Travelers flying out of DFW International Airport, Austin-Bergstrom or Houston Intercontinental will have one less airline option if Frontier Airlines and Spirit Airlines are allowed to go forward with a $6.6 billion merger announced Monday.
Denver-based Frontier plans to buy Miramar, Fla.-based Spirit in a cash and stock deal for $3 billion, a combination that would create the fifth largest airline in the country and set up a low-cost rival to the major network carriers in Delta, United, American and Southwest. The deal also includes assumption of debt and operating leases that raise the value to $6.6 billion.
Spirit and Frontier flew more than 22,000 flights out of the six Texas airports last year and each has been ramping up with new routes as they try to wrestle market share from the major network airlines with hubs in the region.
But there are questions about what will happen when you take one low-cost competitor out of the market in the Dallas, Houston and Austin areas. Travelers out of San Antonio, El Paso and Harlingen could see major changes with Frontier operating out of those airports.
Could the airlines cut frequencies that overlap? Will there be more destinations for Texas-originating travelers? What will happen to airfares with one of the big low-cost carriers out of the picture?
“There isn’t a significant amount of route overlap between the two companies,” said Helane Becker, an airline analyst with Cowen in a note to investors Monday. ”Both networks are domestic-centric, but Frontier tends to have more capacity in the western part of the US, Mexico and Central and South America while Spirit is focused on the eastern part of the US, the Caribbean, and Mexico and Central and northern South America.”
The deal will undergo antitrust scrutiny as the Biden administration signals a tougher stance on big mergers. Frontier and Spirit contend the merger creates a stronger alternative to the four big carriers, which together control about 80% of the U.S. air travel market.
DFW’s impact
At DFW International Airport, Spirit plans to operate 20 routes in August, the busiest months for the ultra-low-cost carriers that focus primarily on flexible, budget-oriented leisure travelers, according to Diio by Cirium. Denver-based Frontier has 16 nonstop routes on its schedule. Nine of those routes overlap.
The airlines even pointed out flights such as DFW to Las Vegas as one that might get more flights after the merger, since Spirit flies there three times a day and Frontier flies to Harry Reid International Airport twice a day. In theory, that would give five flights a day.
“So now in the event of inclement weather or other challenges, our customers will have at least two additional ultra low fare options to reach your destination,” said Frontier CEO Barry Biffle in a call Monday morning.
From DFW, Spirit and Frontier also share routes to Atlanta, Cancun, Orlando, Miami, Philadelphia, Phoenix, San Diego and Tampa. Some of those flights are seasonal, such as flights to Philadelphia, which only operate in the peak-travel months of summer.
The combined airlines could mean even more focus on vacation and leisure hotspots such as Las Vegas and Orlando, said Kerry Tan, an associate professor of economics at Loyola University Maryland.
“Typically, the concern for the merger is that you are taking two rivals and turning them into one and there will also be that incentive to raise prices,” Tan said. “But these two airlines are still much smaller than their rivals, who they need to beat on price in order to compete.”
From DFW, the Las Vegas route is one of the most popular for each airline during the summer months, with three daily flights on Spirit and one on Frontier. Spirit also flies three times daily to Fort Lauderdale International Airport in Florida.
Frontier’s only more frequent route from DFW is to Denver, the airline’s headquarters and its largest hub.
Flying from Houston Intercontinental
Spirit Airlines flies to 24 destinations from Houston during the summer months, including a host of international short-haul trips such as Guatemala City and Comayagua International Airport and Mesa International Airport in Honduras. Frontier’s presence is much smaller in Houston, with just five destinations — Atlanta, Las Vegas, Orlando, Philadelphia and Denver.
Spirit flies to all five of those spots, giving the merger five overlapping routes from Houston’s George Bush Intercontinental Airport. Again, Las Vegas and Orlando get the bulk of the attention from the two low-cost carriers during the peak summer travel season.
Texas’ fastest growing airport
Austin-Bergstrom International Airport has always gotten less attention from budget airlines than its larger rivals in Dallas-Fort Worth and Houston, but that also gives it room for growth, particularly with Austin’s fast-growing tech scene and a booming population.
Dallas-based Southwest Airlines and Fort Worth-based American are already fighting for space at Austin-Bergstrom and the airport is planning a major expansion to accommodate more air traffic.
Frontier operates just two routes to Austin, from Las Vegas and Denver. Spirit, meanwhile, has eight routes to domestic destinations. Las Vegas is the only overlapping route, where Spirit flies once daily and Frontier flies about four times a week.
The other three airports in El Paso, San Antonio and Harlingen are only served by Frontier. It flies to the same three destinations from those cities two to four times a week to Denver, Las Vegas and Orlando.
The competitive landscape
The combined Frontier-Spirit would rank only fifth among U.S. airlines in passenger-carrying capacity and seventh in revenue.
Airlines are struggling to recover as the pandemic stretches into a third year. Frontier and Spirit both reported Monday that they suffered fourth-quarter losses — $87.2 million for Spirit, $53 million for Frontier. Both also posted full-year losses for 2021.
The airlines claim that if they are allowed to merge it will create many new routes that aren’t currently served by ultra-low-cost carriers, resulting in $1 billion a year in savings for consumers. They also say the combined company will grow and create 10,000 new jobs by 2026.
Ultra-low cost airlines have shaken the airline industry in recent years, using their lower cost structure — including less-senior workers — to take customers away from entrenched carriers and lure people who balk at paying major-airline fares. Frontier and Spirit say their costs are up to 40% lower on a per-mile basis, which will discourage bigger airlines from matching their prices.
The budget airlines, however, lack advantages of the giant carriers. They don’t fly long international routes, they have smaller frequent-flyer programs, and they tend to operate fewer flights per route, which leaves fewer options to rebook passengers if a flight is canceled or delayed.
Frontier and Spirit frequently have among the highest complaint rates in the industry — they ranked last and next to last in the latest monthly figures from the Transportation Department. Many of those complaints are for canceled or delayed flights. The airlines say that by combining, they will create a more reliable airline with fewer flight disruptions.
While the airlines were saying that, the Federal Aviation Administration ordered the grounding of all Frontier flights nationwide Monday because of “automation issues.” By midday, Frontier had canceled more than 110 flights, or more than 20% of its schedule, and delayed a similar number.
The Associated Press contributed to this story.
