What Spirit Pilots Should be Prepared for: Frontier Airlines Buying Spirit Airlines - How Does This Affect Your Benefits?

As you woke up this Monday, likely the first thing you heard or saw was that Frontier Airlines is buying Spirit Airlines. (SAVE) stock popped over 20% which was great for many Spirit pilots that hold the stock. But there is still concern on how this merger could affect your benefits and way of life at Spirit, especially since this isn’t the first experience with William Franke, owner of Indigo Partners, which owns Frontier and JetSmart. How will this merger affect you?

Consolidation within the Airline industry is common. So common, that airline companies have been cut in half over the last 2 decades. This is not the first, and certainly not the last merger. (https://www.businessinsider.com/airline-mergers-and-acquisitions-in-the-us-since-2000-2020-3#2009-frontier-airlines-and-midwest-airlines-5)

What is important is what this acquisition could mean for Spirit pilots and their benefits. We will look at what could change and what we expect to happen if the deal goes through, and the two companies successfully merge. (https://www.wsj.com/articles/frontier-group-spirit-airlines-merge-in-6-6-billion-deal-11644236133?mod=hp_lead_pos1)

Frontier Airlines is owned by Indigo Partners, a private equity firm that owns Frontier Airlines and Chilean airline JetSmart. The company is focused on giving itself a competitive advantage within the industry by providing ultra low-cost flights for retail customers. It hopes to provide more low-cost expansion through purchasing Spirit. Franke's goal is to provide better prices to the customer from not just his company, but lowering the prices of other airlines in order to compete. If successful, the new company will be able to carve a massive market share, up to almost 10% of total market share (https://www.statista.com/statistics/250577/domestic-market-share-of-leading-us-airlines/).

Charles Adams, Captain at Spirit Airlines and past CERTIFIED FINANCIAL PLANNER believes it is too hard to tell where benefits may go. Given CBA talks soon for Spirit, and in the near future for Frontier, he expects Spirit benefits will remain the same, if not better after the merge. Overall, he thinks it will help the new company position itself from being snatched up by larger, non-ULCC's and also provide a better service to the public by providing an affordable means to travel. There could be many logistic changes as the companies merge, but benefits have tended to end up the same or more favorable for pilots.?

Spirit offers its pilots a 14% (Soon to be 15%) Traditional 401(k) contribution automatically, regardless if the pilot contributes to the plan at all.? The Frontier package also offers a 14% (Soon to be 15%) Traditional 401(k) contribution. The good news is that this will most likely stay the same once the companies merge. Most 401(k) programs typically only match an employee contribution up to 5 or 6%, which simply meets the minimum level for a retirement plan to reach Safe Harbor Testing.(https://money.usnews.com/money/retirement/401ks/articles/what-you-need-to-know-about-a-safe-harbor-401-k)

Both retirement plans are managed by Schwab, so there shouldn't be any changes there, although the plan administrators may need to audit their retirement plans to make sure they are suitable and comparable to other plans of that size. This means that pilots will retain the Personal Choice Retirement Account (PCRA).?

Both are members of ALPA, which will help make sure pilots have a priority in considerations for the merger.?

It is hard to see exactly what will happen to Spirit pilots’ agreement and benefits, but the good news is there will likely be no major changes. We will readjust our outlook as news changes.

Nick Coleman is a CERTIFIED FINANCIAL PLANNER and helps Spirit pilots and other major airline pilots build wealth and plan for a confident retirement by providing financial planning and investment management advice to his clients.

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