Two U.S. airlines set to merge to make fifth largest carrier

Two budget carriers in the United States are set to become one, under an almost $3 billion deal that would create the fifth largest airline in the U.S.

Frontier Airlines, the only commercial service airline in Delaware, revealed on Monday that it had reached a merger deal with low-budget competitor Spirit Airlines, worth $2.9 billion.

The proposal to form a new no-frills carrier controlled by Frontier Airlines pushed up shares in Spirit Airlines by as much as 18.7%. Reports by Wall Street news agencies revealed several analysts pressed the airlines over possible difficulties in obtaining regulatory approval.

One giant low-fare carrier

The merger would create a giant in the low-budget airfare market, combining Colorado-based Frontier and Florida-based Spirit, together creating the fifth largest airline by market share, Frontier said in a statement.

They intend to compete against the U.S. airline industry’s Big Four – Delta Air Lines, American Airlines, United Airlines and Southwest Airlines

Spirit currently ranks tied for fifth, while Frontier ranks ninth for market share, according to the federal Bureau of Transportation Statistics.

Both Spirit and Frontier have ties to Indigo Partners, a private equity firm that targets the low-budget airline market and is currently the largest shareholder of Frontier.