JetBlue has not been quiet about its desire to have a domestic partner to help it fill some of the gaps it faces as a regionally-focused airline. It had one in American back when it tried to push through the ambitious Northeast Alliance (NEA). The courts didn’t take too kindly to that one, but JetBlue had a fallback plan… a Spirit merger which the courts also shot down. That left JetBlue with new management trying to figure out the right way forward. At this point, despite some of the speculation out there, it’s down to only one good option.
You’ve probably seen wild speculation ranging from a partnership with Southwest or Alaska to a merger with United. Everyone calm down. The only real option at this point is a more limited partnership with United. Reuters is reporting this is a done deal, but I won’t believe it until I see it actually announced. If that happens, however, it would be a good outcome for JetBlue.
What is it exactly that JetBlue wants? JetBlue President Marty St George reminded everyone on the airline’s recent earnings call.
… as far as the benefits that we expect to offer to our customers, the most important thing is, number one, a significantly higher network opportunity for earn and burn of TrueBlue points, which we think greatly improves the utility of TrueBlue. And that means, for example, today, if you are a customer in the Northeast and you love JetBlue for leisure, but twice a year you have to go to Omaha or Boise…. and the second thing is I’m really excited for just the overall broadening of the network opportunities, not just connectivity, but also just a sort of better opportunity to our customers to fly more places with more frequency.
Ok, so JetBlue wants a partner that will enable broad earning and burning of miles in TrueBlue. After all, that makes TrueBlue more valuable and it gets more people to sign up for that lucrative credit card. And it just wants a broader network for customers to access which would include higher frequency in relevant markets. This greatly narrows down the options.
Southwest is not one of them. There is no world where Rapid Rewards would be considered a meaningful broadening of JetBlue’s earn and burn access. I assume people are just getting hung up on hearing “Omaha or Boise,” but that’s just silly. The same goes for Alaska. JetBlue already has its international partnerships and it keeps adding earn and burn on them as of late. Alaska itself doesn’t add that much value in a partnership. And ULCCs? No value there.
So who does that leave?
Delta, well, that would probably be good for JetBlue. It’s also going to happen when hell freezes over. There is no love lost between these airlines, but specifically, why would Delta do this? It wouldn’t. It’s trying to kill JetBlue in Boston and New York. This would only help JetBlue in places where Delta doesn’t need much help. Even that’s questionable. There’s a reason that Delta has never been a part of this conversation.
The only two logical options are American and United. And American has now quite publicly announced it is out of the running. It sent a letter to the team and published it in its newsroom which I’ll talk about more next week.
With American out of the running, that leaves United as the only sensible option for the Blue Crew. That’s the only other possible partner that can give JetBlue what it wants.
JetBlue wants a global mileage earn and burn partner, and United is certainly that. It also makes JetBlue more attractive as an option for the large MileagePlus cohort. That’s obvious. Regarding more frequency to places around the network, United does provide that in New York, if people are willing to cross the Hudson and go to Newark. Elsewhere, it does provide added opportunity to connect via United’s hubs, but how big this opportunity is elsewhere isn’t completely clear.
What may make this more appealing to JetBlue is that United is likely pretty hungry for this deal as well, which could mean a better financial outcome for JetBlue.
Think about it this way. There are three markets that matter to JetBlue the most: New York, Boston, and Fort Lauderdale. United is strong only in one, New York.
In Boston, United is a fourth place airline, similar to American in New York, actually. Here’s a look at July departing seats:
July Departing Seats from Boston
Data via Cirium
United only serves its hubs, so it treats Boston like a proper spoke with ample service to the hubs but nothing else. This partnership would make United somewhat more relevant in Boston.
The same goes for Fort Lauderdale. United has been wanting some kind of toehold in South Florida for ages, and now it could get a small one. Here’s how that breaks down:
July Departing Seats From Fort Lauderdale
Data via Cirium
Fort Lauderdale is particularly interesting since JetBlue’s big competitor there is Spirit. The addition of a partner like United — even though it only serves its hubs plus Cleveland — means that JetBlue could further differentiate its ability to provide value through TrueBlue. It should make a difference in that fight.
Assuming this United/JetBlue tie-up is the eventual outcome, the real question is… what form will this partnership take? Unquestionably it will include a frequent flier partnership that allows for earning and burning on both airlines. But it gets more complex from there. A codeshare would certainly make a great deal of sense, but there are contractual issues with pilots on both sides that would need to be cleared. That might have to be a future development at best. The only other thing I could imagine in the initial agreement would be a slot-leasing agreement.
Somehow, the Italian news site Corriere Della Sera has the scoop that United will pick up 20 slot pairs at JFK from JetBlue. This is an awfully strange place for that leak to come to life. It also seems like more slot pairs than United would actually want. But we do know that United wants to get back into JFK with a full complement of slots so it can fly to the West Coast with enough frequency, unlike its last attempt. JetBlue might find it a benefit to part with a handful of slots are JFK that could make more money on lease.
I can’t imagine anything beyond that would be in an initial agreement. But really, I have to think that JetBlue envisions its ultimate future as a part of something larger. United CEO Scott Kirby is certainly laying the groundwork for something bigger in the future; I don’t imagine he’s busy praising President Trump’s tariff plan just for fun. He wants to know if he comes with a merger proposal, it doesn’t get stopped.
A partnership, of course, doesn’t mean that the partner would end up being the successful acquirer in the end anyway, so it’s very premature. But for JetBlue, just locking down a significant domestic partner is important, and the friendly skies seem to be the only option that gets JetBlue what it wants.
