It continues to get uglier and uglier at Spirit. The on-again, off-again merger with Frontier seems to be off again. The airline delayed filing of its third quarter earnings report, but it did say that operating margin will be about 12 points worse than Q3 2023. For those keeping score, that means it should be around -27 percent. Negotiations continue to deal with the mountain of debt that’s piling up.
It seems highly likely that there will be a bankruptcy filing at some point in the not-too-distant future. This doesn’t need to be a liquidation, however. Spirit has been burning furniture, including selling more than a tenth of its fleet recently. That means it has cash. It just needs to get that debt problem figured out, and while there are discussions being had with creditors, bankruptcy is the most likely path.
With Spirit entering Chapter 11 bankruptcy protection, there is no guarantee that it would come out the other side. There are plenty of airlines that could benefit from buying Spirit, or at least parts of it. Who might that be? I’m not predicting anything, mind you. I’m just thinking about who might like a bite at the apple… or, uh, the banana?
Frontier, Obviously
I don’t want to spend too much time on this, because it has been beaten to death. Frontier benefits most if it can just eliminate Spirit. Maybe then it can pick up some airplanes and gates and enjoy the lessened capacity and competition in the market.
This was supposed to happen long ago… until JetBlue swooped in with a better offer. We all know how that turned out thanks to the judge’s ruling disallowing it. But which assets would be most interesting to Frontier these days?
The crown jewels would presumably be the gates in Las Vegas and Orlando. As currently filed in 2025, those are Frontier’s second and fourth largest airports. These are also airports that do not want for competition, so it shouldn’t trigger too much concern from the feds. I’d think it would like to pick up assets in Atlanta and Chicago/O’Hare as well, where both airlines have large operations. And of course, it would probably be happy taking any slots at LaGuardia along with runway timings at Newark.
Really, it would probably be ok with just about any of Spirit’s assets if the price was right. But I do wonder about Fort Lauderdale. That is Spirit’s home base and largest operation, but it’s also a strange hybrid that functions as a Latin connecting hub. Frontier might prefer to make a run in Miami where it is already bigger today than it is in Fort Lauderdale.
Or maybe it could think about a joint bid that would carve the airline up…
United for Fort Lauderdale
United loves talking about how great its hubs are. It isn’t wrong. It has hubs in all the most important cities… Newark is fantastic as a Transatlantic hub, San Francisco is the best Transpacific hub, and Houston is… well, it’s not great for a Latin hub. Sure it’s fine for Mexico and Central America, but Florida is the best way to properly serve most of Latin America, and that is something United has never been able to do.
There have been rumors about the airline trying to start a Florida hub for years, but they’ve never turned into reality. If United could grab Spirit’s dozen gates, it could create something to actually serve Latin America. This would be quite a coup for the airline, and it would create a new competitor for American and the Delta/LATAM joint venture, among others like JetBlue.
And while we’re at it, I’d imagine United wouldn’t mind getting its hands on the handful of Spirit gates at LAX either. United has recently gotten some time on common use gates in Terminal 6, but it has wanted more and Terminal 9 is no longer happening anytime soon. This is an opportunity.
You can see how United and Frontier actually teaming up to break Spirit into pieces might be a good solution. This could help reduce any governmental concerns about competition while making it cheaper for Frontier to eliminate Spirit.
JetBlue Part Two
JetBlue obviously wanted Spirit bad under the airline’s previous regime. But with Robin Hayes gone and the courts blocking the merger, it all fell apart very quickly.
The Spirit of today is different than the one that JetBlue overbid for. It is a smaller, weaker airline. That could be attractive to JetBlue in the sense that it would be a whole lot cheaper to acquire. This current management team doesn’t want to grow with Spirit the same way the previous one did. But would it like to have Spirit’s Fort Lauderdale, Orlando, and San Juan focus cities? No doubt about that, again, if the price is right.
JetBlue and Frontier could carve up Spirit together, though there might be enough of a disagreement over Orlando to tank that idea.
