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]
23 comments on “American Decides to Cut All Ties with JetBlue”
Would it be a prudent move for JetBlue to join forces with Alaska? After all American will gain a lot of utility with the US Airways hub in Phoenix. As a result, American’s partnership with Alaska may also become less importent to them.
Lets not forget about the growth in Seattle by Delta recently. They have been loosening there partnership with Alaska as well. With those changes, JetBlue may have an opening similar to the partnership they have with Hawaiian.
I don’t see how JetBlue and Alaska help each other here. Hawaiian and JetBlue had a specific reason to work together. Hawaiian launched a new JFK route and needed support to help it survive. JetBlue is happy to do it, oh, and host HA in their own terminal as well. But Alaska wouldn’t really get much benefit from a partnership with JetBlue.
It’s one thing to end a marketing program with another carrier, but it’s another thing to end your ticketing/baggage agreement with one. You don’t see AA end that with head to head rivals DL/UA, so you know it’s a way to punish B6 for something.
On the west coast unless AA or US are planning to rally the old PSA/AirCal system they each destroyed, AA would still need AS as a partner. Now that DL is trying to move in on AS in Seattle, AS/AA/US might become more friendly with each other.
I don’t understand ending the interline. I thought the legacy majors interlined with everybody – that flexibility can come in handy. jetBlue is different in that they seem to market and really emphasize their interline possibilities, but I’m sure they could have turned all that off for the AA one.
tharanga – Nobody interlines with JetBlue domestically. Well, except for Cape Air. I’m assuming this is just a continuation of the US Airways pre-merger policy on dealing with JetBlue.
B6 can just continue interlining with every carrier from Europe/Middle East and add some spokes from BOS and JFK. They’re doing just fine.
Time to end the antitrust immunity of US Carriers’ revenue sharing agreements with foreign carriers now that the US airline industry is an oligopoly.
I am sorry to see AA terminating links with Jet Blue. A year ago both CF and I noted that the, then, new partnership could change as CF noted “under the new management”, and I stated that the new CEO, Parker could “muddy the water”.
In my opinion this decision was made by Parker or with Parkers approval, otherwise it would never have happened. I truly believed that this teaming was a good thing for all parties concerned – including consumers. Parker and his team seem to be tightening the noose for consumers as he limits options for travelers. AND – it is only the begining. Not a good thing.
Hey CF check into Charolete NC news this am
I think AA has bigger problems coming. US Airways
Mechanics Union is asking for a 30 day notice for
a Strike Vote Mid April. US Air and AA Mechanics
have separate contracts and negotiations have
stalled. If US Air mechanics go on strike and I am
betting AA Mechanics will not cross the picket lines.
Don’t forget US Airways pilots are suing AA pilots (as well as AAL and US Airways) over seniority integration. Also, Parker and Kirby may have overplayed their hand with Eagle Pilots. Things could get even messier.
East US Airways pilots are suing. The West (America West) don’t support the lawsuit. East pilots are still trying to dodge the binding arbitration that they agreed to.
Nobody will be released you can bet on it unions have no power anymore and parker knows it STALL STALL STALL .
ORD Rich – All smoke and no fire. They’re never going to be released and allowed to strike. This is just normal negotiating tactics to try to move things along more quickly.
I did not read into the press release that they were ending their standard interline agreement. I am assuming that baggage and connections will be handled the same way as most major carriers, but they are ending joint ticket sales and frequent flier points.
Tom – Not true. They will end all ticketing and baggage agreements.
WOW… that is severe.
Totally agree with your assessment of AA’s strategy vis-a-vis NYC. I had been doing some work with them last year on their “Blue Ocean” (http://skift.com/2013/01/16/american-airlines-in-bankruptcy-launches-investment-fund-for-startups/) project with NYC tech startups and small businesses. Since November, when the DOJ deal was made, AA has totally abandoned the endeavor, and the people working on it have either left to go to Delta in NYC which has launched its own similar initiative or left the industry entirely. It doesn’t seem to me that AA values NYC the way its competitors do.
It doesn’t seem to me that AA values NYC the way its competitors do.
It might relate to the fact that American is #3 at a 3-hub airport JFK & EWR is United’s east coast gateway. So there’s little upside for them in the NYC area, yet they are cutting off there nose to spite there face by killing the partnership with JetBlue wich has long term benefits for both carriers as cranky noted.
I would be interested to see if DL or UA decide to pick up a partnership with B6. Some Pros for UA would be that B6 is 19% (I think I know I am close) owned by Lufthansa. Now Negatives UA’s hub is at EWR and B6 is at JFK just don’t see that working well.
Now on the DL side plus JFK hub cant think of a down side
There isn’t really a downside between a Delta & JetBlue interline agreement. This is especially true if Alaska joins the party. If there is any downside, it’s the overlap of flights to Florida from northeast cities. But to me this shouldn’t be a big deal.
sad to see it leaves less options
What about the fact that the new EAL will fly the same routes currently flown by Jet Blue, which were ironically the old routes flown by American but EAL before that?