Frontier Airlines CEO Barry Biffle is feeling "really good" about a vote by Spirit Airlines shareholders to approve a merger between the two airlines. The airline executive has recently been out and about spruiking the benefits of the merger ahead of the crucial June 30 meeting when the vote will take place. The Spirit Airlines board is supporting Frontier's bid ahead of a bid from rival airline JetBlue.

"Shareholders have a clear choice between the Frontier/Spirit merger versus the JetBlue/Spirit merger," Mr Biffle told Bloomberg TV earlier on Monday. "We would lower fares for consumers, create a billion dollars in benefit for consumers, and theirs (JetBlue) would raise fares for consumers.

Frontier's CEO stays on message, pushing the lower fares mantra

The billion dollars in benefits frequently cited by Barry Biffle comes from Frontier's calculations, whereby consumers will enjoy lower fares after the merger compared to the price they would pay before the merger if consumers choose to fly on a legacy carrier. It's very much a pie-in-the-sky number but one that is widely circulated.

Depending on your point of view, the Frontier/Spirit merger has many competitive implications, especially in the ULCC space. The merged airline will have more market power when competing against the major airlines, but it also decreases the number of carriers in the ULCC arena. But in his campaign to push the merger through, Frontier Airlines' Barry Biffle has focused on providing lower fares for consumers.

One last merger push as Frontier executives write to Spirit's shareholders

In a June 27 letter signed by Biffle and Frontier's Chairman William Franke addressed to Spirit's shareholders, they said a Frontier/Spirit merger will supercharge the ultra-low-cost carrier model and increase industry competition.

"The strategic rationale of the Spirit-Frontier combination is simple—we are building an airline that can realize the competitive potential of the ULCC model. Our transaction will bring scale, capability, and resilience, making it possible to bring ultra-low fares to more routes in competition with larger, high-cost, high-fare airlines."

Frontier's pursuit of Spirit Airlines comes as the ULCC market is seeing a shift in the type of consumer flying onboard their planes. Biffle notes the change, saying his airline is seeing a significant increase in household incomes among customers compared to its pre-pandemic passenger base. Frontier's CEO doesn't know whether this is because his passengers are making more money or if Frontier is seeing some downshift from more upmarket carriers, or both, but it is equating to solid passenger demand and healthy yields. In another interview last week, Biffle discussed that demand, saying it added up to "the greatest revenue environment I've seen in three decades."

JetBlue ups the ante on Monday evening

Frontier's CEO is unimpressed by JetBlue's hostile pursuit of Spirit Airlines. JetBlue is encouraging Spirit shareholders to vote against the Frontier/Spirit merger. On Monday evening, the New York-based airline again upped the ante, offering an increased accelerated prepayment to US$2.50 per share, an enhanced reverse break-up fee of $400 million, and the addition of a ticking fee mechanism that would provide shareholders with a monthly prepayment of $0.10 per share between January 2023 and the consummation or termination of the merger.

"Spirit shareholders should not be misled by Spirit and Frontier's rosy projections of a potential future stock price, which are based on highly flawed assumptions that fail to account for the actual market conditions, including the need for pilot pay increases and elevated fuel costs," says JetBlue CEO Robin Hayes.

Earlier in the day, Barry Biffle was dismissive of the competition from JetBlue. "They (JetBlue) may offer something that seems more, but it is illusory," he said. "It (the JetBlue bid) has no chance of getting through the antitrust process, so all you are getting in the JetBlue offer is the $3 in the break-up fee, which you get with the Frontier/Spirit merger... the Spirit board has voted in favor (of the Frontier/Spirit merger) because they see this as being a $50 to $60 per share opportunity for Spirit shareholders, so we look forward to the vote."

Source: Bloomberg TV