Edited to fix the percentage labels on the FLL chart
66 comments on “JetBlue’s Domestic Partner Options are Now Down to One”
If JetBlue and United are really moving toward a deeper partnership, then yes, I’d imagine JetBlue will need to add frequency to some of United’s key hubs. Right now, JetBlue doesn’t serve most of those cities with any real depth. If they want the partnership to actually function beyond loyalty reciprocity, there has to be some level of feeder flying. United could easily say, “Hey JetBlue, you take this thinner route into DEN or IAH and carry the connection flow,” while they focus on long-hauls and bank structures.
Also, with LAX Terminal 5 set to close for construction, that raises another logistical piece. I assume JetBlue would push for space in T6, 7, or 8. If they’re going to cooperate more with United, especially for connections, they’ll need proximity. Even just a few gates with coordinated scheduling would make a big difference.
Could a codeshare realistically help JetBlue restart routes that struggled before? SJC is a good example — with United’s code on it, there’s more visibility and potentially more feed from their side of the network (especially in the Bay Area, where United is strong). JetBlue doesn’t need to compete with United; they can complement each other. But that only works if JetBlue steps up presence in places like ORD, IAH, SFO, and maybe even DEN.
> United could easily say, “Hey JetBlue, you take this thinner route into DEN or IAH and carry the connection flow,” while they focus on long-hauls and bank structures.
This partnership won’t have antitrust immunity (that’s what doomed the AA-B6 partnership), so wouldn’t that be illegal?
Alex – Thanks for adding levity. That’s right. I can’t imagine there’s any way they would try to get coordination here. Maybe in the future, but antitrust immunity can’t be a first step.
If an agreement with United takes place, whatever form it is in, is there any sort of guarantee that it will stick around for a meaningful length of time?
Last time around with AA, two of the big things were the slot swapping plus FF benefits. All of which had to be undone pretty quickly when it fell apart. Even though it wasn’t directly the airlines’ fault, those rapid shifts are not great for operations or passenger loyalty.
Who knows what the DOJ will have to say this time around, but they’d better come up with a really compelling proposal and very good reasons for us to believe that this partnership will last.
There’s never a guarantee about anything. However, any airline entering into a partnership obviously want it to last.
AA/B6 didn’t ‘fall apart,’ it was (from the start) a risky and legally untested joint venture that was predictably challenged in court, and lost. You can absolutely blame the airlines for pursuing such an aggressive quasi-merger – one of the risks is exactly what happened. It wasn’t just slot swapping and FF benefits – they were sharing revenue and coordinating schedules.
The reporting from Reuters indicated that this would be a much simpler partnership compared to the NEA, and one that would therefore be on much stronger legal footing. All of which would suggest it would last.
Jason H – There’s no guarantee of anything, but the only thing likely to kill something like this would be if another airline swooped in and proposed an acquisition. I don’t see why it would end otherwise, unlike the original NEA with American which was only shot down because of the courts.
I’m not sure B6 is going to let go of their flagship (and possibly most profitable) transcons. Blue has made ALLOT of mistakes….Mint is NOT one of them. If anything it’s a template of what happens when market research, inflight, accounting/finance and advance schedule planning successfully work together. I can’t help but to think there will be a JFK-LAX/SFO carve out to keep the brand, product and revenue skewed towards B6.
It will be good to see Blue tails in flyover country outside of token 2 a days to JFK. I can see B6 metal filling in in high demand/low yield stuff out of FLL, MCO, LAS , SJU and the Caribbean. Twenty years after TED they will finally have a lower cost partner that dosent bastardize the brand but knocks CASM down a few cents to fun N sun markets.
There’s a lot of buzz on FB saying or suggesting that WN is preparing to make a move against JetBlue. What value B6 would bring, beats me. Unless it’s just to eliminate a competitor. I always thought that a AA/B6 matchup would’ve made more sense. Not that I’m a big fan of mergers and acquisitions in general. I figured this “alliance” was intended to be a precursor to that effect. No wonder B6 is trying so hard.
But rumors and speculation have been going on since the earliest days of chat boards. So I rarely give them much credence. Anyone remember the endlessly asked question of “What will Northwest replace their DC-9’s with?”
I really doubt WN’s masters at Elliott are going to let them set fire to bales of money to challenge B6. WN has it hands full already coping with the operational changes coming in and challenges from the ULCCs.
A Southwest acquisition of JetBlue would almost certainly increase the total value of the combined airline. The bases at JFK and BOS would produce way more revenue if they were plugged into a national network.
At the same time, I don’t expect Southwest to make an offer any time soon. The antitrust approval would be too risky and uncertain, and add an extra variable at a time when all executive attention is focused elsewhere.
B6 and WN play in completely different sections of the market. B6 flies transcons/Europe and has its main hub at JFK an airport WN does not even serve.
Is there more likely this partnership would pass when the AA didn’t? What is the current DOJ/DOT views on something like this?
I always figured B6 would go for a smaller airline to prevent any anti-trust denials
What Cranky is describing is a frequent flyer partnership with some paid leasing of assets, not an immunized joint venture. I don’t think DOT/DOJ have much to say about frequent flyer partnerships.
Seriously?
They did.
DOJ shot it down.
This initial proposal is closer to the relationship between AS and AA right now (except stopping short of B6 joining Star), not the Northeast Alliance, and the DOJ has zero problem with that.
No one is proposing coordination of fares or revenue sharing, which of course isn’t permitted without a fully approved and immunized JV, which isn’t going to be allowed. But I’m not sure what level of schedule cooperation, if any, is allowed with a simple codeshare.
