US-based ultra-low-cost carrier Spirit Airlines has called off its planned $2.9bn merger with Frontier Group Holdings, the parent company of rival Frontier Airlines.

The deal was struck in February this year, when Frontier Group Holdings agreed to buy Spirit Airlines to create the fifth-largest airline in the US.

It included the assumption of net debt and operating lease liabilities.

The merger aimed to offer more ultra-low fares for journeys across the US, Latin America, Caribbean region, as well as prime cities and underserved communities.

The termination of this deal sets the stage for a takeover by JetBlue Airways, which made an unsolicited $3.6bn bid for Spirit Airlines in April this year.

JetBlue offered $33 a share in cash for purchasing Spirit Airlines and said that the offer is a ‘superior proposal’ compared to Frontier’s bid. However, Spirit Airlines rebuffed this offer.

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Since then, a bidding war started between the two suitors, with Frontier later increasing the transaction’s cash portion by $2 per share to $4.13 a share and raising its reverse termination fee by $100m to $350m.

JetBlue, too, kept on sweetening its offer. 

Spirit Airlines president and CEO Ted Christie said: “While we are disappointed that we had to terminate our proposed merger with Frontier, we are proud of the dedicated work of our Team Members on the transaction over the past many months.

“Moving forward, the Spirit Board of Directors will continue our ongoing discussions with JetBlue as we pursue the best path forward for Spirit and our stockholders.”

Barclays and Morgan Stanley & Co are offering financial advice to Spirit while Debevoise & Plimpton and Paul, Weiss, Rifkind, Wharton & Garrison are legal advisers.