By Se Young Lee and Danny Lee

(Bloomberg) -- Allegiant Travel Co. agreed to buy Sun Country Airlines Holdings Inc. in a $1.5 billion cash-and-stock transaction, further driving consolidation in the US airline industry amid intensifying competition.

Sun Country’s shareholders will receive 0.1557 shares of Allegiant common stock and $4.10 in cash per Sun Country share, the companies said Sunday. The offer is about 20% above Sun Country’s closing share price Friday, according to a release. Shares in Sun Country rose as much as 18% to $18.54 in premarket trading Monday, while Allegiant was little changed.

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The combined entity will provide more than 650 routes, including 18 international destinations in Mexico, Canada, the Caribbean and Central America, the companies said, and will bring together Allegiant’s presence in small and mid-sized markets with Sun Country’s larger cities, with virtually no overlap.

The deal brings together two smaller carriers that have primarily focused on offering direct flights to price-sensitive US vacationers. Second-tier carriers in the US are seeking to bulk up by combining as they look for an edge against dominant players such as United Airlines Holdings Inc. and Delta Air Lines Inc.

“Together, our complementary networks will expand our reach to more vacation destinations including international locations,” said Allegiant Chief Executive Officer Gregory C. Anderson, who will lead the enlarged airline.

The low-cost airline model offered by Sun Country and Allegiant is under pressure as major US airlines eat into their customer base with basic economy fares and more travelers seek to upgrade to a fuller-service experience.

The deal, which brings together the country’s ninth- and 12th-largest airlines, comes in the wake of Alaska Air Group Inc.’s September 2024 combination with Hawaiian Airlines.

More could follow. Frontier Group Holdings Inc. renewed its pursuit of ailing Spirit Aviation Holdings Inc. in a make-or-break merger discussion after it filed its second bankruptcy in less than a year in August. Spirit has been in dire straits after its failed merger in 2024 with JetBlue Airways Corp.