Kip – If there is no antitrust immunity required and it’s just a simple partnership as I expect, then DOJ/DOT won’t be an issue. I think everyone is getting too amped up over this being something much bigger than it is likely to be at the start.
Ahh I see.
I just hope this partnership includes a “Rhapsody in JetBlue” remix :)
I still believe an Alaska JetBlue tie up is very much possible even if United may have the breath of service in most of the country that JetBlue may desire.
When it comes to NYC flyers, most of them will not willingly travel across the Hudson to fly as most flights at EWR have a similar one at JFK or LGA. The only reason to do that now a days is tied to “what’s in their wallet.”
Thank you for the rational and reasoned approach to what is known about a B6 partnership. There are several realities that some people continue to miss.
First is that there continues to be too much capacity in the US domestic market in part because most of the industry capacity is not sustainably profitable at post covid labor costs which DL has led higher and continues to push up. DL and UA are the only sustainably profitable carriers right now and UA has amendable contracts with its FAs and mechanics and the list of labor groups will grow to all 6 non-pilot unionized groups by summer.
The only thing that is saving the US domestic market is that oil prices are down to pandemic era low levels. Even the AF/KL and LH both noted that the relatively low levels of international booking decline they are seeing is being offset by low fuel prices.
Second is that AA should have done a deal with B6 paralleling the AA-AS relationship. Kirby has been gunning for AA in Chicago (which is adding another round of flights) and they’d love to take out AA in NYC as well.
Third is that UA is motivated first and foremost to a return to JFK because JFK is the primary airport for outside the LGA perimeter traffic in the NYC area. AA, B6 and DL all serve all 3 NYC airports; UA is the notable exception.
Fourth is sheer size of the carriers in the NYC market. NYC is essentially a slugfest between DL and UA with AA and B6 along for the ride. DL has 15% more flights but UA has a revenue advantage because the majority of DL’s slots are from LGA which are perimeter limited.
Fifth is that there is ZERO appetite in the country for any of the big 4 to become larger and to further concentrate their power. It is one thing to add a codeshare and even alliance partnership between B6 and UA but quite a different matter for B6 to give up slots to allow UA to further grow in NYC – even before all of the talk about a potential future merger or acquisition.
Sixth, B6 and UA cannot negotiate what markets UA will serve if B6 leases slots to UA. That is collusion. If B6 leases slots, it runs the high risk that UA could grab the slots and then cancel the rest of the agreement, leaving B6 with competition in some of its most valuable routes – the CA transcons.
And finally, whatever takes place with B6 is the opening salvo in fixing the overcapacity problems in the industry. AA and WN right now both financially underperform as does most of the LCC and ULCC sector. Other deals will come esp. if B6/UA progresses to the point of altering the current competitive balance in the industry.
I don’t agree on point 5 – I honestly don’t think the average American cares that much whether or not an airline or two in the middle of the pack disappears. And even if they do, the current administration is very unlikely to care. B6 being acquired would be likely to pass general antitrust muster, although there would be pressure to give up slots/EWR runway timings depending on who’s doing the acquiring.
OTOH, JetBlue would be foolish to not have UA agree to put the UA code on Mint JFK-SFO/LAX flights written into any codeshare agreement. And if they can’t do that legally, then they just need to do it by simply not leasing UA any JFK slots. I don’t know how much UA wants this deal to solve their Northeast-to-Florida problems, Boston share, or JFK presence-by-codeshare in general, but Mint is JetBlue’s most profitable product and they can’t give it up.
The vast majority of Americans don’t care about the details of the current trade and tariff war but they do very much care about seeing an increase in the price of everything from cars to cucumbers.
Whether the average American understands economic principles doesn’t matter because people in private enterprise and the government not only understand the economic principles at play as well as the issues that are at play in the US airline industry. When you consolidate the industry to higher price competitors and transfer assets to them, prices will rise.
Ever since deregulation, the US government has been trying to build a viable low cost sector and prevent the legacy carriers from being able to dominate the industry. Those attempts are more at risk than at any time in the nearly 50 years since the domestic airline industry was deregulated.
Add in that you have UA execs who have repeatedly talked about eliminating or wounding competitors including AA and multiple low cost carriers including determining how much spill they provide for low cost carriers and it is hard to believe that regulators aren’t fully prepared to add their two cents to any conversations that involve growth attempts by DL or UA, the only two economically and sustainably viable airlines right now.
The DOJ has repeatedly rejected attempts by a higher cost carrier to cooperate with or acquire even assets from lower cost carriers- that is the central theme of the demise of the NEA and the B6/NK merger attempt.
A simple codesharing and even an alliance deal – not unlike AA/AS – could potentially help B6 more than UA but when you get into talk about a future merger or even leasing slots to UA, all of these questions of an increasingly consolidated industry have to be addressed.
And regulators understand that if you allow even little bits of further consolidation in a very limited access market like NYC where one of the players is already the largest player, then you open up all kinds of scenarios for further industry consolidation in many more markets.
Tim, I agree with your initial point #1 – there seems to be way too much capacity in the market at the present time. When have you last heard of airfares dropping in the summer months?
The best way to solve this…. let one of the 2nd tier (struggling) airlines die off, and that would be either Spirit, Frontier or JetBlue. I say struggling in the sense that all seem to be spinning their wheels right now, looking for a way to complete with the Big4, and lacking a very clear direction (at least to my armchair). The only one of those that seems to have any value is JetBlue, and the only value are the JFK & BOS ops. Is it worth it for SWA or UA to come in to try to buy them? Perhaps – both would gain very valuable NE operations and slots. For SWA, the value might not be there, as their operation would be immediately complicated by adding 2 new ac frames to the stable. Or, for AS to spread to being a fully ‘national’ airline? Perhaps. The terms of the deal have to work out for both sides.
