U.S. Lawmakers Take Aim At Frontier-Spirit ULCC Merger

Frontier Airlines
Credit: Frontier Airlines

A group of lawmakers from the U.S. House and Senate are urging the Biden administration to block the proposed merger between Frontier Airlines and Spirit Airlines, warning the tie-up would “monopolize the ultra-low-cost segment of the industry.”

On Feb. 7, the two airlines announced a proposal by Denver-based Frontier to purchase Florida-based Spirit. The $6.6 billion transaction would create the fifth-largest airline in the U.S. and the largest ULCC in the Americas. The companies say they expect the deal to close sometime in the second half of 2022.

In a March 9 letter to Transportation Secretary Pete Buttigieg and Assistant Attorney General Jonathan Kanter, a group of eight lawmakers—including Senators Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts) and Rep. Alexandria Ocasio-Cortez (D-New York)—urged the administration to “closely review this mega-merger” for potential anti-trust concerns and to “oppose it if you determine it will threaten competition in the airline industry.”

The lawmakers expressed concerns that allowing a merger between the two largest ULCCs would undercut the benefits of the low-cost model to consumers, observing that the combined entity would be four times larger than the nearest ULCC competitor. They also highlight how a merged Frontier-Spirit would become the dominant or second-most dominant airline in eight of its top 10 markets, including large markets like Orlando and Las Vegas. 

“There are serious risks that a Spirit-Frontier combination would further concentrate and even monopolize the ultra-low-cost carrier segment of the industry, rather than create a meaningful fifth competitor to the ‘Big Four,’” the group of largely Democratic party lawmakers wrote. “The [Justice Department] and the [Transportation Department] should be extraordinarily concerned about this attempt to potentially forge a new ULCC monopolist in various markets around the nation.”

While the proposed merger has galvanized some progressive Democrats in Congress, most airline industry analysts and industry-watchers have taken a more positive view of the merits of the deal and its prospects at gaining government approval.

“The Justice Department looks at individual city pairs with exacting scrutiny to see whether there’s a substantial lessening in competition, and there aren’t a large number of routes that overlap here with Spirit and Frontier,” explained Kenneth Quinn, a senior equity partner at Clyde & Co. and a former chief counsel at the FAA.

“But the other reason I’m not as skeptical as others–even though the Biden administration is engaging in fairly strong rhetoric against further consolidation—is that here you have carriers who represent a small portion of the overall market in those markets where they compete,” Quinn said. “And those markets are primarily leisure destinations, where there’s lower barriers to entry in terms of gate access or operating authorizations. To the extent that a merged entity would drive up fares, that can attract new entrants if the barriers to entry are low.”

Bloomberg Intelligence analyst George Ferguson also expressed optimism about the transaction, adding that the two carriers could potentially shed some routes at Orlando International or Las Vegas McCarran International as a condition to gain approval. 

“I actually think the market is ripe for a bit of rationalization,” Ferguson said, noting that leisure fares still are below 2019 levels, which is harming profit margins across the industry. “We’ve got all these startups like Breeze and Avelo, we have other airlines that are expanding like Allegiant. I think that this is a very robust market, and I don’t see this merger as a real antitrust problem.”

Ben Goldstein

Based in Washington, Ben covers Congress, regulatory agencies, the Departments of Justice and Transportation and lobby groups.


1 Comment
It figures that the politicians against the merger are the same ones who favor more government control of the average persons life. They are called Socialists/Communists. Look how great Venezuela and Cuba are doing 😉