Frontier goes back after Spirit

Frontier Airlines wants to acquire Spirit Airlines. Again. The Denver-based carrier went public Wednesday with an offer to acquire Spirit out of bankruptcy. Current Spirit management is, however, unimpressed with the offer.

Frontier first proposed an acquisition in February 2022. That eventually led to JetBlue and Spirit agreeing to a deal following a bidding war, and then a DOJ lawsuit that scuttled the deal. Frontier returned in Summer 2024 pursuing a potential buyout. That conversation petered out prior to Spirit’s bankruptcy filing.

This latest round of negotiations began on 7 January 2025. Spirit has, at least initially, rejected the offer.

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Under the proposed deal Spirit’s existing debt-holders would invest an additional $350 million, in exchange for 19% of the combined airline and $400 million in debt equity. This is significantly lower than the $580 million in take-back debt and 26.5% of the combined company (and no $350 million investment requirement) that the parties agreed to in principal in 2024, per Spirit’s 8-K filing. Indeed, in its reply to Frontier Spirit says its advisors “believe [the] current proposal is so insufficient as to not merit a counter.”

Additional documentation shared in the 8-K shows that Frontier CEO Barry Biffle believes a deal would not be feasible should Spirit [known as “Saturn” in the reorg process] emerge from Chapter 11 protection on its current trajectory.

Under the current standalone plan you will emerge highly levered, losing money at the operating level and this would not be a transaction we would pursue… If Saturn emerges standalone as per its plan, we think the company is so weak and highly levered as to attract predatory competitive attacks, and we worry that Saturn could become quickly weakened to the point that a merger is not a prudent risk… The sooner we can take control of the combined companies, the sooner we can stabilize Saturn.

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For its part, Spirit rejected the deal with significant concerns about the value presented:

Unfortunately, despite the clear guidance we and others have provided for three weeks as to the Proposal’s many deficiencies, you have addressed virtually none of them, leaving it (1) impossible for Spirit to effectuate, including because of the demand for $350 million in new funding from our creditors, (2) risky and costly, with no certainty as to either timing or outcome and (3) woefully insufficient financially – particularly when compared to the economic agreement we reached last Summer and Fall from which Frontier unilaterally walked away. Nor does it cover our funded debt or suffice to provide a recovery for equity.

That Frontier unilaterally walked away last summer is an obvious bone of contention, and Spirit appears to feel smarted by that move. Frontier claims additional due diligence at that time triggered its abandonment of a deal in August 2024.

And so, despite multiple rejections over the past three weeks, Frontier went public with its offer. Whether that moves the needle with the debtholders remains to be seen. But, at least for now, Spirit appears on track to emerge from Chapter 11 as a standalone operation at some point in the next couple months.