Spirit Airlines Is Getting Squeezed From All Sides—By JetBlue, Frontier And New Regional Pilot Contracts

Spirit Airlines is being squeezed on all sides, by two carriers that want to acquire it, and by regional carriers that just dramatically improved their pilot contracts.

Spirit said Tuesday that it is talking with JetBlue, which has submitted a tender offer for its stock, as well as with Frontier, which Spirit’s board had already agreed to be acquired by in a deal that JetBlue wants to disrupt. Spirit CEO Ted Christie said the issue will be resolved by June 30, when a shareholders meeting is scheduled.

Spirit said it continues to be bound by the terms of its merger agreement with Frontier, under which a “superior proposal” is defined as being both reasonably capable of being consummated and more favorable to Spirit’s stockholders from a financial point of view.

Meanwhile, Piedmont Airlines’ bold contract move late Friday threatens to shake up pilot pay scales, not just for regional carriers, but also for ultra-low-cost carriers like Spirit.

Ryan Muller, chairman of the Spirit chapter of the Air Line Pilots Association, said Spirit needs a revised contract if it wants to be a viable employer of pilots. The airline has about 3,000 pilots.

Muller said Spirit could get squeezed by improved contracts not only at Piedmont and Envoy Air, but also at the mainline carriers. United pilots have a tentative contract agreement while American and Delta pilots are in negotiations.

Over the weekend, ALPA signed contracts with Piedmont and Envoy, immediately raising regional pilot pay standards and offering favorable conditions for moving to American Airlines. All three carriers are subsidies of American Airlines GroupAAL
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“The improvements to mainline and FFD [fee for departure] contracts will squeeze Spirit Airlines’ ability to attract and retain pilots from both ends of the industry pilot supply chain,” Muller wrote Monday in a letter to pilots. Last week, Muller asked Christie to open contract talks early: he asked for a response by Tuesday.

Through the end of May, Spirit had hired 359 pilots, while 204 pilots had left for other airlines, including 54 who left for American, according to Spirit ALPA. Meanwhile, Muller noted, “More than a third of the pilots hired at Spirit so far this year have come from the AA wholly owned carriers – and now those pilots have much better incentives to stay right where they are.”

“As the legacies come in with new pay rates and the FFD carriers’ offer potential compensation to exceed Spirit and a path to careers at the legacies, we need compensation and work rules that position Spirit as a career airline,” he wrote.

The Piedmont agreement provides “industry-leading pay for our pilots (significantly higher than the next leading regional carrier), enhances our commitment to flow and provides the best possible path to mainline flying at American Airlines,” Piedmont and its ALPA chapter said Friday in a letter to the carrier’s 700 pilots.

Under the new contract, a four-year Piedmont captain’s salary immediately goes to $157 per hour including a 50% pay premium that remains in place until 2024. That rises to $161 per hour in 2023. A one-year first officer’s pay goes to $90 per hour including a $30 per hour premium. In 2023, first-year first officer pays rises to $93 per hour.

Additionally, under a flow agreement, pilots go to top scale at the end of the fifth year if they have not advanced to American mainline.

At Spirit, captains earn $195 an hour in the first year, $221 an hour after five years, and $245 an hour after ten years. First officers earn $61 an hour in the first year and $137 an hour after five years.

In a prepared statement issued Tuesday morning, Christie said, “Consistent with its fiduciary duties, Spirit’s board of directors is engaging in discussions with JetBlue with respect to the proposal received on June 6, 2022 and is also continuing to work with Frontier under the terms of the existing merger agreement between Spirit and Frontier.

“As part of this process, Frontier and JetBlue are being given access to the same due diligence information, on the same terms,” Christie said. “The board expects to bring the process to a conclusion and provide an update to stockholders ahead of the special meeting of Spirit stockholders scheduled for Thursday, June 30, 2022.”

As for regional airlines, Faye Malarkey Black, president of Regional Airline Association, said their pay scales have been rising consistently, even before the Piedmont and Envoy deals. “Regional airlines are constantly investing in their employees and this is the latest development in a years-long trend,” she said. “Pay has never been higher.”