I had a completely different post lined up for today, but really, when news like this breaks, it’s hard to stay away. For those who haven’t yet heard, JetBlue will issue a bunch of new shares to
Lufthansa giving them 19% of the company for about $300m. So far, there is no relationship between the two airlines in a commercial sense, but Lufthansa will hold a seat on JetBlue’s board, and after listening to their conference call this morning, it’s clear that they want more.
First thought? Enjoy your bitch-slap, United. Oh sure, that young little hussy JetBlue can’t replace you . . . yet, but Lufthansa is clearly not as faithful to you as you might have hoped. Maybe you shouldn’t have let yourself get so out of shape over the years.
Second thought? This is great for JetBlue. They get a bunch of cash, which is nice, and they get some solid external guidance from a very large, profitable European airline on their board. And yes, there are so many opportunities for cooperation here. Sweet.
Third thought? What exactly is Lufthansa thinking? This is why my brain hurts right now. They’ve already got a very strong presence in the US with both United and US Airways in the Star Alliance. Why not buy into them? Maybe they don’t like where things are going with those guys. But point-to-point JetBlue?
Even at the bare minimum, I think this makes sense. JetBlue’s shares, like those of most other airlines right now, are in the toilet. It’s a nice cheap investment that’s made even cheaper by the exchange rate. So, they have a good investment that also can give them a little presence in NYC with even the most basic of interline agreements, something that Star Alliance doesn’t have.
At most, it could be much bigger. I’m not really worried about US Airways in this equation, because they’ve never been a major Star Alliance player. But Lufthansa and United were founding Star members, lovers, and they share revenue on flights over the North Atlantic.
But let’s say that Lufthansa is sick and tired of United not paying attention to their business. Maybe they aren’t happy with management and they want something different. Hello, JetBlue.
United isn’t going to walk away from Lufthansa, because they have nowhere else to go (unless someone buys them). They need Lufthansa and Star more than the other way around. So, Lufthansa can keep United around while JetBlue has the chance to build up its domestic operation into a strong network. Does that take years? Most definitely. Can Lufthansa wait? Yeah, sure.
But what about international flying? Who cares? Right now, Lufthansa has to split Transatlantic revenues with United. So, they can kick them out and do the flying themselves with JetBlue waiting on the other end to fill up their planes. Remember, now with open skies, Lufthansa can fly from anywhere in Europe to anywhere in the US.
What about Pacific routes? Eh, ANA, Thai, Air China, Air India, Singapore . . . the list goes on and on. There are plenty of carriers on the other side that can take care of that market. So, JetBlue can become a major domestic powerhouse and then auf wiedersehen, United. They would lose US government traffic across the pond (since they have to fly US carriers), but I’m not sure how much business that is for them now.
Am I crazy? Probably. But remember, United has been talking about mergers for a long time. They may go run off with someone else and leave Star Alliance anyway. If Tilton can make enough money for him and his investors, don’t think he won’t do it.
Do I think this is going to happen? Nah, but it’s fun to think about it. We’ll probably see something happen that’s more in between these two extremes where Lufthansa gets to play with everyone. Pretty cool.