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.
53 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.
NYCFlyer – Sure, if Frontier and United split up Spirit, that would not be ideal for JetBlue in some ways, but in others it would. For example, if United were to do this, it would make Fort Lauderdale a Latin hub. JetBlue would then not have to worry about a point-to-point ULCC competitor in the market. It would be able to expand its presence as a key operator at FLL with less price pressure. On the other hand, whatever Frontier picks up would just put a financially stronger, more aggressive carrier up against JetBlue. So it’s mixed.
As for the JetBlue management team, this group has to be opportunistic if something pops up. That doesn’t mean it will actively pursue a merger, but it does need to be aggressively defensive if others try.
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”
Ahhhhh. Fair point.
Works the other way too. Being on the east coast i once went to sleep thinking LaLa Land had won best picture
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.
There are just people who won’t go to EWR…. (I read in countless Flyertalk threads)
I’ve never understood that – yes, EWR is a craptacular mess (it used to be my home airport), but is it really that much worse than, say, LAX or JFK? Or, for on-time performance, ATL in thunderstorm season?
How could UA’s cost structure handle what Spirit does at FLL? That’s the part that doesn’t make sense, about the suggestion of UA acquiring Spirit’s FLL operation.
As for a hub to Latin America (rather than P2P), how many Latin American cities can handle 4 nonstops a day from FLL at UA’s fares? Sure there will be some Basic Economy fares at Spirit prices, but the rest of the plane? Would UA want to confront AA at MIA like that?? South Florida isn’t Chicago
FrequentWanderer – This would not be United taking over Spirit’s operation and doing the same thing. This would just be United using the available terminal space to create a Latin hub operation of its own. There’s no way to challenge American’s hub at Miami. It’s just too big and dominant.
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.
Strategy changes to increase revenue aren’t normally part of a bankruptcy reorganization plan. The point is to do some combination of cost cutting and debt service reduction that puts the company in a stable state going forward.
I think we can definitely expect strategy updates from Spirit management, but the bankruptcy process comes first.
It wouldn’t be in the Chapter 11 filing, but I’d think that, given their awful revenue performance, they’d at least mention it in passing when describing their turnaround plans.
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?
I think most of the reason is that Allegiant isn’t really that interested in Spirit’s existing route structure – they have a very different philosophy on routes, concentrating on flying people to a relatively small group of destinations from mostly smaller cities on a LTD basis. And Allegiant is a smaller company than other possible suitors.
Other than perhaps a few planes, I’m not sure what Spirit has that Allegiant would want…maybe some runway timings at Newark (if those are transferrable)? Spirit’s position at FLL is really only desirable if you want a connection point, and Allegiant doesn’t care about connections.
Allegiant would pick up some traffic here and there and might take another look at a few smaller cities Spirit flies to one of their focus destinations from, as new cities or increasing frequency or upgauging if it currently gets the A319, but that’s about it.
Pilotaaron1 – Not sure if Allegiant is or is not interested, but I just don’t expect that it would be. It doesn’t really compete much with Spirit, It hasn’t really shown much of an interest in building Fort Lauderdale or Orlando/MCO all that much. I just don’t know that it cares.
Thank you both for your responses. I just always thought of Allegiant as a competitor since it is also a large-ish LCC. But thinking about it from your perspective it makes more sense as to why they’re really not. And maybe they don’t want to absorb Spirit and would just want to stick with slow and steady growth.
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.
Basic fares on the majors are still high compared to Spirit and Frontier. Come back down to reality.
And yet, Spirit is the one filing BK. Customers are paying those basic economy fares and they aren’t being nickeled and dimed.
I’m going to disagree on this a little. The basic economy fares on the majors aren’t always THAT high compared to Spirit & Frontier.
Yes, for pax that are okay with a personal item only and 28″ pitch, Spirit/Allegiant/Frontier may be $40 each way cheaper, but few pax on the ULCCs buy the base fares alone (without any add-ons), and the difference is often well under $100 each way vs basic economy on the legacy carriers (+ Southwest). If a person adds more upsell services to the ULCCs (or wants 30ish inch seat pitch, which is standard on basic economy on the legacy airlines but requires an upsell on many ULCCs, or wants a carryon bag, which is included on basic economy fares with most of the legacy carriers), the total costs are often similar.
I’d argue that the “invention” of basic economy fares is one of the best moves the legacy carriers have done to combat the ULCCs. Even if the basic economy fares on the legacy carriers are a bit higher than the ULCC base fares, the legacies have a better product, and many leisure travelers recognize the value & difference.
