Frontier, Spirit Take Off With Merger Deal

Spirit Airlines, Inc. and Frontier Group Holdings, Inc. (the parent company of Frontier Airlines, Inc.) have announced a definitive merger agreement under which the companies will combine, creating America’s most competitive ultra-low fare airline.

Together, Frontier and Spirit expect to change the industry for the benefit of consumers, bringing more ultra-low fares to more travelers in more destinations across the United States, Latin America and the Caribbean, including major cities as well as underserved communities.

The stronger financial profile of the combined company will empower it to accelerate investment in innovation and growth and compete even more aggressively, especially against the dominant “Big Four” airlines, among others.

William A. Franke, the Chair of Frontier’s Board of Directors and the managing partner of Indigo Partners, Frontier’s majority shareholder, noted that Indigo has a long history with both Spirit and Frontier, and is proud to partner with them in creating a disruptive airline.

Said Franke: “We worked jointly with the Board of Directors and senior management team across both carriers to arrive at a combination of two complementary businesses that together will create America’s most competitive ultra-low fare airline for the benefit of consumers.”

Ted Christie, President and CEO of Spirit, said: “We are thrilled to join forces with Frontier to further democratize air travel. 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. We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent Guest service.”

The combined airline is expected to:

• Deliver $1 billion in annual consumer savings.
• Offer more than 1,000 daily flights to over 145 destinations in 19 countries, across complementary networks.
• Expand with more than 350 aircraft on order to deliver more ultra-low fares.
• Increase access to ultra-low fares by adding new routes to underserved communities across the United States, Latin America and the Caribbean.
• Deliver even more reliable service through a variety of operational efficiencies.
• Expand frequent flyer and membership offerings.

The combination of Spirit and Frontier is expected to deliver enhanced value to shareholders of both companies:

• On a combined basis, the company would have annual revenues of approximately $5.3 billion based on 2021 results.
• Once combined, Frontier and Spirit expect to deliver annual run-rate operating synergies of $500 million once full integration is completed, which will be primarily driven by scale efficiencies and procurement savings across the enterprise with approximately $400 million in one-time costs.
• The combined airline is expected to have a strengthened financial profile, with a cash balance of approximately $2.4[2] billion as of the end of 2021 on a combined basis.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, Spirit equity holders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own.

This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on February 4, 2022, representing a premium of 19% over the February 4, 2022, closing price of Spirit, and a 26% premium based on the 30 trading-day volume-weighted average prices of Frontier and Spirit.

The transaction values Spirit at a fully diluted equity value of $2.9 billion, and a transaction value of $6.6 billion when accounting for the assumption of net debt and operating lease liabilities.

Upon closing of the transaction, existing Frontier equity holders will own approximately 51.5% and existing Spirit equity holders will own approximately 48.5% of the combined airline, on a fully diluted basis, providing both Frontier and Spirit equity holders with substantial upside potential.

Go to www.flyfrontier.com or to www.spirit.com for more.