The proposed merger of Frontier Airlines and Spirit Airlines is probably the most significant development in the U.S. low-fare market since the advent of the ultra-low-cost carrier, and it also has ramifications for the aftermarket.
Under the deal, the airlines are targeting $500 million of annual run-rate synergies, some of which would come from the larger company’s greater procurement clout in the maintenance arena.
That said, MRO demand from the combined company is likely to remain relatively low for some time given the youth of the two airlines’ Airbus A320-family fleets and their weighty backlogs of new-build aircraft.
As of Dec. 31, 2021, Frontier had a fleet of 110 Airbus single-aisle aircraft, consisting of 73 A320neos, 21 A321ceos and 16 A320ceos. All aircraft in the fleet are financed with operating leases that expire between 2022 and 2033.
Frontier has a further 234 A320neo-family aircraft to be delivered through 2029, including 76 A320neo aircraft and 158 A321neo aircraft. Spirit, meanwhile, finished 2021 with a fleet of 174 A320-family aircraft, and has a Neo backlog of 134 aircraft.
By 2026, Frontier-Spirit is targeting a fleet of 493 aircraft of which 79% will be A320neo types – dwarfing the size of other A320neo fleets in the region. This is likely to mean that the combined carrier will play a decisive role in shaping the U.S. maintenance market for new-generation Airbus narrowbodies and their engines.
Spirit currently uses Pratt & Whitney PW1100G engines on its Neos while Frontier has the CFM LEAP-1A.
Combined the two airlines will boast an average fleet age of just five years, less than half that of almost any of its major competitors. The U.S.’s biggest low-fare carrier, Southwest, has an average age of 12 years.
Touting the advantages of this fleet, Frontier-Spirit told investors that their company would have a 34% unit cost advantage over Southwest and more than 70% over the U.S. majors.
The parties hope to complete their merger in the second half of 2022. Under the proposed deal, which values Spirit at a fully diluted equity value of $2.9 billion, existing Frontier equity holders will own approximately 51.5% and existing Spirit equity holders will own approximately 48.5% of the combined airline.
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