Would such an acquisition get approved with the current administration, since, as noted above, this would be one of the Big4 carriers gobbling up a smaller competitor? There is only one way to find out with the current administration – propose it, and bring it to the table to see what happens.
the big 4 all have moats – airports where they control a high percentage of the market.
Not only do the ULCCs not have moats but neither does B6. B6 has slots at JFK which is limited access – but so do AA and DL. AA doesn’t know what to do with its slots – the NEA was an attempt by AA to come up w/ a plan to meet the DOT’s requirement that AA uses its underutilized LGA and JFK slots.
No administration is going to allow the US airline industry to collapse into the hands of the big 4 even if the 20% not controlled by the big 4 is economically very fragile right now.
The real underperformer is AA which has underperformed much longer than any other airline and seems to have the least solid plan to turn things around. AA’s domestic capacity is just about as much as all of the non-big 4 carriers combined.
WN stock, btw, is the best performing in the US airline industry – or at least not as bad as the rest of US airline industry stocks. the worst is AAL.
Every administration would be happy for capacity to come out of the big 3 and for LCCs and ULCCs be able to provide price discipline to the larger airlines. Basic economics says the weakest competitors should be the ones that give up the most capacity.
“Price discipline” What a stupid concept. It’s not a concept that exists anywhere in antitrust law, only in the fever dreams of rabid Chicago School, supply side ideologues. Who gets to decide which unlucky airlines get to enforce “price discipline”(bleed money) and which very fortunate airlines get to play the part of powerful monopolists setting whatever exorbitant price their monopoly market position will allow? Do we need to bring back CAB for “price disciplinarians?” Is the government going to subsidize these price disciplinarians? Spirit was designated a price disciplinarian and now they are headed back towards their second bankruptcy in less than a year.
The law makers that wrote anti-trust law never tried to regulate price. Yes, that’s right. They didn’t care about price. They recognized price was a short-term strategy while market share was more fixed and powerful. Actual anti-trust law (not precedent or case law) only concerned itself with market share. The entire NK/B6 trial was a travesty. Wrong-headed consumer welfare principle in reverse, all case law and idealogy, deployed against small players fighting for survival in a world of giants. If the United States had functioning anti-trust law as it was practiced from the 1930’s until the 1980’s the Big 4 would not have these “moats” or localized airport monopolies you speak of. Preventing one monopolist from capturing 60% of the market or more as Delta has done at MSP, SLC, ATL and DTW ensures proper competition can flourish. Price discipline occurs naturally without having to resort to one, uncompetitive, loss-making ULCC that uses bait and switch and other sharp practices to burn consumers for a short time before moving on to another overpriced monopolist route.
Capt,
the simple reality is that lower fare carriers – both LCCs and ULCCs – have been very effective in providing price discipline.
The basic principle of how lower cost carriers have worked is – COST.
As LCCs including WN and now B6 have matured, they have many senior, top of scale employees.
LCCs are more efficient – F9 crams 30 to 40 more people in the same airplane type that legacies use; WN historically had much higher labor efficiency but now has a bloated workforce.
Add in that DL has recognized that the way to win against the LCCs is to keep raising labor rates; in an industry w/ relative scarcity for skilled labor – pilots and mechanics – you have to be able to generate the revenue to cover costs.
and the LCCs and ULCCs have long competed for the national market even outside of airline hubs – which are less than a couple dozen cities in the US.
Price discipline has come from lower cost and thus lower fare carriers.
There is ample ability for competitors to enter nearly all US airports – with slot controlled airports and airports like Dallas Love Field being notable exceptions – and the FAA has very specific rules in place to allow competitors a place in nearly all US airports.
You are correct that it is ALWAYS problematic when a higher cost carrier – such as the big 3 – further concentrate their size in limited access markets such as NYC or DCA – which is why it is far from a slam dunk that UA will be able to lease slots from B6 – even before the topic of a merger or acquisition is discussed.
The reason why WN is suggested as a potential B6 partner is that they have a very limited presence in NYC so has much less antitrust risk.
If the goal is a global marketing and alliance partnership and nothing more, then UA might make the most sense.
If the goal is something that leads to an acquisition, then B6 and WN are the best fit of any of the big 4.
If the goal is to connect two scrappy coastal carriers which combined would still have a huge hole in their combined route system, then AS is the choice.
and specific to where we are today, it is AA that is flying the most unprofitable capacity. The industry is reducing capacity which is as much of a lifeline to AA as it is to WN, NK and F9.
Mr. Dunn,
As usual, you seem to be missing my point.
You said – “Add in that DL has recognized that the way to win against the LCCs is to keep raising labor rates; in an industry w/ relative scarcity for skilled labor – pilots and mechanics – you have to be able to generate the revenue to cover costs.”
What you’re describing is an anticompetitive in nature, an unnatural advantage accrued to Delta by their size, scale and highly concentrated markets. Despite their market advantages as just mentioned, Delta STILL loses money on the core airline operation and is only profitable thanks to their wildly successful credit card. A credit card that is popular because of Delta’s massive size and the global reach of their international partnerships. Something JetBlue or Spirit can not offer on their own. Delta is spending their smaller, less-concentrated competitors into oblivion like a cold-war arms race hegemon. This is textbook anticompetitive behavior and if there was any justice in the “Justice Department” this would not be allowed. Delta is not crushing JetBlue in JFK and BOS because they’re sooooo great at the airline business. Delta is steadily crushing their competitors and taking their market share because they are anti-competitive monopolists.
