CHICAGO—Budget carriers Frontier Group Holdings and Spirit Airlines Inc on Monday unveiled plans to create the fifth-largest U.S. airline in a $2.9 billion tie-up likely to tighten competition against traditional carriers. The proposal to form a new no-frills carrier controlled by Frontier Airlines pushed up shares of Spirit as much as 18.7 percent, though several analysts pressed the airlines over possible difficulties in obtaining regulatory approval. “In a competitive industry like ours, the lowest costs always win,” Frontier Chief Executive Barry Biffle told analysts. “These low costs will, in turn, enable us to keep our fares low for customers.” The move comes at a time when the U.S. airline industry is grappling with volatility in travel demand due to new COVID-19 variants. At the same time, costs are soaring on a combination of rises in wages, fuel prices, and airport charges. Spirit’s wage expense as a percentage of revenue shot …