Allegiant Travel announced on Sunday that it intended to acquire Sun Country Airlines in a deal worth $1.5 billion. The merger of the two low-cost airlines comes at a time when low-cost airlines have been facing high costs and intense competition in recent years, and some have been under pressure to find growth and scale through mergers.
Allegiant and Sun Country tend to specialize in offering low-fare flights to individuals traveling for leisure or to visit friends and relatives. Their combined effort will cover nearly 175 cities across the U.S. and other neighbouring nations.
In a statement, Allegiant’s Chief Executive, Gregory C. Anderson, said, “This combination is an exciting next chapter in Allegiant and Sun Country’s shared mission in providing affordable, reliable, and convenient service from underserved communities to premier leisure destinations.”
Allegiant stated that it will finance the acquisition, which will entail the payment of $400 million of Sun Country’s debt in terms of stock and cash. The shareholders of Sun Country would get a premium of close to 20 percent on their shares, as per the stock prices of the two airlines as of Friday.
The merged firm will have its headquarters in Las Vegas, where Allegiant is located. The airlines said in a news release that it will have a “significant presence” in Minneapolis-St. Paul, where Sun Country is based. The airlines anticipate accomplishing the transaction in the second half of this year.
However, the deal is to be approved by the regulators. Airline mergers are not always smooth sailing: integrating technology and workforces may not be easy to unravel.
News of the deal comes as discount airlines, which are a varied bunch of companies, have been hit hard by the growing competition, rising costs, and a growing willingness among travelers to pay extra money to get perks such as a seat with more legroom.
Spirit Airlines, which had entered bankruptcy twice since late 2024, was especially affected by an oversupply of flights on important routes.
A massive engine issue also affected the Spirit aircraft disproportionately, and the airline was competing against the largest carriers of the country head-to-head on most routes. It was in an industry that has already been dominated by the largest airlines, which have already effectively competed with low-cost carriers on restrictive basic economy fare contracts.
Spirit had attempted to sell to JetBlue Airways, but the Justice Department under President Joseph R. Biden Jr. questioned that plan, which was later blocked by one of the federal judges in 2024. Analysts predict that the Trump administration will be more accommodating to such deals.
But Sun Country and Allegiant have not experienced the worst of such issues, in part due to having limited competition flights. Allegiant faced a huge loss in 2024, having reported profits in the three preceding years.
It and Spirit embraced a business model that emphasizes cost reduction approximately two decades ago. Allegiant faces no competition on about 75 percent of its routes.
Therefore, it also makes an income with its airline credit card and sells travel packages like hotel rooms, ground transportation, and other services. Sun Country, being a smaller carrier, has been able to report profits over the last few years.
It flies mainly between Minneapolis-St. Paul International Airport, although the airline also generates approximately 20 percent of its income through charter flights and approximately 10 percent through cargo flights carried out on behalf of Amazon.
The airlines in a statement claimed that it would serve over 650 routes each, and about 195 planes. The shareholders of Allegiant are supposed to hold about two-thirds of the merged company, where the remaining third is held by the Sun Country shareholders.