And yes, I suppose any airline who wants to challenge Delta’s supremacy in ATL, MSP, SLC, etc. is welcome to show up, slash open an artery and challenge Delta to a bleeding contest on a route by route basis, but my last paragraph explains why this is losing proposition for anyone in the business who’s not Delta.
I get your points exactly.
first, AA, UA and WN have concentrated hubs just like DL does. In fact, DL’s share growth post covid has come primarily in highly competitive markets including BOS, NYC and LAX.
second, yes, ALL of the big 3 push their income statements into being profitable because of their credit card deals but DL still has come up w/ the most valuable non-transportation revenue partnerships including w/ Amex but DL didn’t invent either the airline loyalty program or the credit card partnership – but they have executed them better than their peers.
there is nothing written in anti-competitive behavior about being a HIGH cost producer in order to drive out competitors – because it is antithetical to what is written.
third, we are almost 50 years into deregulation. AA and UA could have and should have seen the value of hubs just as much as DL has and added and dropped hubs if creating strong market positions was the key to success. Again, DL simply has understood what matters in the industry and executed to those goals for the long-term better than its peers.
and what matters is generating a revenue premium which has come from winning more corporate business than anyone else – which is tied to a higher level of service in the markets that matter the most to business. again, any airline could have seen that correlation.
fourth, and specific to this discussion. B6 has chased all kinds of strategies over the past decade and has failed to operate reliably which has alienated their most loyal customers. B6 made excuses that its operation was always so hard because it operated in congested NE airspace but AA and DL, esp. the latter, manage to run better operationsi in the same airports. B6′ current mgmt realizes that running reliably matters and B6′ operation has improved.
and finally, the LCCs and ULCCs HAVE served to provide price discipline to the legacy carriers; the LCCs and ULCCs largely grew their share post-deregulation. The DOJ and others in government are simply not interested in allowing the legacies to consolidate their power anymore which anything beyond a simple B6-UA codeshare and potential alliance membership would do. and, if you allow B6 to start selling off all or part of itself to UA, then you open the door for that to take place throughout the US even though DL and UA have proven they are better stewards of public assets in providing high quality service than AA.
B6 pilots have expressed objections to news about a potential B6-UA partnership and UA pilots are saying the same thing even if they haven’t formalized those objections. Domestic codesharing creates real problems and the only reason why AA was able to push it through was because the company has been so weak that the company immortalized some advantages including scope in chapter 11 that other airlines including DL and UA still don’t have
Love the Dating Game pick BTW.
These airlines are struggling now, with full airplanes. What happens if there is a downturn this year, as looks more and more likely?
Take 10 or 15 percent of the pax away.
Someone isn’t going to make it to 2026 without a filing, maybe multiple somebodies.
Blocking the JetBlue / Spirit merger is looking even more nonsensical in hindsight.
“You are ordered to provide sub-scale competition to the majors, even if it kills both of you!”
It only looks non-sensical if you don’t understand anti-trust law.
Competitors failing in the marketplace is fine and legal.
Competitors merging with the explicit intent to reduce competition is illegal.
“We must allow this anti-competitive merger in case the economy crashes and there’s a downturn in travel demand” is an unserious argument.
Alex that just shows how little you know about business – specifically airlines.
The B6/NK merger was about TRYING to compete. To gain scale to create a 5th competitor.
DOJ and Biden were wrong on this one.
You can have the best business case in the world, and even a strong, logical argument that a merger would make the merged companies a stronger competitor.
That doesn’t change the law. The law is very clear – mergers that eliminate competition are not allowed.
And this wasn’t a DOJ or even Biden administration thing – they brought the suit, yes, but the Federal judge absolutely ridiculed the proposed merger as a blatant violation of antitrust law, and all appeals of that decision have been unsuccessful.
If we end up with one of B6 or NK disappearing because they failed in a competitive market – that is what antitrust law wants.
What the law does not allow is to have one of those airlines disappear because of a merger that’s been prohibited for decades under the Clayton act.
This isn’t entirely correct. The ruling in the B6/NK ruling leaned heavily on the novel idea that there was a specific class of competitors – “ULCCs” – that required specific protection on the grounds that they, by their nature, provided a form of competition other airlines could not. The ULCC-centric ruling also put an unusual emphasis on the idea that reduction in competition in any specific market could not be offset by a general increase in competitiveness in the national industry as a whole from the newly-merged company.
There were many antitrust analysts that thought JetBlue stood a very good chance of winning on appeal, given that these considerations were not based on precedent and that the merger would have met the traditional tests of general market concentration and lack of barriers to entry for new entrants.
On the other hand, JetBlue certainly didn’t help itself by being so blunt about just wanting the planes and the pilots, and under current bankruptcy law it was impossible to argue that Spirit would inevitably fail without the merger.
Mergers lead to companies “disappearing” all the time. Whether they meet antitrust standards or not depends on a variety of tests, specific judges’ interpretations of the law and precedent, and the position of the DOJ at any specific time. Antitrust law doesn’t “want” any specific outcome, it just sets down a process.
Great reply CraigTPA. Biden Antitrust DOJ pick Johnathan Kanter landed his job declaring he wanted to bury the pro-business, Chicago School “consumer welfare principle” framework of antitrust law. Instead he cynically used years of consumer welfare principle case law to construct a reverse consumer welfare principle argument against B6/NK (higher prices = bad) even though the B6/NK deal easily passed muster using traditional antitrust law that focuses on market share and competition ( legislated law, not case law) The judge even bizarrely stated in his decision that the defendants did an excellent job of proving the merger would be pro-competitive. I think that guy was bribed. Nothing in antitrust law preferences ULLC or ULCs over any other competitor. If antitrust law has anything to say about ULCCs at all, it’s probably that their business model is illegal. Antitrust law prohibits selling a product below cost to gain market share, but it’s been decades since that was enforced. Lots of consumer law prohibits deliberate bait and switch pricing strategies as well.
