Spirit and Frontier: A merger in the short to medium term makes little sense, despite suggestions

The abrupt departure of Spirit Airlines CEO Ben Baldanza in early Jan-2016 immediately generated wide-ranging conjecture that his exit was setting the stage for a merger with fellow ULCC Frontier Airlines. On paper the two airlines seem like a perfect fit, with complementary fleets and similar business models. However, the likelihood of a merger occurring in the short term is low. Both Spirit and Frontier have much to accomplish on their own before any consideration is given to combining forces.

Proponents of a merger who are basing their conclusions on similar fleets and network overlap perhaps are overlooking some less tangible, but important, factors to consider in any tie-up between Spirit and Frontier. Employees at Denver-based Frontier have been through the wringer during the last eight years, facing long bouts of uncertainty as the airline struggled to find the right business model. Suffice it to say that they seek to enjoy a period of stability before undergoing the complexities of merging with another airline. Frontier also needs time to mature its ULCC model before rushing to merge with another airline simply because it appears to make sense in theory.

Shortly after the CEO change at Spirit, Frontier unveiled 40 plus new routes for 2016. It is a clear message that the airline continues to seek its own growth opportunities as Spirit prepares (possibly) to hit the reset button on some its growth targets under new leadership.