Frontier Group Sees Surge In Retail Chatter After Rival Spirit's Second Bankruptcy - Analyst Expects Lower Domestic Competition

Frontier Group (ULCC) stock experienced a surge in retail chatter, as investors believed the airline could gain market share following rival Spirit Airlines' second bankruptcy filing.

The stock jumped 14.5% on Tuesday, compared with a near 1% decline of the S & P 500 Passenger Airlines index. According to Koyfin data, about 8.85 million shares changed hands,  nearly double its 50-day average trading volume.

Retail sentiment on Stocktwits about Frontier was in the 'bullish' territory at the time of writing.

On Friday, budget carrier Spirit filed for bankruptcy protection for the second time in less than a year, will reduce its network and shrink its fleet, cuts that it said will reduce costs by“hundreds of millions of dollars” a year.

Deutsche Bank upgraded Frontier Group to 'Buy' from 'Hold' and raised the price target to $8 from $4. According to TheFly, the brokerage believes Frontier to be the biggest beneficiary of Spirit's bankruptcy given their network overlap.

The brokerage also noted that 35% of Frontier's network overlaps with Spirit for the September quarter. It believes the overlap would increase to 40% by the December quarter following Frontier's addition of new routes.

Late last month, Frontier revealed plans to launch 20 routes this winter, many of them in major Spirit markets like its base at Fort Lauderdale International Airport in Florida. This came before a report said that Spirit Chairman Robert Milton spoke with Bill Franke, the Frontier chair, earlier in August.

The companies have held merger talks as late as early this year. However, Spirit had rejected the $2.2 billion deal from Frontier, after labeling it as“inadequate.” The offer came after Spirit declared bankruptcy in November to restructure about $1.6 billion in debt.

One investor on Stocktwits wanted to buy the stock if it dipped on Wednesday, hoping that the share prices would climb to $7 apiece.

Frontier stock has fallen nearly 22% this year. Budget airlines have continued to suffer due to the pandemic, primarily because of a shift in travel patterns to higher-end seats amid rising labor costs and aircraft issues.

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