Disagree that the ruling heavily relies on the ULCC categorization; and to the extent that it does, it’s because of B6’s own incompetence in the discovery phase, admitting their plan to completely erase Spirit and massively raise fares.
The merger was doomed on very normal antitrust grounds; they had something like a 30% route overlap on the metro area level. That’s massive!
Either way, the point is that the B6/NK merger (and the NE Alliance) both failed review under very normal and longstanding antitrust doctrine.
I have a differing opinion on the 20 slot pairs. To me it doesn’t seem that much when you divide it amongst SFO/LAX/DEN/ORD/IAH with the majority SFO, LAX, & DEN.
Eric – But why bother with any of that. United already flies to DEN/ORD/IAH/IAD from LaGuardia, so what does JFK add? This isn’t about connections. This is about local traffic, and LaGuardia is better for most. So it’s really just a question of LAX and SFO.
They already served DEN, ORD, and IAH out of LaGuardia already, so they wouldn’t really need to add service from JFK.
(The only reason to consider adding JFK to those hubs would be if their market studies showed a substantial demand from Long Island that wasn’t willing to go to LGA, and if there was enough demand there they could just add ISP to ORD and have done with it. The fact that none of the three network carriers serve ISP now suggest this isn’t the case.)
The main reason for UA to want slots for JFK is for premium service to SFO and LAX instead of codesharing on JetBlue’s Mint product, and JetBlue is really going to have to think long and hard about going along with that.
As for Southwest they have 2 moves to make on this proposed deal.
#1 They can come in and just make a Full blow Merger offer to JetBlue and force United hand to make a counter deal. This will make United pay a lot more money for JetBlue or could Kill the deal entirely.
#2 They can Lobby to Block the deal saying it’s no different than a new version of NEA with a new partner rallying with AA that’s it’s Anti competitive.
The question is, would WN’s bluff get called? And if it does, are they prepared to go through with it? Courts have made companies complete mergers in the past.
In one scenario, it’s worth UA’s while to force WN to buy B6, then watch as WN mismanages the assets. Then UA can move in. The problem tends to be getting access to JFK, which is something UA would like.
WN making a Play to buy JetBlue would be a Win Win either way for Southwest. Gaining JetBlue market share and network would give Southwest a strong foothold in a markets it’s struggled to capture organically over the last 2 decades.
The one Fleet Type operation has Run its course at WN Buying JetBlue gives them a Turnkey opportunity to capitalise all the synergies JetBlue would add to WN robust Domestic dominance. It’s something WN couldn’t do overnight and in the current delivery delay environment would take them well over 15 years to achieve organically.
Hopefully Elliot’s WN BOD aren’t too short sighted to see the long term benefits with such a merger would bring.
Is it just me or are the percentages in the FLL table wonky?
And does this mean B6’s recent small moves to snuggle up to OneWorld members (BA codeshares, redemption of TrueBlue on JL) were some of four-dimensional chess to get UA’s attention, or that B6 wants to maintain a solid degree of independence from UA, even if it eventually joins Star, just as CO used to do even when it was a Star member?
CraigTPA – It’s not just you. I’ve fixed in the post. It had the percentages from Boston in the Fort Lauderdale chart. Sorry about that.
As for JetBlue, it is going to do what it can to partner with as many international carriers as possible. United has nothing to do with that strategy and won’t impact it.
Basically the same thing as AA and AS where American is weakest and pairs with a smaller, West coast focused airline. Makes sense to me!
I have a hard time seeing JetBlue leasing slots at JFK. It’s basically the only city they are making money in these days. Where could they possibly move those aircraft to?
Anthony – Boston? Fort Lauderdale?
Neither of those markets are performing well enough otherwise they would have already moved capacity back there. This is mostly true for FLL. The double down on NY to new Caribbean markets and entry into ISP demonstrates how reliant they are to make money. I could see the argument for moving capacity back to BOS, but they took their foot off the gas and Delta made them pay.
Anthony – That’s just not true. This July, Boston seats are up 13.5% vs last July. In Fort Lauderdale, it’s up 3.1%. Fort Lauderdale has been more iffy, but JetBlue has been pouring capacity back into Boston regularly since Robin Hayes left.
Maybe this whole thing boils down to TV sets. United is getting them, and American apparently isn’t. If there is a merger in the future, it could also boil down to engines. American’s A321NEOs have GE engines, and JetBlue and United’s have Pratt and Whitneys. LOL
P.S. This comment is meant to be a bit facetious. Most of the comments I’m seeing about this seem to think there’s some kind of nefarious ulterior motive to this partnership, and maybe there is. But it’s nice to see someone try to counter all of the hyperbole.
I don’t see this moving the needle much for either airline.
For JetBlue, their customers get the opportunity to earn and redeem on a wider network. Presumably that will help retain some frequent flyers that mostly fly JetBlue, but have occasional trips that aren’t in the network. I used to fly JFK-SFO frequently for work, and it would have been nice if I could have used those points to fly to the regional airport near my hometown for VFR travel, so I see the appeal here.
For United, their customers get the ability to earn and redeem on some nonstops to Boston and Fort Lauderdale that United is very unlikely to fly themselves. I was going to write “their customers can use their points for nonstops to Orlando”, but JetBlue has shrunk their Orlando station down to basically just serving the Northeast now. It seems very marginal and I think most United flyers will never notice or care.