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
This post is pretty much spot on. Prepackaged bankruptcies such as this aren’t uncommon at all. Only time will tell about what will ultimately happen to Spirit, but it looks like it’s lined up support for its restructuring quite well.
Well said. Once the company goes into a Federal Bankruptcy Court, it is protected from vultures such as the ones depicted in the drawing that accompanies this article.
Unless the deal with creditors unravels, JetBlue, Frontier, and other garbage pickers are out of luck until the new Spirit emerges.
The fact that Spirit is in bankruptcy would be insufficient for approval of a full merger between JetBlue and Spirit. From the opinion that blocked the merger:
A defendant asserting the failing firm defense bears the “burden of proving” three distinct elements:
(1) the acquired firm “face[s] the grave probability of a business failure,”
(2) “[t]he prospects of reorganization” under the bankruptcy laws are “dim or nonexistent,” and
(3) “the company that acquires the failing company . . . is the only available purchaser.”
A JetBlue/Spirit merger does not meet element #2 or #3, so they would be held to the same standard that was used in the original trial.
Some questions I’m curious about on gate sales:
– In which airports does Spirit have gate leases that are truly valuable? I wasn’t able to find good data on which airports are truly “gate-constrained”. At both FLL and LAS, it seems like it has been relatively easy for new airlines to enter, but maybe that’s not true if you want to scale up an operation.
– How easy is it for an airline to sell their gates to another airline? Since the gate are leased, I assume the airport authority would have to approve a transfer.
In any case, I think gate leases are a very small fraction of Spirit’s value, so they are unlikely to be a primary focus of the reorganization plan.
I was curious about that too.
LaGuardia slots are valuable. Newark time slots are too. Nothing else.
Hi Brett, I probably know the answer to this before I ask it – but do you see United remotely interested in taking some of Spirit’s toe-hold at DTW? In terms of physical space, UA have modestly expanded gate usage towards the Spirit gates in Evans Terminal. But I was sort of hoping increased UA provision might enable better competition with DL, whose monopoly at DTW really have fixed fares for TATL flights obscenely high (or maybe DTW is just a very expensive airport to fly from). I’m not suggesting UA competes with DL for non-stop TATL flights, just increased service to EWR, IAD and ORD to feed connecting traffic – certainly passenger loads on UA flights from DTW to their hubs have seemed to be consistently high all year.
Bobber – No way.
Frontier is interested in flying to Newark after pulling a boat load of routes from that airport a few years ago. That’s crazy.
Frontier Airlines To Pull Out Of Washington Dulles And Newark
Frontier Airlines
Nov 11, 2021
https://simpleflying.com/frontier-dulles-newark-end/
Atiya – Frontier went back into Newark this summer, so it’s already back in there and using a different strategy.
United isn’t going to South Florida anytime soon, if ever.
Once upon a time, United had a Miami hub that I think it inherited from Pan Am. The hub was closed because American was beating their brains out in Miami. Can’t imagine that would change if United was at Ft. Lauderdale.
Read Tim Dunn’s post. It sums up the situation quite well. Spirit’s prepackaged Chapter 11 filing doesn’t make Brett’s analysis invalid. Spirit’s restructuring could be quite beneficial to a number of different carriers.
thank you
Spirit’s filing will reduce industry capacity which will help all carriers and those that overlap the most with NK including where NK pulls capacity out. NK’s filing does not open the flood gates to allow other carriers to pick off NK assets
They have already said they intend to double down on FLL so any hopes that any other carrier will have a shot at NK’s operations is out of touch with NK’s plans – and NK does dictate its future in C11 for now – and likely until the time they emerge – which is very fast by US airline chapter 11 standards.
With a Trump Administration the industry is gearing up for some major shake ups.
I think Spirit is gonna be picked apart for its assets at cheaper price than a merger would have been.
Both F9 and UA will be the bread winners on the eastern side of the Mississippi.
Out west I think WN will gain a strong foot hold in LAS with the demise of NK.
Delta the Wild card they love used airplanes.
American seems lost in its own mess.
The other elephants in the Room after the Skift conference in Dallas is the rumbling of the secret Meeting that Marty (B6) and Bob (WN) had. The chatter is they have kicked the tires about a potential merger.
Post meeting it’s be said BOB joked with industry analysts that WN could be in Europe in the near future and flying a different Aircraft type.
