Spirit and Frontier Add $250 Million Termination Fee to Deal

Spirit and Frontier continue to move ahead with their previously announced merger, which would create one of the U.S.’s largest low-cost carriers in the market.

The carriers on Thursday announced that they had amended their previous agreement to include a $250 termination fee, which will be paid by Frontier “in the unlikely event the combination is not consummated for antitrust reasons.”

Executives from both carriers still believe that the deal, which has so far survived other hurdles including a hostile takeover attempt by JetBlue, will go through. The termination fee, according to them, provides “regulatory protection for Spirit stockholders.”

William A. Franke, the chair of Frontier’s Board of Directors and the managing partner of the carrier’s majority shareholder Indigo Partners, said that the team believes “regulators will find this combination to be pro-competitive."

“We look forward to bringing these two companies together and delivering on the benefits for all stakeholders,” he said.

“We look forward to closing the transaction and bringing more ultra-low fares to more people in more places,” Ted Christie, president, and CEO of Sprit said.

JetBlue made an unsolicited offer to buy the low-cost carrier for $30 per share in cash and was also ready to “negotiate in good faith a consensual transaction at $33,” which is significantly more (60% more according to JetBlue) than what Frontier was offering. JetBlue had also said that, despite concerns about that deal’s regulatory approval, it would pay a $200 million breakup fee if its merger wasn’t approved.

The addition of the termination fee makes the Frontier merger, which has been the favored deal from Spirit, more competitive with that JetBlue offer to the airline’s shareholders, who will vote on the deal next week.

Should the deal with Frontier go through, Spirit says the combined airline will offer more than 1,000 daily flights to over 145 destinations in 19 countries across complementary networks.