Spirit Airlines has rejected a revised takeover bid from JetBlue Airways in favor of an earlier offer from Frontier Airlines.

Despite attaching a $200 million reverse-breakup fee and agreeing to a series of gate and route divestitures, JetBlue’s offer would still “involve an unacceptable level of closing risk,” Spirit’s board of directors concluded in a May 2 letter to JetBlue CEO Robin Hayes.

Of particular concern to Spirit was the Northeast Alliance (NEA) between JetBlue and American Airlines, which the US Justice Department (DOJ) has described as anti-competitive and sued to block in federal court. The board wrote that it “struggles to understand” how the DOJ, or a court, could be persuaded to greenlight any possible merger with JetBlue while the “anti-competitive” NEA remains in place.

In order to reduce regulatory risk, Spirit had proposed a covenant on April 25 that would require JetBlue to “take any action” required to obtain regulatory clearance, up to and including jettisoning the NEA altogether, but JetBlue has refused to modify its stance on the partnership.

In its revised bid submitted April 29, the airline said it would offer a remedy package that includes divestiture of all Spirit’s assets in Boston and New York—as well as gates and assets at other airports like Fort Lauderdale—but otherwise planned to preserve the NEA in its current form.

JetBlue said in a statement that it “strongly” believes the NEA will be allowed to continue because it is delivering customer benefits including increased connectivity and more competition to major airlines in Boston and New York. The airline said its own analysis found that the presence of the NEA has “no meaningful economic effect” in a potential merger, given the proposed remedy package.

Still, Spirit’s board determined the divestitures do not go far enough, and that no actions short of completely eliminating the NEA would be enough to limit regulatory risk to an appropriate level.

“By prioritizing the NEA…[JetBlue] imposes on our stockholders a degree of risk that no responsible board would accept,” the board wrote.

Moreover, the board expressed misgivings about the DOJ’s willingness to approve a higher-cost airline like JetBlue to acquire a ULCC like Spirit, noting the transaction would “eliminate the largest ULCC and remove significant low-cost/low-fare capacity” from the US market. The board also cast doubt on JetBlue’s contention that it brings down major airline fares as much as ULCCs in the markets it enters via the so-called “JetBlue Effect.”

“Given this substantial completion risk, we believe JetBlue's economic offer is illusory,” the board concluded.

Spirit’s rejection of JetBlue’s offer means that its shareholders will now proceed to vote on the $2.9 billion cash-and-stock offer from Denver-based Frontier. There is also the option for JetBlue to issue a formal proxy to present its offer for a side-by-side shareholder vote, although whether that step will be pursued is uncertain, according to Raymond James analyst Savanthi Syth.

Spirit’s board reiterated on April 2 that it expects the merger with Frontier to close sometime in the second half of 2022.

CORRECTION NOTE: This article has been updated to make clear that JetBlue did not change the per share offer of $33 in its revised offer.