Spirit Airlines rejects Frontier’s bid, aims to exit bankruptcy in first quarter

Spirit Airlines said on Wednesday it has rejected a bid from rival Frontier Group as it was not favorable for the low-cost carrier and expects to exit bankruptcy in the first quarter.

Frontier offered Spirit shareholders $400 million in debt and a 19% stake in Frontier earlier this month, Spirit said in a regulatory filing.

The proposal implied a total consideration of about $2.16 billion, Frontier said in a letter to Spirit that was made public along with the filing.

Ultra-low-cost carriers, which excelled at keeping expenses low and offering no-frills travel, have struggled since the pandemic as travelers prefer to pay extra for a more comfortable journey.

"As a combined airline, we would be positioned to offer more options and deeper savings, as well as an enhanced travel experience with more reliable service," Frontier CEO Barry Biffle said in a statement.

Analysts have said a successful merger with Frontier could establish a nationwide discount airline more capable of attracting price-sensitive passengers.

But Spirit rejected the proposal as it would not provide the anticipated shareholder value and raised concerns over the timing and successful completion of the deal.

"We are told they (advisors to Spirit's bondholders) believe your current proposal is so insufficient as not to merit a counter," Spirit CEO Ted Christie and board chair Mac Gardner said in a letter to Frontier that was made public on Wednesday.

In 2022, Spirit Airlines came close to a merger deal with Frontier but the talks were halted in favor of JetBlue, which won the bidding war for the airline.

Spirit and JetBlue had to scrap that deal last year, after a U.S. judge blocked the merger on anti-competition concerns

The Florida-based airline declared bankruptcy in November after grappling with prolonged periods of financial losses, unsuccessful merger efforts and a substantial levels of debt.

The airline said it expects to complete its restructuring process in the first quarter.