The serial airline entrepreneur thinks the ULCCs might resume merger talks.
Frontier and Spirit aircraft (Photo: AirlineGeeks | William Derrickson)
Spirit and Frontier’s survival may depend on another merger attempt, says longtime airline founder David Neeleman. The two airlines’ first merger attempt was sidelined thanks to a juicer JetBlue deal.
Of course, the Biden administration, on antitrust grounds, quashed JetBlue’s $3.8 billion plan to purchase Spirit. In October, Spirit and Frontier resumed last-ditch merger talks, eventually failing.
Spirit has since filed for Chapter 11 bankruptcy protection, and company executives have less optimism about the company’s ability to continue operations. Frontier – while not nearly in the same dire straits – has not made a full-year profit since 2019.
Some airline CEOs have said the ultra-low-cost model is essentially dead, including United boss Scott Kirby. But Neeleman isn’t convinced yet.
“ I know why Scott said it because it makes logical sense and he’s a very smart guy …,” he told AirlineGeeks during an interview. “ If these guys rationalize their growth and rationalize the competition with each other, I do think there’s a market for them.”
With premium revenue becoming a hot topic in the industry, ultra-low-cost carriers have been forced to adapt. Spirit has beefed up its “premium” offerings, including snacks and drinks in its Big Front Seats and free Wi-Fi coming soon.
Both Frontier and JetBlue have debuted domestic first-class products, something that Breeze has had from its inception.
A rendering of Frontier’s new first-class product (Photo: Frontier Airlines)
“ You had these ULCCs growing indiscriminately, [with] bigger airplanes, stuffing more and more seats in them, thinking no one can ever stop us because United can’t offer $29 or $39 fares,” he continued.
Neeleman has founded multiple airlines, including JetBlue, WestJet, Morris Air, and Azul. His latest venture – Breeze – began operations in 2021 and now operates a fleet of Airbus A220 and Embraer aircraft to over 60 U.S. cities.
”It’s good to be able to not have to be scrambling to deal with that,” Neeleman added. “It’s great that we have first class, and it’s great that we have ‘extra legroom seats.’”
Breeze has seen strong demand for its premium product, he notes, especially on the airline’s longer routes.
The carrier’s A220-300s have 137 seats, including 12 in its premium class. In the future, Neeleman hinted at a potential increase in premium seating at Breeze.
First class seats on Breeze’s Airbus A220. (Photo: Breeze Airways)
During the Wednesday interview, Neeleman added that Spirit and Frontier’s survival may very well depend on another merger attempt.
“ I think Spirit and Frontier will survive and the way they’ll do it, I think, is by merging. That’s my guess. If they were to merge, they have 40% overlap on the routes that they serve,” he said. They also have dual station operations and dual headquarters. If they can work on getting the revenue synergies and the cost synergies in line, then I think there’s certainly a market for that in the U.S.”
Neeleman continued: “I think that’s probably the most effective way … as opposed to adding eight first-class seats.”
JetBlue swooped in to buy Spirit in 2022, essentially outbidding Frontier. Neeleman adds that JetBlue “kind of derailed” Frontier’s plan to build an ultra-low-cost conglomerate.
He also gave accolades to recently appointed JetBlue President Marty St. George.
“[He’s been] doing a good job trying to reorient it there, and I think the first class will really help them a lot because they have a lot of customers that will be willing to pay for that,” Neeleman shared. “And that will attract a lot of people back to them.”
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