Not just similar type. Also similar business model. Both went through the same process by the same indigo group. Lots of similarities aside from type.

 

They could consolidate, trim any excess/overlap, and gain economy of scale to spread out costs further. They could then rework their growth plans as one instead of as competitors. Certainly the growth would be a bit less as one than each would plan to grow on their own. The fact that the airline would be a much bigger market presence would reenergize many employees and keep them from bailing to legacies. The cost of the actual merger would be far less than other airline mergers - apart from nearly identical fleets, there is a very similar culture, business model, marketing, and customer base. I really don’t know if it will ever happen, but I don’t know why anyone would conclude that it is a far-fetched possibility, especially if market conditions are challenging for any number of reasons.

 

But what does Spirit's board really gain by merging with Frontier? There are absolute similarities, but Spirit makes so much money, in places Frontier doesn't, what would be the incentive for them to merge over the long term? Or to sell to anyone? I think the only people gaining from that merger would be Frontier. But what would Spirit really gain over the long term? Over the last 1-2 years, Frontier just seems to be playing behind the Spirit playbook. Frontier has very efficient airplanes right now, but they don't have nearly as many NEOs coming in over the next 2 years, as compared to Spirit. Spirit brought back their 319s solely for growth and for slots and to take advantage of the pandemic.

I just don't think Spirit has any real incentive to merge with anyone at the moment. Nor should they, honestly. There is no doubt that Indigo would absolutey love a merge with Spirit, though.

 

I think economies of scale for sure . I’m making up numbers here but let’s say you have 2 C-suites each with $5 million pay roll .. that’s $10 million for 2 companies, combine it and you let’s say have 1 C suite salary package of $7 million. That’s savings. Let’s Say you use the exact same numbers for training centers and corporate headquarters costing 10 million individually annually.. and having just one of each at 7 million annually more savings.. the list goes on and on. Not to mention the fleet usage.. let’s say we have one plane start the day in Denver and it goes DEN-IAH-FLL-LAS. Perhaps with more planes and more cities one plane can start in SFO (which we don’t serve) with a stop in vegas then head to Denver to resume the schedule. More utilization. Not to mention its easier to recruit the bigger you are , pay more the bigger you are, strike deals with airport authorities the bigger you are .. so on and so forth. Also in terms of actual dollars would you have more money in your pocket if you had a 15% profit margin off a billion in revenue or 10% margin of 2 billion of revenue? The latter actually puts more cash in your pocket. I’ve been a big believer that it’s only matter of time Before we marry F9. I’ve been wrong before so we’ll see . And one little tiny coincidence F9 lowered their bag weight limit today to 40 pounds. Any guess what airline also limits it to 40 pounds?

 

JCBA, and more importantly, seniority list integration are my biggest concerns in that scenario…

 

I mean that’s kinda everyone’s biggest concerns in any merger.

 

You understand that we don’t make money right now right? And even pre-covid were not killing it if you’re honest. You also understand that Frontier is not playing the spirit playbook, they made the playbook. Those in charge turned spirit into a ULCC, cashed out and are doing the same at Frontier.

 

We weren’t killing it pre Covid? That’s an interesting take.

 

nope we weren’t

2018

https://www.fool.com/investing/2018/...enue-chal.aspx

2019
https://www.fool.com/investing/2019/...stors-are.aspx

 

An awful lot of what would have been profit going into growth.