Two budget carriers, Frontier Group Holding and Spirit Airlines, announced a USD$6.6 billion ($9,238,521,836) creating the fifth-largest US airline.
The proposal to form a new airline headed by Frontier boosted Spirit’s share price by 18.7 per cent, though some analysts questioned whether the airlines could obtain regulatory approval.
“In a competitive industry like ours, the lowest costs always win,” Frontier chief executive Barry Biffle told analysts, according to Reuters.
“These low costs will, in turn, enable us to keep our fares low for customers.”
The merger comes as the US airline industry struggles with emerging COVID variants and rising ticket prices due to increases in wages on account of labour shortages, increased prices of fuel and airport charges.
Spirit’s wages expenses as a percentage of revenue rose 10 per cent in 2021 compared to 2019 and higher fees forced Frontier to exit airports such as Los Angeles and San Jose, and stop serving Washington-Dulles and Newark.
The merger is expected to be completed by the second half of 2022 and is projected to result in synergies of USD$500 million ($699,672,500) per year, mainly through operational savings.
The companies pledged to avoid any job losses and create 10,000 direct jobs by 2026.
The airlines promised the merger would deliver USD$1 billion ($1,399,400,000) in annual consumer savings and offer over 1,000 daily flights to over 145 destinations.
“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 for the flying public,” Ted Christie, president and CEO of Spirit, said.
“We look forward to uniting our talented teams to shake up the airline industry while also continuing our commitment to excellent guest service.”
Biffle is also excited about the merger and what it will mean for both companies roles within the US airline marketplace.
“Together, Frontier and Spirit will be America’s greenest airline and deliver more ultra-low fares to more people in more places,” Biffle said.
“I couldn’t be more excited for our team members, customers, partners, the communities we serve and our shareholders.”