Southwest? Nah
It’s always tempting to consider Southwest in the mix, but I just don’t see how this would really work. Sure, it could get more gates in Florida, but does it really want more there? It would probably rather have a legacy carrier get the gates, eliminate a competitor, and then be in a better spot.
This airline is lurching toward implementing its transformation plan, and adding a merger into the mix would throw all of that into disarray. It would need to divert tech resources to handle a merger, and it would have to redirect ops people to deal with the entirely different fleet. This is not a good idea.
The DOJ/DOT Sniff Test
Would any of these possibilities actually pass the government’s antitrust review? It would seem like they would have a chance. Just look at overlap on a high level.
Overlap Between Spirit and Other Airlines by City, Not Airport
Jan-Jun 2025, Data via Cirium
Obviously, the feds and the courts didn’t like the JetBlue combo, but JetBlue has a higher percentage of overlap than nearly any other airline. Frontier is higher, of course, but Frontier has the same business model as Spirit which should win it some points.
United has the lowest percent of overlapping routes, and it could solve for a lot of that anyway. Looking at what’s filed for the first half of next year, there are only 17 specific airport to airport routes where there is no other competitor. Those are split nearly evenly between Newark and Houston/IAH, with one route connecting them both. Those are both places where Frontier has been interested in growing, so it’s entirely possible that we could see that backfill happen.
Further, while the whole “failing airline” argument seems nearly impossible to win, there might be more sympathy when looking at a company in Spirit’s current state.
Of course, I have no idea, and every time I’ve predicted how DOJ would approach something, I’ve been wrong. Those hoping a new administration will just steamroll any antitrust enforcement, however, are probably wrong about that. This is a pro-business administration, but it is not generally thought to be pro-merger. But it may at least soften its stance, hard to say.
Will any of this actually happen? That’s not the point of the post. The point is that it would be good for each of those three airlines if it did. Spirit has some valuable parts that airlines would covet. It also has yet to show that it has a sustainable business as an independent, but that doesn’t mean it can’t. It’s food for thought.
15 comments on “The Three Airlines Who Could Benefit Most From Spirit’s Downfall”
Speaking of United and perhaps the need for a FL hub, I tried to book RDU to NAS the other day and realized my two options were to go through ORD or EWR. I like my miles, but that’s a tough one to swallow.
Hi Brett-
Let’s say Frontier and United do team up to carve up Spirit. Doesn’t that make it more difficult for Jetblue on the competition and relevancy level? United in FLL would be a thorn in Jetblue’s side, wouldn’t it? Could they even compete with a giant United and an enormous Frontier?
Also, I don’t know much about Jetblue’s management, but from what I can tell, they have always seemingly let opportunities pass them by and then regret it later. Would the new management team even be interested in something like a carve-up or a full-out bid to buy the carrier out of BK?
The CEO Joanna said this last week: Below is the question and response from her
*****Jamie Baker — Analyst
OK. Helpful. And then second, I do have to ask, can you envision any scenario where you might reengage with Spirit? Or maybe scratch that. A better way to ask the question, do any of the tenants of the original deal still stand or still appeal to you given how your balance sheet and your margins have evolved since then?
*****Joanna Geraghty — Chief Executive Officer
So maybe to be clear, we’re not interested in revisiting the Spirit’s potential acquisition. We want to really focus on improving our margins within JetBlue, delivering on JetForward, controlling what we can and keeping the team laser-focused on that. I will say that, if there are opportunities that come up with assets that are reasonable and may allow us to grow in a capitally prudent manner, obviously we would consider and evaluate those. But of course, there’s a complexity there, lease price, aircraft age, reconfiguration, and the list goes on.
So headline, we’re not interested in revisiting the Spirit acquisition, focusing on JetForward, laser-focused on delivering sort of the organic plan for JetBlue and then the opportunity to potentially consider things that may shake free to the extent it makes sense for JetBlue.
Let’s see if Jetblue comes to the table and seizes an opportunity. I would imagine they are not going to sit this one out.
Ah you westcoasters and your filing posts early… never knowing what’s happening at 6 am East Coast time at a courthouse in New York city while you sleep…
Pretty sure he has this set on auto publish and doesn’t physically submit at 4am Pacific time.
