Sorry for the tease in today’s earlier post, but these became public at different times, so I decided to go with a rare double post. Today, American and JetBlue are creating a strategic partnership in the same vein as the American/Alaska deal. Some have suggested American was irrelevant in New York and would have to pull back, but creativity has bred another option while also boosting Boston. This should instantly make American more relevant where it needs the help most.
This particular partnership just covers Boston and New York (JFK/LaGuardia/Newark) and nothing else. That means these two will continue to bash heads in Philly and South Florida, and JetBlue will continue to do… whatever it is doing in LA. I had long thought there was an opportunity to carve up JetBlue with the north going to American and the south to United in order to make them both more competitive in those regions. But why split the airline up if American can just partner with the part that it needs?
Assuming that the economics create enough incentive for each airline to take the other’s connecting flows in large numbers — and this is really the key to the whole thing — this will be a boon for both carriers. I’m assured that this is structured similarly to the Alaska deal which was meant to accomplish just that, but of course, we haven’t seen that in practice yet.
American’s strategy in New York since the merger has effectively been a) serve the big business markets and b) bring people from smaller cities where American has strength to New York. It was missing out on opportunities to actually serve most New Yorkers, and it was ok with that because it had to be. It was never going to get enough slots to be competitive, so why give a half-hearted effort and make the airline underperform even more in the region? That would only end up losing more money.
Now with JetBlue, American can gain a big benefit without having to spend a dime. JetBlue has huge relevance to New Yorkers, but it’s weaker outside the eastern seaboard… and it has no long-haul. This will eventually result in a codeshare and frequent flier partnership, so that means loyalists to either program will now be able to get most of their needs filled by sticking with their preferred airline and its partner. This creates a real — though obviously not perfect — third competitor to Delta and United in New York.
What’s really interesting here is that the airlines can now work together to serve their strongholds by moving slots around if they see fit. I spoke with both Chief Revenue Officer Vasu Raja at American and SVP Airline Planning Scott Laurence from JetBlue and they talked about this in real terms.
For example, with the added relevance to people in New York, Vasu says American will pull its 50-seaters from New York and be able to offer everything on airplanes with two classes onboard. Meanwhile, JetBlue could grow beyond its tiny presence at LaGuardia by utilizing gates and slots that American might not need.
At JFK, American is going to rely on JetBlue to really bulk up the feed for international. To accomplish this, it could swap a morning slot for an evening slot with JetBlue since they each have better uses at those times.
American is expecting the benefit to be enough that it will bring back Rio service this next winter, add Athens service for next summer, and start Tel Aviv year-round. Yes, it will be a pain to connect between Terminals 5 and 8, but as Scott noted, JetBlue feeds all kinds of airlines at JFK at different terminals successfully today. They may look at ways to improve the connection experience, but it will work either way.
I brought up the issue that American and JetBlue have more overlap than American and Alaska, so how would that work? I asked, for example, about LA to JFK. Vasu says they can focus the A321T as a true corporate shuttle while JetBlue can help serve all those coach travelers that American has turned away due to lack of capacity. Even in competitive markets, they think there’s opportunity.
Vasu was feeling characteristically bullish by saying that this will be comparable to Philly as a Transatlantic gateway. That would be… something. But New York isn’t the only winner here. Don’t forget about Boston.
Vasu tells me that American’s largest AAdvantage base outside of its hubs is in Boston. Now those travelers will have a whole lot more options for earning miles when they fly JetBlue. At the same time, JetBlue’s customers will have access to American’s flights, including London. This is much less interesting to JetBlue since it will likely be flying its own metal to London soon enough, but it still gives JetBlue a global partner to help counter Delta’s growing presence.
This along with the Alaska deal gives American significant presence along the coasts where the airline is weakest. Even better for American, it doesn’t have to pour a bunch of money in to get the benefit. Delta knows the pain that can come with equity deals — its second quarter results included over $2 billion in writedowns for LATAM, Aeromexico, and Virgin Atlantic investments. If this does work as planned, then it’s a big win for JetBlue and American. If not, well, nothing is lost.
