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Frontier CEO on Spirit terminating deal: ‘I’m disappointed for their shareholders’

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Frontier Airlines President and CEO Barry Biffle joins Yahoo Finance Live to discuss the company’s now-terminated merger agreement with Spirit, company earnings, continuing to offer low fares amid inflation, staffing opportunities, and the outlook for investors, and growth.

Video Transcript

- Also watching the developing story coming out of the airline sector as the merger between Spirit and Frontier is no more and a deal between JetBlue and Spirit is all but done. Let's bring in Frontier President and CEO Barry Biffle for his take on all this.

Barry, good to see you here this morning. We've been following this one closely with you since it began. I think a lot of folks are surprised to see your stock up close to 10% on this news. What have you been hearing from shareholders since this decision came to pass?

BARRY BIFFLE: Well, look, it's-- Thanks for having us on. It's a great day for Frontier because we get to be the low cost carrier of the United States. And our employees are winning, but shareholders are going to get a windfall from this. And really the only losers are the consumers that are going to have to pay over 40% more with SPIRIT but they can find over a million seats available at flyfrontier.com for 19 bucks and up.

So it's a great day for Frontier. And again like I said, we get to be the low cost carrier of the United States. So that's why I suspect our share price is up.

- You had a lot that was really riding on looking to get this deal done, looking to be able to add on the capacity, the routes. And really bring together these two entities. And so, what is that kind of next wave forward that you start to think about now at Frontier?

BARRY BIFFLE: Look, I think we're just going to double down on our strategy. We just announced a return to profitability after the pandemic. We expect margins to continue to improve through the tail end of the year. And so we've announced also that we expect to have our cost below $0.06 on ex-fuel next year, which is kind of close to pre-pandemic level. So we expect to be able to offer low fares for consumers and save them at a time they need it most with all the inflation out there.

- Hey, Barry. It's Julie. What's the plan for planes for you guys? If indeed JetBlue and Spirit get regulatory approval, we don't know if that's going to happen yet, but if they are forced to perhaps sell off some of those planes, are you going to snap them up?

BARRY BIFFLE: Well, I don't know about the planes. But they have disclosed that they would give up, for example, their positions at LaGuardia and other places. Obviously, I think we would be the primary candidate for that. As I mentioned, we're going to be the low cost carrier in the United States. So I think consumers would want access to that.

But we have the ability to triple our size over the next 10 years. With the order we have, we're going to grow 30% in 2023 over 2022. So we have a lot of growth ahead of us. And actually, I don't think anyone has the kind of growth potential that we do when you're looking forward.

So again like I said, it's a big windfall for Frontier. Great news. And so I'm not surprised that our share price is up today.

- Ensuring though as well at the same time that you have enough pilots for that anticipated growth that you're looking to enact, what does that pipeline look like for Frontier moving forward as its own entity and without this deal?

BARRY BIFFLE: So we enjoy a surplus today. I know some carriers are having a tough time. We have a small surplus today. And we have the ability to add 80 pilots from a training perspective each month. And we also just announced a cadet program yesterday, which will ensure that we have a pipeline of growth and supply, if you will, for pilots.

And it's really exciting. We've gotten huge interest just in the last 24 hours from that. So we feel good about where we are. We're going to be the place that people want to work. We've got the most growth of any carrier in the US. And if you're a pilot, you want to upgrade and you can't upgrade to Captain if you don't have plenty of growth and room to grow into the left seat. So there's going to be lots of opportunity for pilots and we're excited about that as well.

- Barry, this is your deal. You came out first and you laid this deal out and you made a very strong case for doing it. And JetBlue essentially comes out of nowhere. Granted, this is a big industry but it's small, a lot of relationships. I mean, what do you think of both of those teams and how they have handled the situation?

BARRY BIFFLE: Well, look, you know, I'm disappointed for their shareholders. I think they're not going to get to participate in the up side that we're kind of in one of the first few innings of. And I'm disappointed for their employees. They're not going to have the growth that ours.

But look, I have to look after our shareholders and our employees. And it's a great day for us because we get to be, again, the low cost carrier of the United States. We can own the space. And so it's great for our employees. I mean, not the path that I planned to become the leading ULCC, but sometimes you just get lucky.

- Well, Barry, if it's such a great day, why don't you give up on this deal a long time ago? I mean, you just sound so positive after something that you have been pushing for, for months.

BARRY BIFFLE: Well, look, I agree with you that we wanted this deal. And we could have given up. But it wasn't clear that they were going to go with JetBlue. And you know, it was much better than a stand alone in Spirit via stand alone. But this is actually a great consolation prize.

Again, the market is speaking. That's why our stock price is up. I mean, this is good for Frontier in the way it came about.

- $3 billion, where does that get put to work now? It's not going towards the acquisition?

BARRY BIFFLE: Well, we were going to use equity. So it gets to go towards generating shareholder returns for our shareholders because again like I said, we're doing really well. We increased our revenue 43% in the second quarter. I think that's a record for us and I think the record for the industry.

And again, we plan to continue to be profitable and like I said, expand our margins by increasing our non-ticket revenue and further reducing our costs as we move into next year. So again, really excited about the future and disappointed for the Spirit employees and their shareholders. But conversely, I'm really excited for our shareholders and our employees. So great day for us.

- Barry, if this deal closes between Spirit and JetBlue, do you think they have a monopoly in key markets? And what does that mean for the person that is out there booking flights on these two carriers?

BARRY BIFFLE: Well, look, I mean, I don't think you're going to see much difference if you're a JetBlue customer. But if you're a spirit customer, you're going to see the biggest inflation you've seen. You're going to see fares jump up over 40%. It's going to be hundreds of dollars per family. And so that's why I think it's a challenge for their consumers. There's going to be millions of people that get priced out. But that's why they need to go to flyfrontier.com because Frontier is going to be ubiquitous with low cost in this country. And so we'll grow as fast as we can. And get them relief as quick as we can.

- All right. Well, we appreciate you coming on here. We know it's been a busy 24 hours for you and the team. Barry Biffle, Frontier President and CEO. Always good to see you.