Yes… That’s what I meant by “filing posts early”
Well that was an awkward time to hit publish. Timely analysis, though.
Is there enough demand in the Latin market to upgrade an entire FLL hub from no-frills to full service? Either way, a United hub there would absolutely be kicking American while it’s down.
I haven’t heard any informed speculation about AS/HA terminal plans in LAX, but I’d imagine they’d be eager to swap some TBIT for some T5 in order to co-locate.
I’m sure Brett’ll post an update, but for those that might not be seen it yet, NK filed for Ch.11.
https://ir.spirit.com/news-releases/news-details/2024/Spirit-Airlines-Announces-Comprehensive-Agreement-to-Deleverage-Balance-Sheet-and-Position-the-Company-for-Long-Term-Successas-a-Leading-Low-Fare-Carrier/default.aspx
Dont forget, United HAD a hub in Miami.. though it was years ago and at a very different time in the industry.
While the United idea at FLL is tempting, it’s not an exact replica. Fares are just higher at MIA. There are just people who want to go to MIA and do not consider FLL. There’s a reason that Spirit went to Miami as well. There’s a reason that Norse, Emirates, etc all tried FLL and decamped for MIA. MIA is where the higher quality revenue, especially for South American traffic is. FLL is not a perfect substitute, never will be. The San Jose/ San Francisco comparison is not a perfect analogy, but it’s what we’ve got.
I just read the Spirit press release, which might just have the most overblown, ridiculous title in the history of press releases:
“Spirit Airlines Announces Comprehensive Agreement to Deleverage Balance Sheet and Position the Company for Long-Term Success?as a Leading Low-Fare Carrier”
After you get past that, it basically just describes a prepackaged Chapter 11 that has bondholders agreeing to convert $795 million of debt into equity, injecting another $350 million into new equity, and providing $ 300 million in debtor-in-possession financing, reducing interest expense and putting $650M into the bank, letting Spirit “continue executing on our strategic initiatives to transform our Guest experience, providing new enhanced travel options, greater value and increased flexibility.” Notice how the words “increase revenue” don’t make a prominent appearance in that sentence. The word “revenue” doesn’t appear in the press release at all. They expect to emerge from Ch 11 in the first quarter of 2025.
Oh, and the current shareholders are, as usual in Chapter 11, completely wiped out.
I’m sure this has been talked about, but I’m curious, why wasn’t Allegiant interested in bidding for Spirit? Also, in this post, is it just too small of a player to really “win” anything from Spirit’s demise?
It’s only a matter of time for Spirit at this point. If JetBlue sees an opportunity they will strike regardless what Joanna said in that boilerplate of a press release.
So it appears that Spirit management has decided that they’re not interested in being acquired and that they have a plan to make the carrier profitable. That doesn’t make Brett’s post any less interesting, just perhaps premature – I’m not convinced the US can support two ULCCs along the Frontier/Spirit lines in a world with non-ULCCs offering basic fares that are competitive, Allegiant, and new entrants like Avelo and Breeze on LTD markets.
In the midst of the morbid fascination with carving up Spirit, it is appropriate to note that NK has filed a pre-packaged chapter 11 filing. In chapter 11, the debtor maintains control over the operation and future of the business. Only when enough creditors are dissatisfied and/or the reorganization drags out for too long, then and only then can creditors petition to take control of the operation of the company and determine its future, including the selling off of assets.
Because NK has obtained agreement by a supermajority of creditors for a restructuring which is based on a business plan developed by NK. NK expects to exit chapter 11 in about 6 months, far faster than other US airline C11 cases have been.
It is very unlikely that NK will be carved up.
It is possible that another airline could approach NK or the creditors with a merger or acquisition plan as NK merges from C11 but that would be subject to DOJ review – which could delay emerging from C11 which the creditors probably do not want.
The chances are high that NK will successfully emerge from chapter 11 as an intact entity, although smaller than what it is now based on communications the company has had with its employees