Bankrupt Spirit Aviation Holdings Inc. is in discussions to merge with Frontier Group Holdings, people familiar with the matter said.

A transaction could be announced as soon as this month, said the people, who asked not to be identified because the matter is confidential. The discussions are ongoing and could end without a deal taking place, they said.

A merger between the airlines would mark a significant step for Spirit, which filed its second bankruptcy in less than a year in August. It comes as ultra-low-cost carriers struggle with rising costs and fierce competition from larger U.S. airlines..

The discussions are taking place as Frontier abruptly replaced its longtime leader and Chief Executive Officer Barry Biffle.

Representatives for Spirit didn’t immediately respond to a request for comment. Frontier declined to comment.

Executives at Frontier have pushed for years for a combination of the two lower-cost carriers, which once specialized in offering heavily discounted ticket prices while charging travelers for anything else — including printed boarding passes and inflight water. Both have recently begun to offer more upscale options in a bid to expand their customer base.

Spirit has been buffeted by a bruising year for U.S. aviation, which has included a government shutdown, trade feuds and network disruptions that have curbed flying. Beyond these factors, the basic economy fares and strong networks of major carriers like United Airlines Holdings Inc. have made it harder for traditional discounters like Spirit to compete.

Earlier this year, Spirit filed for Chapter 11 bankruptcy, marking the failure of an earlier restructuring that cut about $795 million in debt from its balance sheet and required bondholders to inject additional capital into the business.

Florida-based Spirit has been taking steps to reduce labor costs as part of the restructuring.

In November, Spirit announced 150 job cuts across corporate and operational roles. Earlier in the year, it furloughed roughly 1,800 flight attendants and at least 270 pilots. Spirit employed roughly 12,800 people at the time of its first bankruptcy filing in November 2024 to restructure about $1.6 billion in debt.

Spirit rejected an 11th-hour Frontier offer in January, following its first bankruptcy filing. The $2.2 billion proposal was “inadequate and unactionable,” Spirit said at that time.