Here’s what the Spirit and Frontier airlines merger means for travelers
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At Orlando International Airport, passengers wait in line for Spirit Airlines Check-In Counter.
LightRocket – Getty Images| LightRocket | Getty Images
Spirit AirlinesAnd Frontier AirlinesThe company has grown rapidly over the years, offering no-frills travel services for very low airfares.
Even if they complete the $6.6 billion merger, their executives have pledged to continue this tradition. This would make the carrier a discount giant and country’s fifth-largest airline. Frontier will own a controlling share.
Frontier’s CEO Barry Biffle explained in an interview, “Our business model was built on low airfares that stimulate travel.” We’re planning to offer people more affordable fares.
Antitrust obstacles
It will play a crucial role in regulators’ approval of the agreement. This will be crucial to regulators’ approval of the deal. American AirlinesAnd JetBlue AirwaysTheir partnership in Northeast raises concerns about the reduction of competition and potential price increases.
However, the airlines deny that they did so and claim the alliance was formed to help them compete more effectively with each other. United AirlinesAnd Delta Air LinesIn congested, large airports of New York and Boston.
Frontier Spirit would be a stronger competitor to other airlines, while one less airline is available for passengers.
Biffle declared that “we believe in the merits” of the agreement, and everyone benefits. We believe we deserve a warm welcome because the administration is looking for ways of increasing competition. This, we feel, is the solution.”
We don’t know if these approvals will change the status of our customers yet. According to the airlines, the agreement will close by the end of the second quarter. The airlines have not yet decided on a name for the new headquarters. Integration of an airline can take several years.
Although they fly narrowbody Airbus planes together, their executives aren’t sure if they will change their Airbus identities: Frontier’s yellow planes with wildlife paintings on the tails of Frontier’s planes while Spirit is a bright-yellow plane.
Rivals under Pressure
If they raised fares after the merger, that could drive customers to look for cheaper tickets on other carriers, including other ultralow-cost airlines, which would be counterproductive, analysts said.
Samuel Engel, ICF’s senior vice president, stated that the benefits to passengers would not only come from reduced fares but also from how other airlines react to the new competitor.
When major airlines opened new hubs, fare-wars were common. Aviation data and consultancy firm Cirium found that Spirit and Frontier have grown their flying capacities by 467% and 35% respectively since 2017.
Cirium data shows that the two carriers share approximately 520 routes out of over 2,800.
Cost Control
Rising costs are one factor that can drive customers’ fares up, but not only for these airlines. As airlines expand their flight schedules, fuel costs and labor prices have increased. Airlines have had to reduce their growth plans due to a lack of pilots and other employees.
“It’s not like you’re going to see Spirit and Frontier go from offering $49 fares to $149 fares,” said Henry Harteveldt, a former airline executive and founder of travel consulting firm Atmosphere Research Group. His challenge was how they can continue to offer such low fares despite rising cost pressures.
These costs are eventually passed on to the travelers.
The combination could be a way for the two airlines to grow. “They would not, actually, be able to grow unless they merged,” said Cowen & Co. analyst Helane Becker. There is a limited amount of space at the airports and infrastructure, as well as a finite number of pilots.
Segmentation from the Sky
This deal also illustrates the changes in how we fly. Delta, American, and United have all introduced basic economy ticket options over the past decade. These often eliminate perks like seat selection or the lowest fare.
Some carriers chase the ultra-low price airline market, even though they have seen growth in ultra-low cost airlines. Delta claims it is the “premium airline choice”, and last month, Delta’s earnings call stated that revenue from premium products (business class and extra legroom) recovered more quickly than normal coach.
United is, however, revamping onboard servicesThe carrier is known for narrow-body planes, which are designed to attract more travelers to the airport.
-CNBC’s Kevin Stankiewicz contributed to this article.
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