Frontier to buy Spirit Airlines in $2.9 billion low-cost carriers deal

FILE PHOTO: A Spirit Airlines A320-200 airplane sits at a gate at the O’Hare Airport in Chicago, Illinois
FILE PHOTO: A Spirit Airlines Airbuys A320-200 airplane sits at a gate at the O’Hare Airport in Chicago, Illinois October 2, 2014.REUTERS/Jim Young/File Photo

Frontier Group Holdings will buy rival Spirit Airlines Inc in a $2.9 billion deal, as the U.S. low-cost look to compete better with larger rivals, tap a rebound in air travel, and expand their flying routes.

The announcement comes as major U.S. airlines forecast profitability in 2022, benefiting from higher vaccination rates and reopening of economies from pandemic-led lockdowns.

The companies expect the cash-and-stock deal to accelerate investment in innovation and growth, and help compete with major U.S. airlines like American Airlines Group, Delta Air Lines, Southwest Airlines and United Airlines Holdings.

The merged business is seen adding 10,000 direct jobs by 2026, the companies said, adding that it expects to deliver $1 billion in annual consumer savings and offer more than 1,000 daily flights to over 145 destinations.

The transaction value of the deal is $6.6 billion when accounted for the assumption of net debt and operating lease liabilities, the carriers said in a statement.

Colorado-based Frontier will own 51.5% stake in the combined entity, while the remaining 48.5% will be held by Spirit’s shareholders.

Frontier’s offer price of $25.83 per share of Spirit represents a premium of 18.8% to the stock’s last close on Friday. Shares of Spirit rose about 11.6% in premarket trade after the announcement.

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