Allegiant Travel said Sunday it is acquiring fellow leisure carrier Sun Country in a $1.5 billion cash and stock deal, including debt, a plan that comes as budget airlines in the U.S. have faced a surge in costs following the pandemic and an increase in domestic capacity.

“Our two complementary airlines will create the leading, more competitive, leisure-focused airline in the U.S.,” Allegiant CEO Greg Anderson said in an interview.

Smaller budget and leisure-focused airlines are dwarfed by larger competitors Delta Air Lines, American Airlines, United Airlines and Southwest Airlines, which together had a roughly 70% domestic market share in the U.S. in the 12 months ended Oct. 31, according to federal data.

Both Las Vegas-based Allegiant and Minneapolis-based Sun Country focus on cost-conscious travelers, connecting smaller cities to sun, beach and other vacation destinations.

Sun Country also flies charters, as well as packages for Amazon, a business Anderson said was crucial to the deal. The airlines’ CEOs discussed their proposed combination with Amazon beforehand, he said.

The two carriers have faced fewer headwinds than other low-cost airlines, changing capacity around to meet demand, analysts noted. Allegiant and Sun Country, stripping out the former’s failed foray into owning a resort in Florida, have fared better than rivals.

Deutsche Bank analyst Michael Linenberg said in a note Sunday that for this year “we estimate that Allegiant and Sun Country will produce operating margins of 9.3% and 11.7%, respectively, both in the ‘ballpark’ of what we are forecasting for industry financial leaders Delta and United.”

Sun Country shares were up 10% on Monday afternoon, trading around $17.50, while other U.S. airlines, including Allegiant, dropped.

Allegiant’s offer has an implied value of $18.89 for each Sun Country share, a premium of almost 20% over Sun Country’s closing stock price of $15.77 on Friday, Allegiant said.

Allegiant shareholders would own about 67% of the combined company and Sun Country’s shareholders would own around 33%, the airlines said. The deal includes $400 million of Sun Country’s net debt.

The deal will test the Trump administration’s appetite for an airline merger.

Allegiant’s Anderson expressed confidence that the agreement would be approved, noting that the two carriers have little network overlap. In a report Monday, aviation data firm Cirium said the carriers’ route overlap is “basically zero.” The airlines expect the deal to close in the second half of this year.

Allegiant approached Sun Country in late fall, Anderson said. If the deal is approved by regulators, Anderson would become CEO of the combined airline. Sun Country CEO Jude Bricker, Allegiant’s former chief operating officer, would join Allegiant’s board.

The Biden administration challenged JetBlue Airways’ acquisition of Spirit Airlines, which is now in its second bankruptcy in less than a year and is fighting for survival. A federal judge sided with the Biden Justice Department and blocked the JetBlue-Spirit on antitrust grounds deal two years ago. The JetBlue deal had upended an earlier 2022 merger deal between Spirit and Frontier Airlines.

Spirit and Frontier leaders have engaged in repeated discussions over the following years, and airline analysts still point to their combination as a possibility.

The Biden administration, however, cleared Alaska Air’s nearly $2 billion acquisition of Hawaiian Airlines in 2024.