Frontier Group Holdings, Inc. (ULCC) shares climbed more than 9% in Tuesday's extended trading session after Bloomberg reported the budget airline is in active discussions to merge with bankrupt Spirit Aviation Holdings, Inc. (FLYYQ).
Sources close to the negotiations indicated that a deal could potentially be announced before the end of this month, though terms remain under discussion. The timing is intriguing, coming just one day after Frontier announced an unexpected leadership shakeup.
On Monday, Frontier revealed that former CEO Barry Biffle was being replaced effective immediately. James G. Dempsey, who previously served as the company's president, stepped into the interim CEO role. Biffle will stick around in an advisory capacity through the end of the year, but the sudden transition raised eyebrows across the industry.
For Spirit, this represents yet another attempt to find solid ground after a turbulent year. The airline had been working toward a merger with JetBlue Airways Corp. (JBLU), with the two carriers agreeing to a $3.8 billion combination. But in January 2024, a federal judge threw cold water on those plans, blocking the deal on antitrust grounds. The court ruled that eliminating Spirit as an independent low-cost competitor would harm consumers by reducing competition and driving up ticket prices.
After the court's ruling, JetBlue and Spirit mutually agreed to walk away from the deal. The collapse proved devastating for Spirit, which was already grappling with financial pressures. The airline ultimately filed for Chapter 11 bankruptcy protection in November 2024, less than a year after the JetBlue merger fell apart.
Now, Frontier appears to be stepping in where JetBlue couldn't. Whether regulators will view a Frontier-Spirit combination more favorably remains an open question, but the deal would reshape the ultra-low-cost carrier landscape significantly.
Price Action: Frontier shares climbed more than 9% in after-hours trading on Tuesday following the merger reports. Spirit Aviation shares remained flat, though that's largely because the over-the-counter market where they now trade was closed during extended hours.
