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Spirit and Frontier say their airline merger will create more jobs. History says otherwise

A budget-carrier behemoth is not necessarily great for airline workers.

Spirit and Frontier say their airline merger will create more jobs. History says otherwise
[Source Images: OsakaWayne Studios/Getty]

Budget air carriers Spirit Airlines and Frontier Airlines have announced a multi-billion-dollar merger deal that would create America’s fifth-largest airline if it gets approval.

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If you’re part of the air-traveling public, it’s likely you already have strong feelings about these two particular airlines potentially combining forces—of the 10 major U.S. carriers, Frontier and Spirit consistently rank at or near the bottom in customer satisfaction. (People on Twitter immediately greeted the news by joking that now they’ll only need to click one box instead of two when removing airlines from online airfare searches.) However, the two companies are making an earnest argument to investors and federal regulators that the $2.9 billion cash-and-stock deal will be great for the economy.

Their press release describes the combined company in rosy terms (“America’s greenest airline,” “the youngest, most modern and fuel-efficient fleet in the United States”), but spends the meat touting the benefits to both consumers and industry workers. The merger would create $1 billion in annual cost savings, allowing the new airline—whose name would be chosen after the transaction closes—to offer more flights, better service, and cheaper fares. “America’s most competitive ultra-low fare airline for the benefit of consumers,” in the words of Frontier chairman Bill Franke, who’s been picked to chair the combined company.

The two airlines also say the merger will add better opportunities and more stability for their current 15,000 employees—and they “expect to add 10,000 direct jobs” by 2026.

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But historically, mergers and acquisitions tend to result in job losses—there’s a reason why career-guidance blogs are full of posts with titles like “How to survive a merger.” Most of this is because the combination creates redundancies and the new company wants to boost efficiency. In their announcement, Frontier and Spirit say it is “expected that all current team members will have an opportunity to be a part of the combined airline.” However, the next line predicates that on them prospering—on the unknowable future “growth of the combined company.” When T-Mobile bought Sprint in 2020, then-CEO John Legere publicly proclaimed: “New T-Mobile will have more than 11,000 additional employees on our payroll by 2024 compared to what the combined standalone companies would have.” By the end of 2020, though, T-Mobile had quietly eliminated at least 5,000 jobs. (“We knew T-Mobile couldn’t be trusted,” one telecom-industry union said afterwards.)

There are other examples, and many of them aren’t directly tied to the point of mergers typically being to trim away fat. Papers like this one from 2016, in Harvard Business Review, have argued there’s little evidence that mergers improve productivity, or that streamlining activities on the administrative side actually yields lower costs. It also isn’t hard to find media stories about mergers ultimately harming local communities, suggesting that even if a deal were to lower costs, the savings don’t necessarily result in a number of net new hires, or growth at all resembling what was projected.

Savings from a merger don’t necessarily translate to lower prices, either, to turn to Frontier and Spirit’s other claim. (The researchers in that HBR study wrote, “We find substantial average increases in the amount that firms mark up prices over cost following a merger, ranging from 15% to over 50%.”)

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But if the share prices stay up, Wall Street often won’t lose much sleep over lost jobs. Goldman Sachs M&A expert John Waldron gave a candid speech a little over a year ago where he predicted the boom in jumbo mergers would cause “more losses of jobs along the way,” observing, sort of as an aside, that this could become “complicated societally.”

This hints at the bigger question of the merger-mania America is in the middle of. Last year saw a record number of mergers, and the Biden administration has been warning companies to expect it to take a harder look at any new ones.

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