Frontier’s giving its Spirit takeover another go, hoping for friendlier M&A skies

If at first you don’t succeed… try again in three years for $800M less. Yesterday, ultra-budget airline Frontier said it made an offer to buy no-frills rival Spirit for ~$2.1B. It’s the second time Frontier’s officially attempted the takeover (which would create the US’s fifth-largest airline). In 2022, Spirit accepted Frontier’s $2.9B buyout offer before dumping it for a bigger offer from JetBlue. Biden’s DOJ sued to block that deal, though, and early last year the airlines called it off. 

• Round 2: Spirit said it rebuffed Frontier's latest acquisition offer for being too low, but that it’s open to further negotiations. Shares of both carriers climbed yesterday.

• Decline: Spirit, which filed for bankruptcy in November, has lost $2.5B+ since 2020. The airline said it's on track to climb out of bankruptcy this quarter thanks to steep cost cuts.

Budget isn’t doing well… Spirit is bankrupt, Frontier hasn’t reported an annual profit since before the pandemic, and JetBlue posted a gloomy outlook that tanked its stock this week. With budget airlines on the rocks, bare-bones carriers are looking to premium for profits. Frontier is debuting a first class, Spirit launched a perk-filled tier, and Southwest Airlines is shifting to assigned seating and extra legroom (FYI: it reports today). 85% of the seats Delta Air Lines plans to add this year will be premium, too (think: business, comfort).