JetBlue Airways (JBLU -1.99%) has a deal to buy Spirit Airlines (SAVE -0.46%), emerging victorious after a six-month bidding war against Frontier Group Holdings (ULCC -2.20%).

JetBlue won the battle, but now the real fight begins. Investors have every reason to be excited about the prospects of a combined JetBlue/Spirit, but it will likely take years for the deal to live up to its potential, if it ever does.

A quick connection

Frontier put Spirit in play back in February, announcing a cash-and-stock deal that would have created the nation's fifth-largest carrier. JetBlue came forward with a rival, higher, bid a month later, but Spirit's board remained loyal to Frontier in part due to fears that antitrust authorities would quash any JetBlue merger effort.

JetBlue remained steadfast in its offer, and its persistence paid off. On Wednesday, Spirit and Frontier announced they were terminating their agreement after Spirit failed to win shareholder support for the deal.

It took less than 24 hours for JetBlue to secure a deal. Terms of the deal call for JetBlue to pay $33.50 per share in cash for Spirit, including a prepayment of $2.50 per share payable once Spirit shareholders sign off on the deal. To address regulatory concerns JetBlue has also agreed to pay a $0.10-per-month "ticking fee" starting in January until the deal closes, and a $400 million breakup fee if the merger is rejected.

A chance to "turbocharge" growth

For both Frontier and JetBlue, buying Spirit was a unique opportunity to springboard growth in a difficult operating environment. Airlines have seen demand rebound from pandemic lows, but a shortage of pilots and planes has put a cap on organic growth.

Smaller carriers like JetBlue have been hit harder by the pilot shortage because they tend to pay less than larger rivals like Delta Air Lines (DAL -0.71%) or United Airlines Holdings (UAL 0.55%), meaning those titans can poach pilots to fill their own needs

Buying Spirit would give JetBlue a much larger pilot roster, and a huge order book of new jets. The combination would have more than 1,700 daily flights to more than 125 destinations in 30 countries, with a fleet of 458 aircraft and more than 300 Airbus (EADSY 0.18%) jets on order.

"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," JetBlue CEO Robin Hayes said in a statement. "This combination is an exciting opportunity to diversify and expand our network, add jobs and new possibilities for crew members, and expand our platform for profitable growth."

Not an easy sell to regulators

For Hayes to gain control of Spirit, he will have to convince a skeptical audience in Washington that the deal is pro-consumer. Spirit's board was not incorrect in its original conclusion that JetBlue likely will face an uphill battle winning over regulators.

Spirit, like Frontier, operates an "ultra-low-cost" model that offers low base fares but charges for extras that other airlines include in their fares. JetBlue has always been more of a hybrid, selling a premium experience at a somewhat higher price. JetBlue has said it intends to shift Spirit's operations to its model, which would mean removing seats from Spirit planes and reconfiguring the cabins to provide more premium seating.

Fewer discounted seats would likely mean higher prices, a sticking point for regulators. JetBlue and Spirit also both primarily fly around the East Coast and the Caribbean, meaning more overlap and the elimination of a competitor on a lot of routes.

JetBlue is already in the regulatory crosshairs due to its close partnership with American Airlines Group (AAL -0.72%). The Department of Justice has voiced concerns about an arrangement that allows the two airlines to coordinate operations in the U.S. Northeast, and is unlikely to look favorably on JetBlue's bid to consolidate the industry.

JetBlue has offered to divest gates at crowded airports to appease regulators, but has shown no indication it is willing to give up the American partnership.

JetBlue shareholders need to buckle up

Spirit shares are up on the JetBlue deal, but still trade at a 25% discount to JetBlue's offer price. That wide gap indicates how skeptical the markets are that JetBlue will actually close the deal.

The caution is justified. At best, JetBlue investors are facing a bruising Capitol Hill battle that is likely to drag on for months, after which JetBlue would face a long and costly integration to bring Spirit up to its standards. Airlines historically have struggled to merge union seniority lists following a merger, and almost inevitably resolve issues with pay raises and other perks.

At worst, JetBlue's management will be distracted for months, pay out some cash to Spirit shareholders, but not be able to close the merger. Management already has a lot to deal with even without that distraction, with fuel costs soaring and the prospect of softening demand due to inflation and the threat of a recession.

There's great potential in the JetBlue/Spirit deal, but given the risks and the extended timetable there is no reason for investors to buy in right now.