airline's funded debt. NK's advisers deemed the offer so lousy that it did not even receive a counteroffer.

Frontier’s Strategic Perspective

As its primary reason, F9 views financial instability as something Spirit is susceptible to, as an opportunity and push for being acquired before leaving bankruptcy. Thus, according to Frontier CEO Barry Biffle, "It would place them in that much riskier of a scenario where they remain independent."

"Under the standalone plan as it stands now, you will exit highly levered, losing money at the operating level, and this would not be a transaction we would pursue," Biffle said in letters that are part of Spirit's latest 8-K filing.

He said that should NK, nicknamed "Saturn" in the bankruptcy reorganization, emerge from Chapter 11 on schedule, it could remain exposed to "predatory competitive attacks" and ultimately become such a weak and dysfunctional company that merging with one of its parts may no longer make sense.

Despite NK's outright rejection, F9 is publishing its offer to win over NK's creditors.

Implications for the U.S. Ultra-Low-Cost Market

The combined entity will become the United States' fifth-largest carrier after American Airlines (AA), Delta Air Lines (DL), United Airlines (UA), and Southwest Airlines (WN) if F9 successfully bags this consolidation bid. In theory, F9 would keep the budget airlines' ultra-low-cost offering, which commands low base fares while offering fees for extra ancillaries, such as check-in baggage and seat selection.

However, F9 and NK have recently unveiled upgrades to attract budget-conscious travelers. F9 will roll out "first-class style" seating later this year, while NK has introduced its "Go Big" bundles, which include priority boarding, free checked bags, and complimentary snacks.

Spirit's rejection of F9's bid indicates that the Dania beach-based ULCC is confident of its ability to recover independently. Its bankruptcy restructuring plan aims to stabilize NK's operation without a merger and stiff competition from both US legacy and low-cost airlines.

The Road Ahead

While F9 seems keen on consummating, NK's leadership seems less willing to reconsider unless there is a substantially improved offer. NK's rejection signals its dissatisfaction with F9's walkout on negotiations last time and concern with the financial terms of this offer.

Spirit is laser-focused on its goal of coming out of Chapter 11 as a standalone carrier in the months ahead. Whether F9's public bid gets a foothold among NK's creditors remains to be seen, but the battle to keep ULCC alive in the U.S. continues.

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