I expect the impact in NYC to be relatively minimal. EWR and JFK serve mostly non-overlapping catchment areas for origin traffic. It will be somewhat nice for Manhattanites, but most other people in the area will only cross-shop across airports if there is a huge difference in fare or schedule.
@Cranky – Can you discuss how Alaska’s relationship with AA is different than what JetBlue expects with United? I woyld think that is the base case AA was offering to JetBlue. AA had a path for B6 to join OneWorld and both were colocated at JFK hubs. I dont see how Someone from NJ is going to travel to JFK or someone in Queens/LI is going to travel ro Newark to get some frequent flier miles.
Brian W – Well, we don’t know because no partnership has been announced.
But I would think that this would not be as tightly tied as Mileage Plan and AAdvantage are. Those are really set up to make it so you are treated similarly regardless of which airline you have status with. I would think this would be a lighter touch in the beginning.
True, but, just for example, consider the Long Islander who works in Manhattan and whose company uses UA for business travel. Right now to get Mileage Plus miles for personal travel, this benighted soul has to schlep to Newark or take UA out of LGA to a hub and connect. Even if the alliance is just a simple earn-and-burn they can now go to JFK and take JetBlue for their personal travel if that works better. And if it goes codeshare, it’s all for the better.
(It isn’t possible to overemphasize how much of a pain in the butt LGA is for the majority of Long Islanders compared to JFK. There’s no LIRR option, and while 27 isn’t perfect it’s a hell of an improvement over the LIE (as is anything up to and possibly even including the sweet release of death.) And it would even let them hop to Florida and connect to the Caribbean out of ISP.
Same for Westchesterites and HPN.
And even for a lot of Manhattanites, JFK is preferable. I could (and did, several times) go from my office in Rockefeller Center to the JetBlue check-in counter at JFK in an hour or less. Walk to Penn, LIRR to Jamaica, AirTrain to JFK. It’s counterpart, Penn-NJT-AirTrainEWR, would always take longer.
I’m not saying a lot of Manhattanites with MP accounts would make the switch, but the option would sure be nice.
I know Alaska has its hands full. But I also have trouble seeing them sit on their hands for this one.
One scenario in my mind is they’d but JetBlue, but not immediately go about integrating it. They’ve got their hands full with Hawaiian, and JetBlue can exist as a separate part of the Air Group until they’re ready to integrate it.
There has to be JFK slots in this for United to resume JFK-LAX/JFK-SFO with competitive schedules. United has to be getting something more out of this than a simple reciprocal loyalty program partnership.
I think the rumors of an full-on acquisition are far-fetched. I can’t see anything there that United would strongly benefit from except JFK, as well as Jetblue’s fleet. Jetblue’s A321ceos still have plenty of life left in them to provide some relief against Boeing Max and PW GTF delivery delays. The A220-300s could help them continue upgauging regional jet routes and plug the capacity gap between express and the 737 Max 8 in their fleet plan going forward. FLL seems like a great way for UA to light money on fire, and they’ll have to fend off Delta in BOS.
NYC isn’t a market where regulators are lax about antitrust concerns, and can United really afford to divert resources from their growth plans to pursue what is going to be a costly integration? We don’t want a repeat of the failed US Airways takeover in 2000.
“I can’t see anything there that United would strongly benefit from except JFK, as well as Jetblue’s fleet.”
The word “except” is doing a lot of heavy lifting in that sentence. I think you explained the benefit to United. Nearly 300 aircraft, 330 daily JFK slots, plus slots in LGA, DCA, LHR, AMS, and CDG shouldn’t be dismissed as a throw away when discussing JetBlue’s value.
Based on earlier comments by Scott Kirby stating a clear desire for JFK slots as a possible motivator for a full Jet Blue acquisition, but then in the same breath questioning if those slots would be worth the “headache” and “brain damage” of a merger process, it’s safe to say that if United were to secure 20 JFK slots from Jet Blue in a “partnership” deal the motivation for a UAL acquisition of B6 is effectively removed. I can’t imagine the revenue and value lost by trading away the most profitable and most core part of the JetBlue business model could be offset by feeding some Star Alliance passengers to low-value south Florida and the Caribbean destinations?? This rumored deal as outlined so far seems like a very foolish accelerate of demise not any kind of lifeline for Jet Blue. A B6/UA tie-up could make sense as a full merger and would be a win-win for both companies. As things stand now Jet Blue does not have an answer for juggernaut Delta that is slowly but surely devouring them in their two most critical, and formerly profitable markets, JFK and BOS. United wants to grow domestically, and besides JFK slots, Jet Blue offers scarce and valuable things- airplanes, pilots and gates in places where United has expressed a desire to grow. Given what’s left of small airlines that could be acquired, Jet Blue also wins the beauty pageant in terms of product and brand.
Lots of big opinions here about things that happened in the past with the DOJ and antitrust, but I think the anti-trust angle on this developing story is overblown. The last administration is long gone and with it all the norms of the post WWII era. We’re in a different world now where you can buy whatever you want with the purchase of Presidential meme coins or throw yourself in front of a frivolous lawsuit so you can “settle” wink-wink for billions of dollars. (60 minutes-Paramount-Redstone) The CFPB has been vaporized and the SEC is on a choke chain. Recent draconian tariffs have made it even more clear that consumers and their wallets are not a concern for this admisnistration. JD Vance and Gail Slater *may* care about antitrust law, but DJT does not. This fantasy of small, structurally flawed, regional airlines “out competing” giant monopolists like Delta through plucky grit and determination is a childish fantasy. Jet Blue cannot out compete 2025 Delta anymore than a middle-school football team can beat the Kansas City Chiefs. Allowing the post Obama era merged monopolists to continue business as usual without allowing anymore mergers is the same thing as feeding the little guys into the wood chipper one by one. In the end it’s the same result as an unregulated merger orgy. Two or three monopolists and lousy service. A full UA/B6 merger seems like a decent outcome for consumers and employees. It should be allowed to proceed.
capt,
this has been a good discussion not just w/ you and with others who really do understand the industry.
