Key points:
- Spirit Airlines stock soars 15% on merger with Frontier Group Holidays
- The new ultra-cheap, budget entity hopes to undercut larger traditional airlines
- Frontier group hold a 51.5% stake, and Spirit retain a 48.5% stake
Spirit Airlines' (NYSE: SAVE) stock soared over 15% as the company announced plans to merge with Frontier Group Holdings today in a tactical move to tighten competition against the wider airline market. The deal, totaling $2.9B, will create the fifth largest airline in a bid to move in against traditional carriers.Â
The ultra-low-cost concept undercuts the wider airline market, offering budget options that have seen a promising expansion during the pandemic, with customers opting for cheaper options, causing the demise of larger rivals who have seriously struggled over the pandemic. The deal will mean the new entity will be much better positioned against companies like AAL, Delta, Southwest, UAL.Â
Read Also: Best Travel Stocks To Buy Now
The Frontier-controlled entity is estimated to add around 10,000 direct jobs by 2026, hoping to deliver $1B annually in consumer savings, as well as offer more than 1,000 daily flights to over 145 destinations.Â
Frontier will own a 51.5% stake in the combined venture, with Spirit retaining a 48.5% stake. Spirit’s shares soared on Monday trading with shares bought at $25.83 per share, equalling an 18.8% premium to the closing price on Friday. Investors should keep a keen eye on the new merger, especially as travel continues to return, proving a formidable force against more costly airlines.Â