Spirit and Frontier airlines to merge in $6.6bn deal to 'shake up' industry

Deal between budget US carriers would create nation's fifth largest airline, pending approval

Budget US airlines Spirit and Frontier announced a merger that is expected to close in the second half of the year. AFP

Budget US airlines Spirit and Frontier announced on Monday they will merge to create a competitive low-cost airline, in an industry “shake up” they say aims to challenge the dominance of larger rivals.

The cash and stock deal is valued at $6.6 billion and expected to close in the second half of the year, pending approval from US antitrust regulators.

“This transaction is centred 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,” Spirit chief executive Ted Christie said in a statement.

“We look forward to uniting our talented teams to shake up the airline industry.”

The deal — with Frontier Airlines controlling 51.5 per cent of the new entity and Spirit controlling the remaining 48.5 per cent — would create the nation's fifth largest airline, after American, Delta, Southwest and United.

Frontier and Spirit, which did not announce a new name for the joint company or its headquarters location, said they were a “perfect fit”, whose merger would save consumers about $1bn annually.

The new airline would also have a fleet of more than 350 aircraft and offer 1,000 daily flights to 145 destinations in 19 countries.

“Together, Frontier and Spirit will be America's greenest airline and deliver more ultra-low fares to more people in more places,” said Barry Biffle, president and chief executive of Frontier.

The Frontier board of directors chairman will become chairman of the board of the combined company, the statement said.

The as-yet-unnamed board will comprise 12 directors, seven named by Frontier and five by Spirit.

On Wall Street, Spirit's stock jumped more than 11 per cent to $24.33 in premarket trade on Monday, while those of Frontier Group, the parent company of Frontier Airlines, slid by 2.3 per cent to $12.10.

The companies, which both fly exclusively Airbus aircraft, aim to create about 10,000 jobs by 2026.