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Low-cost carriers Spirit Airlines and Frontier Airlines announced Monday their merger following a stock-and-equity deal valued at $6.6 billion.
“This transaction seeks to create a competitive group that offers ultra-low prices to serve our clients even better, diversify the professional opportunities of our team members and increase competitive pressure with more favorable rates for the public”, said the CEO of Spirit. Airlines, Ted Christie, in a statement.
The agreement must be finalized before the end of the first half of 2022 and stipulates that Frontier Arilines will control 51.5% of the new company and Spirit 48.5%. But to be valid, it requires the approval of the antitrust authorities of the United States.
Spirit shareholders will receive 1.9126 Frontier shares, plus $2.13 in cash for each Spirit share they own, which is 19% over $25.83 at Friday’s close.
William Franke, chairman of the board of directors of Frontier, will hold the same position in the new company, whose name has not been specified. The identity of its executive director and where the headquarters will be located were also not disclosed.
Both companies, which fly only Airbus aircraft, hope create 10,000 jobs by 2026.
Spirit has expanded dramatically over the past decade and plans to continue that strategy once it’s combined with Frontier.
According to the Department of Transportation, in 2013, Spirit and Frontier earned 2.8% of the revenue per passenger mile flown by US airlines.
By 2019, their combined market share had nearly doubled to 5.4%, while America’s four largest carriers, American Airlines, Delta, United and Southwest, controlled 73.9% of passenger mile revenue.
In premarket trading on Monday, shares of Spirit were up about 11% and shares of Frontier Group were down about 3%.
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