American put out a very tersely-worded release last week announcing that its relationship with JetBlue was coming to an end. This had to be American’s decision, and it’s not entirely surprising. But is it the right move?
I suppose I should start by going back to a post I wrote last year saying that “I have no doubt that a stronger relationship with JetBlue is a good thing for American.” Oops. Guess I was wrong about that. But circumstances have changed since that time.
On American’s side, I assumed that American would still want to have a big presence in New York, even though I didn’t think it was a good idea. I figured that instead of flying money-losing airplanes on a lot of routes it could work more closely with JetBlue to create a broader presence that would help rival Delta and United. Then American could focus on the bread and butter long-haul, big business market routes that it serves well today. Both airlines would be happy.
What I failed to consider is that American isn’t nearly as tied to New York as I thought they’d be. They don’t need JetBlue to help them quit over-serving the city; they can handle it themselves. Why do I say that? Well we got our first look at American’s post-merger New York strategy back in January. American started pulling out of the mid-sized business markets on its own and redeployed its airplanes to instead serve the needs of smaller city travelers looking to go TO New York. So the New York strategy is about making it work for the rest of the network as opposed to the United or Delta strategy to “win” New York. It will still serve the routes that it needs to serve, but it doesn’t need JetBlue to enhance its presence.
On JetBlue’s side, the airline made some very big decisions to increase competition with airlines like American. In particular, its Mint premium cabin product which gets introduced between New York and LA/SF in June is a direct threat to American. It is also growing its presence at Washington/National, flying up against American there. As JetBlue starts trying to move more upmarket into American’s turf, the partnership was bound to fray.
That being said, you can overlook those things if the partnership brings enough value. It appears that simply wasn’t happening.
The partnership was a fairly loose one. American’s travelers flying on JetBlue routes out of New York and Boston that were NOT served by American could earn miles in the AAdvantage program. These were just regular redeemable miles and not elite qualifying miles. For that reason, it probably attracted the leisure traveler more than anyone else. And it was most likely a happy bonus and not a purchase decision driver for that customer. That’s why I figured if this partnership was going to make sense, it should have grown to include elite qualifying miles. Whether that was ever on the table or not, I have no idea, but I would guess it wasn’t. American just wanted to end this.
With the US Airways network combining with the American network, the new American can now serve these people better than they could before anyway. A lot of the routes in the partnership are now served with a ton of connections over US Airways hubs. Look at West Palm Beach, for example. American could get you there from Boston a couple times a day over Chicago or Dallas (ouch). But now there are a ton of flights via Philly, DC, and Charlotte. There’s just far better utility than American could provide in those north-south and intra-Northeast markets before the merger.
American probably figured that this was benefiting JetBlue more than anything. It was just last year that JetBlue CEO Dave Barger said “we look forward to deepening and expanding the relationship with American Airlines.” Of course, JetBlue has changed its tune now, apparently saying that the agreement was underperforming. But that could simply be an effort to save face.
My guess is that JetBlue won’t really miss the mileage-earning part here but rather the end of the interline agreement. Interline agreements allow airlines to sell tickets with flights on both airlines and can allow them to check bags on to each other. American is ending this outright, meaning that JetBlue now has no interline agreement with a major US carrier. That hurts JetBlue more than it hurts American since JetBlue added very few destinations for American anyway.
With all that in mind, I’m now not surprised it’s ending considering how things have progressed. Now let’s see what happens with American’s partnership with Alaska Airlines. (If that one ends, on the other hand, I’d be very surprised.)
[Original photo of woman via Sutterstock]