What happened

JetBlue Airways (JBLU -1.99%) is going directly to shareholders to keep its bid to pry Spirit Airlines (SAVE -0.46%) away from Frontier Group Holdings (ULCC -2.20%). The hostile bid sent Spirit shares soaring as much as 13.7% higher on Monday, while Frontier shares are 7% higher and shares of JetBlue traded down about 5%.

So what

An airline industry takeover battle got a fresh twist on Monday, with Spirit the target of overtures by both Frontier and JetBlue. In February, Frontier and Spirit agreed to combine in a cash and stock deal that valued Spirit at about $24 per share at the time. In April JetBlue came in with its own $33-per-share cash offer.

A ground worker directs a plane to its gate.

Image source: Getty Images.

Last month, Spirit's board deemed Frontier's offer to be superior, despite its lower value, because the board believes Frontier would have an easier time getting past regulatory scrutiny and completing the deal. The board determined that Spirit and JetBlue have more overlap, and JetBlue's partnership with American Airlines Group could make it difficult for the airline to argue that it would compete vigorously with American and other airlines.

On Monday, JetBlue took its case to Spirit shareholders. JetBlue filed a proxy statement urging Spirit holders to vote "no" at the June 10 meeting to approve the Frontier transaction. JetBlue also began a $30-per-share tender for Spirit shares, saying it would potentially return to the $33-per-share offer price subject to Spirit allowing it to conduct due diligence.

In a letter to Spirit shareholders, JetBlue highlighted the connections between Frontier and Spirit's board, which JetBlue CEO Robin Hayes argues is clouding Spirit's judgment when assessing the two offers. Hayes notes that Frontier chairman Bill Franke previously held that same role at Spirit, and has worked previously with Spirit directors, including board chair Mac Gardner.

"By refusing to engage on our original proposal, the Spirit board has deprived its shareholders of the most attractive value creating opportunity available to them," Hayes wrote. "We urge you to send a message to the Spirit board by voting "against" all proposals related to the Frontier transaction ... and tendering your shares into our offer."

Now what

Spirit shareholders have a tough decision ahead. In one sense, JetBlue even at $30 per share is clearly offering a substantially higher price. Frontier shares are down more than 25% since the deal was announced, meaning the cash and stock offer is worth a lot less now than it was when it was first made public. At Frontier's current price, Spirit shareholders are currently being offered total consideration of about $19.80 per share.

But Spirit's fears about JetBlue winning antitrust approval are not frivolous, and it is far from clear that Spirit shareholders would ever see that $30 or $33 per share even if they do reject the Frontier bid.

It's possible Frontier might sweeten its bid to try to get the deal over the line, but given the recent spike in fuel prices and the threat of an economic slowdown up ahead the airline has to be careful not to overcommit. The reaction of Frontier's share price could imply investors are betting the company could instead walk away, and seemingly does not support a market belief that these are the early days of a bidding war.

If nothing else, Monday's moves are a reminder that this merger saga is far from over. The weeks leading up to Spirit's June 10 shareholder meeting are likely to produce more drama.