I agree I don’t think WN will make any type of play for Spirit.
But a JetBlue merger would bring them the Void they have struggled to capture in BOS,NYC,FLL and Caribbean.
Get your popcorn ready 2025 gonna be interesting.
Southwest doesn’t need a “foothold” in LAS, they’re already far and away the biggest airline there (roughly 40% to #2 Spirit’s 15%.) There’s no real barriers to entry at LAS and if Spirit ever draws LAS down (or shuts down completely), Spirit’s LAS market share is likely to get spread across several airlines, although WN would get a good bite of the pie, especially if it can just upgauge some of the many cities where it and Spirit overlap.
I can’t imagine a judge that didn’t want JetBlue to acquire spirit because of it being anticompetitive, but allow a behemoth UA get like 50% of its assets. Any judge can tell united, I’m sorry your already very big, your the biggest airline in the world. You do you, which doesn’t need anything of NK.
I don’t get this aviation enthusiast fascination about “buying gates” from airlines. Airports are more like an apartment building than a condo. An airline goes out of business or gives up a gate? Goes back into the pool and anybody can lease it per the lease conditions.
At ATL there are gates coming open from Southwest. Those will be handled per the use and lease agreement. Frontier or whoever can make an attempt at those. What makes anybody think if Spirit went ka-put its gates would be handled any differently?
MCO has gates (quite a few) open to lease on a preferential use basis as well as plenty of common use capacity. Anybody who wanted to crank another 50 flights a day through could do so without any Spirit-leased gates.
IIRC, DL has right of first refusal on any ATL gates that open up. The Widget will only get bigger there.
ATL has gates that are available for new entrants as required by FAA regulations.
Further, NK is reported to have acquired a chunk of the gates that WN is giving up in ATL. Whether they do anything w them remains to be seen but as noted above, gates at most airports are use-it-or-lose-it.
NK might see ATL opportunities in markets that WN is exiting or they may see demand elsewhere but they have specifically said they will bulk up around cities where they already have a larger presence which is where they have the largest pool of assets that could be of value to someone else.
Given that NK’s business model is so different from the legacy airlines’, the only real value that NK has is planes and they have already decided to get rid of some of their 319s and likely some 321NEOs – which might not be able to operate a full schedule for several years because of GTF issues – so the idea that NK is going to have a bunch of assets that they or their creditors want to put on the market is detached from what they have revealed about their intended business plan.
If NK and its major creditors are aligned, there is little room for anyone else in inserting themselves in the restructuring.
I don’t want UA to grab anything of NK other than the gates at FLL. I don’t want my airline to increase its proportion of non-US planes. I want them to get rid of the old foreign planes that they have, and regret that they had no other option to replace the 757. AA can take NK’s two gates at ORD (the only airport that matters) anytime they want. Maybe this time they can gift them to their alliance partner AS, unlike the last time gates in Terminal 3 became available. And as for NK themselves, the only reason I wanted the merger to go through was so that NK could take down B6 with it. Now that’s an airline that doesn’t deserve to exist.
Why would FLL be better for Latin America than IAH? Living on the west coast, IAH seems to be a good connection point for Central and South America, but too far east for Mexico. FLL seems to be too far east and make routing inefficient. LAX seems to be the best connection point for Mexico.
southbay – This isn’t about hub geography. This is about where the demand is. You simply can’t beat the Latin demand in South Florida.
If you look at a map, south Florida is pretty much equidistant from southern/central Mexico, every Central American capital city, northern/central Colombia and Venezuela. Yes, IAH is closer to Mexico City than FLL is. However, more of Latin America is much closer to FLL than it is to IAH because the continent swings east as you travel southward. And all of South America lies to the east of Texas. So the geography is excellent for a Latin American hub to be in MIA or FLL. AA dominates the marketplace thanks to their important (yet obnoxious) MIA hub.
Even Iberia had a MIA hub where they used widebodies to feed crowds from MAD-MIA then connecting to many smaller Latin American cities on narrowbodies. IIRC, 9/11 ultimate put an end to it because the USA started requiring even transfer pax to clear immigration as if they’re entering the USA. That killed it. Anyhow, MIA/FLL is basically on the way there for much of the USA. IAH (like DFW) isn’t bad but it isn’t nearly as good.
True. MIA is great for that. However, my local airport does not have any flights to MIA. You can fly nonstop to IAH and you can fly nonstop to ATL, which is what Delta uses for Latin America. But, MIA is a double connection for me.