You can be on Entrepreneur’s cover!

One Low-Cost U.S. Airline Is Buying Another for Nearly $3 Billion, Raising Monopoly Red Flags The Biden Administration has tightened the reins on anticompetitive conduct in the airline industry.

By Amanda Breen

entrepreneur daily

Frontier is buying Spirit Airlines in a $2.9 billion cash-and-stock deal that will create the country's fifth-largest carrier, per a statement released on Monday by Frontier. The merger is valued at $6.6 billion after the assumption of debt and other liabilities.

The companies said the deal will result in more ultra-low-cost fares for travelers across the U.S., Latin America and the Caribbean, including those in major cities and underserved communities. The combined airline anticipates delivering $1 billion in annual consumer savings, expanding with upwards of 350 aircraft to further drive down costs and creating 10,000 direct jobs in addition to thousands of jobs at their business partners by 2026.

"This transaction is centered 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," said Ted Christie, president and CEO of Spirit.

Related: United and Spirit Airlines Increase Pay for Pilots and Flight Attendants to Offset Labor Shortages

But the deal between Frontier and Spirit may face scrutiny from antimonopoly regulators. The Biden Administration has tightened the reins on anticompetitive conduct as it pertains to industries including Big Tech, health care, airlines and agriculture. Microsoft's nearly $70 billion all-cash acquisition of mobile-gaming company Activision Blizzard is one of the latest mega-mergers to raise eyebrows and will be reviewed by regulators in the coming months.

Though the Frontier-Spirit transaction will likely close in the second half of the year, it still needs approval from Spirit shareholders, who will own approximately 48.5% of the combined airline while current Frontier shareholders own approximately 51.5%. Additionally, Spirit equity holders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own, implying a value of $25.83 per Spirit share at Frontier's closing stock price of $12.39 on Friday.

American Airlines, Delta Air Lines, Southwest Airlines and United Airlines are the nation's four largest carriers. As such, they have the power to make the rules when it comes to air travel, whether that means increased baggage fees, higher ticket prices or service to smaller airports. According to Vox, airlines collected $8.6 billion in baggage and change fees in 2019 — six times the $1.4 billion they collected in 2007.

Frontier shares were down 2% as of 10:13 a.m. Monday morning while Spirit shares were up just over 11%.

Related: Major U.S. Airline Becomes First to Require Employees to Be Vaccinated or Face Termination

Amanda Breen

Entrepreneur Staff

Senior Features Writer

Amanda Breen is a senior features writer at Entrepreneur.com. She is a graduate of Barnard College and received an MFA in writing at Columbia University, where she was a news fellow for the School of the Arts.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Innovation

How Corporate 'Intrapreneurs' Can Harness the Power of AI to Transform Their Businesses and Supercharge Their Careers

Corporate intrapreneurs are uniquely positioned to lead the charge in harnessing the transformative power of artificial intelligence within their organizations. Here is how and why.

Growing a Business

24 Hours After a Grueling Session of Pickleball, He Invented Something That Makes Most People Better at the Addictive Sport

Veloz founder, president and CEO Mitch Junkins discusses the creation process behind his revolutionary paddle and shares his advice for other inventors hoping to make an overhead smash in their industry.

Leadership

Employees Are Burning Out — and the Culprit Isn't What You Think

There's a type of stress that has a huge impact on employees' health, work performance and personal lives. Here's what it is and what you can do to combat it, both for yourself and your employees.

Business News

Disney CEO Bob Iger Says Disney+ Is Banning Password Sharing Starting in June

Disney CEO Bob Iger hinted that this was coming in an earnings call last summer.