Spirit Airlines appoints new CEO, seen as M&A harbinger

Wed Jan 6, 2016 8:22am EST
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By Jeffrey Dastin

(Reuters) - Spirit Airlines Inc (SAVE.O: Quote) on Tuesday named board member Robert Fornaro as chief executive officer in a move analysts say may nudge it towards a merger with Frontier Airlines and improve its results after a year of unit revenue decline.

Fornaro headed AirTran Holdings Inc for nearly four years until Southwest Airlines Co (LUV.N: Quote) bought it in 2011. Analysts say his record of dealmaking may in the long run seal a merger of Spirit and Frontier, which have a common low-cost model and plane types.

Shares of Spirit were up nearly 6 percent at the close of trading.

The U.S. carrier has grown rapidly in the past five years by marketing ultra-low fares with heavy restrictions. Recent moves by larger Delta Air Lines Inc (DAL.N: Quote) and American Airlines Group Inc (AAL.O: Quote) to match those prices have hurt its unit revenue and slashed 46 percent from its stock in 2015.

Fornaro replaces Spirit's decade-long leader, Ben Baldanza, who will assist with the transition, the company said in a news release. The reason Baldanza left was not immediately clear.

A tie-up of Spirit and Frontier would give the carriers scale to "compete better against larger airlines by leveraging cost efficiencies," Wolfe Research analyst Hunter Keay said in a note Tuesday.

Baldanza has said Spirit did not need a merger to grow, according to the note. The managing partner of Frontier's owner Indigo Partners, Bill Franke, has said he expects low-cost airlines in the United States to consolidate.

Indigo sold its stake in Spirit before buying Frontier in 2013.   Continued...

A Spirit Airlines airplane sits at a gate at the O'Hare Airport in Chicago, Illinois October 2, 2014.   REUTERS/Jim Young