Two low-cost airlines are merging in $1.5 billion deal

Core Viewpoint - Allegiant Air plans to acquire Sun Country Airlines for $1.5 billion, aiming to create a single low-cost airline in a challenging market for low-cost carriers [1]. Deal Structure - The acquisition will involve both cash and stock, with Allegiant taking on approximately $400 million of Sun Country's debt [2]. - Sun Country shareholders will receive $18.89 per share, consisting of $4.10 in cash and a 0.1557 share in Allegiant stock [2]. Ownership Distribution - Upon regulatory approval, the merger is expected to be completed by the end of 2026, resulting in a combined airline where Sun Country shareholders will own 33% and Allegiant shareholders will hold 67% [3]. Company Background - Allegiant Air, established in 1997, focuses on serving smaller markets with low traffic, currently operating 117 destinations across the U.S. [4]. - Sun Country Airlines, founded in 1982, operates a similar model, connecting smaller markets to vacation destinations in Florida, Mexico, and the Caribbean [4]. Strategic Insights - Allegiant's CEO expressed admiration for Sun Country's business model, highlighting its flexibility and strong margins, which align with Allegiant's strategic goals [5]. - The merger is seen as a way to expand both airlines' reach to more vacation destinations, including international locations [5]. Market Context - The deal comes at a time when low-cost airlines are facing high costs and competition for similar routes, although Sun Country has reported a profitable quarter with revenue of $255.5 million in October 2025 [6]. - Following the merger announcement, stocks of both airlines experienced an increase in pre-market trading [6].