By Shivansh Tiwary and Anshuman Tripathy
(Reuters) -Frontier Group shares jumped 15% on Tuesday, as investors bet that the ultra-low-cost carrier would scoop up more market share following main rival Spirit Airlines’ second bankruptcy in months and plans to trim routes.
The stock was on track for its best day in more than five months, underscoring expectations that the turmoil at Spirit could reshape the U.S. budget airline industry and hand Frontier a competitive edge.
Deutsche Bank analysts said they see Frontier as best positioned to benefit from Spirit’s bankruptcy, given the two airlines’ network overlap. The brokerage also upgraded its rating to “buy” from “hold”.
Spirit filed for bankruptcy protection on Friday for the second time in a year after a previous reorganization failed to put it on a firmer financial footing.
While the Florida-based carrier — which emerged from its first bankruptcy in March — plans to continue flying, it said it would shrink its footprint in some markets and cut its fleet to reduce debt and lease obligations.
“Generally some portion of Spirit’s capacity is likely to be removed, easing pressure on the domestic market, particularly main cabin, at a time when domestic demand is also improving from the sharp stepdown earlier in the year,” Raymond James analyst Savanthi Syth said in a note.
Frontier has the largest seat overlap with Spirit, though questions remain about whether ultra-low-cost carriers can sustain their business model as costs rise.
The airline, which has been expanding its network, recently announced 20 new routes for the winter season and has rolled out offers aimed at building loyalty and luring passengers from rivals.
Still, analysts have said full-service carriers such as United Airlines and Delta Air are better equipped in the changing U.S. aviation market.
(Reporting by Shivansh Tiwary and Anshuman Tripathy in Bengaluru; Editing by Sriraj Kalluvila and Shilpi Majumdar)
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