In a million ways big and small, the pandemic shook up the travel industry. Apparently seeing some opportunity amid all the turbulence, the nation’s two largest so-called ultralow-cost airlines agreed to merge to form what will become the fifth-largest airline in the United States.
Frontier Airlines will ultimately control the merged air carrier entity with a 51.5% stake. Spirit Airlines investors, meanwhile, will receive $2.13 in cash and 1.9126 shares of Frontier for every share they own, representing a 19% premium over the Spirit Airlines stock price as of the end of last week.
Overall, the deal is valued at $6.6 billion. The boards of both companies approved the merger last weekend.
Traditionally, airline industry mergers have been heavily scrutinized by government antitrust regulators. Most recently, the Justice Department filed a lawsuit in September seeking to block a partnership between JetBlue and American Airlines in the U.S. Northeast. While there is no official word yet on whether Biden administration lawyers will object to the Spirit-Frontier merger, the markets didn’t seem to be overly concerned, with share prices for both companies rising somewhat on news of the deal.
Perhaps a bigger question than whether the Spirit-Frontier merger has anything to offer investors in the short term is whether it has anything to offer travelers in the long term. Between the two of them, Spirit and Frontier nearly doubled their market share from 2013 to 2019. Still, as of 2019, that market share, as measured by revenue passenger miles flown, was only 5.4%. In comparison, the four largest U.S. airlines (American Airlines, Delta Air Lines, United, and Southwest) controlled a combined 73.9% of the market share in 2019.
Both Spirit and Frontier reported losses over the past two years, at least when excluding special items like the federal dollars that went to all U.S. airlines as part of the COVID-19 relief packages. Depressed demand for flights during the pandemic hammered airlines across the board.
One way Spirit and Frontier seem to be aligned is not giving much of a crap about customer service. According to data from the American Customer Satisfaction Index, Frontier and Spirit have the airline industry’s lowest customer satisfaction ratings. Department of Transportation statistics have also consistently ranked Frontier and Spirit at or near the bottom of the industry for rates of passenger complaints.
Personally, I have flown Spirit many times and don’t really have any major complaints. Sure, the seats are cheap and thin, and there is very little room. But who cares? Flights are short, and if you’re really that worried about being uncomfortable, you can use some of the money you saved on your Spirit tickets to get drunk beforehand at the airport bar.
Frontier, on the other hand: I shudder to even say its name. Back in 2015, I was departing from an airport I had departed from numerous times before, at a time of day when I knew the line for security would be nonexistent, so I wasn’t overly rushed in getting to the airport. Of course, something was wrong with the Frontier website the night before, so I couldn’t check in there. No problem: I’d do it at one of those computerized self-service kiosks at the airport. Except all of Frontier’s kiosks were broken. OK … I went to the counter, where there was one other customer ahead of me. By the time that person was done, it was 43 minutes until my flight departed, and the Frontier agent refused to print my boarding pass, citing their policy not to do so less than 45 minutes before any flight departure.
Despite the visible absence of a line at security, despite my best rhetorical efforts, there was no moving this Frontier agent. Not only that, he refused to talk to me about the problem and instead gave me some customer service number to call. I was told on the call they’d put me on a much later flight to Trenton, New Jersey, at no additional charge — I originally set out to get to Philadelphia, which is, of course, not Trenton, New Jersey. At any rate, I figured close enough, I could get to Philly somehow when I got to Trenton. I asked for a confirmation number for this flight change, but whoever was on the other end of the line for Frontier said no need, it was all in the computer system. But then, when I showed up for the flight to Trenton several hours later (ridiculously early this time), no one had heard of me having a ticket for it, I had to call this stupid number again, the person I talked to this time pretended like I was crazy and was just lying about having talked to someone at their customer service center earlier, and then Frontier tried to charge me a big additional fee for switching flights, despite promising not to do so.
I eventually got to Trenton. But I vowed never again to set foot on a Frontier plane, no matter how cheap a Frontier flight may have appeared to be.
I paid $169 for that godawful Frontier flight in 2015. Just a few weeks ago, I dropped $287.20 on a Delta flight. Never before have I spent an extra $118.20 so wisely.
We’ll see what the Spirit-Frontier merger brings for investors, and for the flying public. Perhaps a rebrand is in order.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at email@example.com.
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