Spirit Airlines Inc. (SAVE  ) terminated its pending merger with Frontier Group (ULCC  ) last week, coming months after JetBlue Airways (JBLU  ) began courting investors in an attempt at a hostile takeover.

Despite the immense reservations that Spirit management has had with JetBlue's offer since early on, investors appear to have been swayed by the New York based airline's offer. JetBlue offered at least $1 billion more for Spirit as well as a larger breakup fee if regulators strike down the merger.

JetBlue announced shortly after Spirit's termination of its Frontier deal that the low-cost carrier would be pursuing its offer. In a press release, JetBlue has claimed that the merger will create a "national low-fare challenger" to dominant airlines.

"We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes," said JetBlue CEO Robin Hayes. "We look forward to welcoming Spirit's outstanding Team Members to JetBlue and together creating a customer-centric, fifth-largest carrier in the United States. Spirit and JetBlue will continue to advance our shared goal of disrupting the industry to bring down fares from the Big Four airlines."

JetBlue's victory lap seems a bit premature considering the steep regulatory hurdle that faces the merger, and potentially creating its own stiff competition by handing total control of the domestic ultra-low-cost airline market to Frontier. As the offer stands, JetBlue intends to assimilate Spirit's personnel, aircraft, and other assets into itself, rather than operate Spirit as an owned brand.

Integrating Spirit's assets and personnel also doesn't look good for JetBlue considering the regulatory scrutiny it has received for its Northeast Alliance with American Airlines (AAL  ). A coalition of the Department of Justice and attorneys general of six states filed an anti-competition lawsuit against the alliance, which allowed the companies to cooperate on rewards programs and streamlining travel through participating airports. In addition to the anti-competition charges, the merger faces a pro-antitrust regulatory environment.

Pulling Spirit away from its ultra-low-cost model will inevitably raise prices, and as many experts and commentators have pointed out, this will restrict many low-income Americans to a single, smaller airline. JetBlue's intent is likely to draw intense scrutiny because of this drastic contraction of the ultra-low-cost market, which is likely why Spirit initially turned down JetBlue's offer in favor of Frontier. While still likely to face regulatory scrutiny, a Frontier-Spirit merger was expected to have an easier time due to the identical business models of both airlines.