Frontier Airlines Stocks Surge as Deutsche Bank Predicts it Will Benefit Most from Spirit Bankruptcy

Frontier Group Holdings' (NASDAQ:ULCC) shares surged in premarket trading after Deutsche Bank upgraded the airline to a Buy rating, citing it as the main beneficiary of Spirit Airlines' bankruptcy. Analyst Michael Linenberg sees Frontier as a low-fare carrier poised to gain market share following Spirit's bankruptcy. The upgrade comes as Frontier's stock has been underperforming the industry, with a 25% decline year-to-date compared to the S&P 500 Airlines Index's 30% gain.

Frontier Group Holdings' (NASDAQ:ULCC) shares surged in premarket trading after Deutsche Bank upgraded the airline to a Buy rating, citing it as the main beneficiary of Spirit Airlines' bankruptcy. Analyst Michael Linenberg sees Frontier as a low-fare carrier poised to gain market share following Spirit's bankruptcy. The upgrade comes as Frontier's stock has been underperforming the industry, with a 25% decline year-to-date compared to the S&P 500 Airlines Index's 30% gain [1].

Deutsche Bank raised its price target for Frontier to $8 from $4, implying 63% upside from its current levels. The bank expects Frontier to benefit from Spirit's bankruptcy, as the two airlines have overlapping networks. Currently, about 35% of Frontier's routes overlap with Spirit's, and this figure is expected to rise to approximately 40% by the end of the year [2].

Spirit Airlines, which filed for bankruptcy protection, plans to use Chapter 11 to shed billions in liabilities and cut costs. Deutsche Bank expects the active fleet to shrink by another 50 aircraft, as Spirit is likely to emerge from restructuring with a smaller fleet [2].

Frontier Group Holdings' recent expansion efforts, including the addition of 20 new routes, are aimed at capturing market share from struggling competitors like Spirit. The new routes feature fares as low as $29, positioning Frontier as a strong contender in the low-cost carrier segment [3].

While Frontier's prospects appear promising, the airline still faces significant challenges. The ongoing industry overcapacity, weak domestic fares, and structural disadvantages against larger carriers remain critical issues. Frontier's ability to effectively manage costs and capacity will be crucial in navigating these challenges and realizing the potential gains from Spirit's bankruptcy [3].

References:
[1] https://www.investing.com/news/stock-market-news/deutsche-bank-upgrades-frontier-as-spirit-bankruptcy-to-boost-its-market-share-4219778
[2] https://www.ainvest.com/news/frontier-airlines-stocks-surge-deutsche-bank-predicts-benefit-spirit-bankruptcy-2509/
[3] https://finance.yahoo.com/news/why-frontier-group-flying-high-172506348.html