This Airline Stock Could Rise if Spirit Airlines Collapses

Spirit Airlines’ second bankruptcy filing in less than a year doesn’t seem to bode well for the ultra-low-cost carrier business. One rival’s shares rose today anyway.

That was Frontier Group Holdings (ULCC), the parent of Spirit rival Frontier Airlines, shares of which jumped today to their highest levels in months. Frontier Group Holdings shares soared 13% Tuesday afternoon but remain more than 20% lower this year.

Spirit Airlines owner Spirit Aviation Holdings (FLYY) on Friday said it entered the Chapter 11 restructuring process. Spirit, which previously filed for bankruptcy last November, had recently warned that it could run out of money within the next 12 months.

Deutsche Bank analysts on Tuesday upgraded Frontier Group Holdings stock to “buy” from “hold” and doubled their price target to $8, saying they “see the low fare carrier as best-positioned to be the biggest beneficiary of Spirit’s bankruptcy given their network overlap.”

The new target is aggressive by Wall Street standards, with Visible Alpha’s mean target at $5.50 and most analysts having “hold” ratings; the shares closed Friday at $4.90.

Frontier last week announced 20 new routes, including 14 serving Spirit focus cities Baltimore, Detroit, and Houston, which Ben Schlappig of travel blog One Mile at a Time said was a sign Frontier “smell[ed] blood.” By the end of the year, Deutsche Bank said, Frontier’s network could overlap 40% of Spirit’s.

Spirit’s fleet could also shrink through the restructuring process, Deutsche Bank said.