American budget carrier Frontier Group Holdings has signed a $2.9bn deal to acquire rival discount carrier Spirit Airlines, creating the fifth-largest airline in the US.

According to the merger deal, Spirit Airlines investors will get 1.9126 shares of Frontier and $2.13 in cash for each share held.

The deal is valued at $6.6bn, including the assumption of net debt and the operating lease liabilities.

Through this combination, the two carriers aim to offer more ultra-low fares for passengers travelling across the US, Latin America, the Caribbean region and major cities and underserved communities.

This merger is expected to deliver $1bn in annual consumer savings and increase connectivity with more than 1,000 flights operating daily to more than 145 destinations in 19 countries.

The combined airline is expected to offer various operational efficiencies, expand with more than 350 aircraft to deliver more ultra-low fares, and expand frequent flier and membership offerings.

Spirit and Frontier intend to add 10,000 direct jobs by 2026.

The merged entity will feature a modern and fuel-efficient fleet comprising a line-up of A320neo aircraft, and is expected to exceed 105 seat miles per gallon by 2025.

Additionally, the definitive merger deal is anticipated to provide ‘enhanced value’ to the two firms’ shareholders.

The completion of the deal, which awaits the approval of regulators and Spirit stockholders, is expected in the second half of this year.

The transaction already secured the go-ahead from the two companies’ boards.

Once completed, Frontier equity holders will have a 51.5% stake in the combined entity while the remaining interest will be held by existing Spirit equity holders.

On a combined basis, the merged group will have a cash balance of nearly $2.42bn as of the end of 2021.

Spirit Airlines president and CEO Ted Christie said: “We are thrilled to join forces with Frontier to further democratise air travel.

“This transaction is centred around creating an aggressive ultra-low fare competitor to serve our guests even better, expand career opportunities for our team members and increase competitive pressure, resulting in more consumer-friendly fares for the flying public.”

In December last year, Spirit Airlines introduced its automated self-bag drop technology with a biometric photo-matching system at Dallas Fort Worth International Airport (DFW).