You and I are probably alot more in the same position than you might think. The current industry structure is not sustainable.
I focus on what the structure of the industry was supposed to be and what did work for decades of deregulation – a successful tier of LCCs and ULCCs that did provide a competitive balance and forced legacy airlines to compete not just on size but also on price; economy basic fares exist even outside hubs because of ULCCs and likely would not as soon as there is no viable very low fares.
As I read what you write, you seem to believe that there is no hope for any real competition and the strongest carriers are going to win – so just let them. That may be what ends up happening but I’m not sure anyone other than a few CEOs and their inside circle are ready for that to happen.
DL and UA are the only two carriers that have the financial strength and strategic willpower to be in a leadership role in the industry. DL’s balance sheet is stronger and it also is much more conservative in making big flashy moves but has proven it has the ability to come out on top.
Regardless, no one can believe that an industry composed of DL and UA plus maybe a revitalized WN which probably still cannot compete well in DL or UA hub markets plus at least one ULCC -even if NK and F9 merge – plus a perpetually financially and service weak AA is a good or sustainable structure for the industry.
It is fair to ask what the endpoint is… and if you are right that DL and UA will lead the next phase of transformation of the industry, then DL will have a deal up its sleeve as well.
let’s see what B6 and UA come up w/ and where it goes in the medium to long term but I don’t think this will be the last deal in this decade.
Yes, it sounds as if we agree on a good number of things, like the current industry structure being unsustainable, but I think I have a fundamentally different view of the marketplace and antitrust law.
You wrote, “I focus on what the structure of the industry was supposed to be and what did work for decades of deregulation”. That is a loaded statement full of many biased assumptions. “Supposed to be?” That’s a mouthful. According to who? Louis Brandeis, Wright Patman? Robert Bork? Eisenhower? Jimmy Carter? Ronald Regan? ALPA or Airlines for America? Christine Varney or Johnathan Kanter? Ed Bastain or Ted Christie? There are many different views of how the industry is *supposed* to work.
When you say deregulation worked well for decades, yes, I supposed it did IF falling fare prices are the only yardstick, but only focusing on fare prices would completely ignore all of the bankruptcies, mergers and industry consolidation that those falling fares required, leaving many communities without air service. The deregulation era low fares enjoyed by consumers were generously subsidized by airline employees. Before 2018 pilot shortage era, almost every single 1st year regional First Officer qualified for food stamps. Those deregulation-era industry arrangements including using shell-companies to arbitrage labor and “whip-sawing” competing regionals may have worked great for you but it wasn’t so great for me and thousands of other airline employees.
Concerning antitrust and the government, I think absent the political will to bring back CAB and split apart the big monopolists into smaller, less concentrated airlines, the best solution is government managed consolidation. Like I already explained, expecting JetBlue or any airline smaller than United to “compete” against 2025 Delta is a childish fantasy. The government should encourage combinations that are likely to succeed, preserve some competition (ex. UA+B6 = DL/UA NYC cage match) and try to prevent the creation of any more “moats” – a.k.a. monopolies – airports/markets where one airline controls more than 60%. Perhaps a hard 59% cap would be in order with divestitures above that number? 60% based on the economic theory of the airline “S-curve”. I don’t have all the answers but I know deregulation has not been a success from my standpoint and antitrust down-punching at combos like B6/NK is terrible for US consumers and workers. If Delta is as awesome as you say it is, they should welcome the competition in BOS and JFK a UA-B6 combo would bring.
Capt.
Let’s start w/ the common ground… the current industry is not sustainable.
The original goals of deregulation were to remove government controls over industry capacity, route selection and pricing and allow the free market to work. That succeeded.
Yes, there were hugely painful periods including multiple bankruptcies -mostly restructuring – and a great disparity in pay between employees in the sector. Multiple C11s have occurred w/ other companies and other industries.
Ironically, it is precisely because there has been consolidation not just among large jet carriers as well as regional carriers that the gap between the lowest and highest paid workers is narrower than it was and is largely a product of seniority and union-developed pay scales than between carriers.
We differ in that you think that the answer is to either allow full-throated consolidation – survival of the fittest regardless of market share or else reintroduction of government controls.
Chapter 11 has worked to restructure airline finances but that has been frequently punctuated by massive federal handouts during/after major global events such as 9/11 and covid. The reality is that several airlines would have shut down if the free market was allowed to run its course but that hasn’t happened. A big part of the reason for the fragility of the airline industry is not because of monopolies (which is not the case; none of the airlines have monopolies – they are more accurately oligopolies) but because the airline industry has been torn between a spasmic clash of market forces and government intervention and bailouts.
You also selectively believe that market share is measured solely by airports and that is clearly contrary to the fact that the DOJ has consistently evaluated airline concentration by metro area. Many mergers have been called off because a few airlines thought that large market shares in different airports in the same region would be acceptable.
B6/UA would further increase UA’s #1 lead in NYC if there are any assets transferred – let alone a full merger or acquisition.
And, DL has never controlled more than 50% of the slots at any slot-controlled airport, something AA and UA cannot say.
We may well be heading toward allowing a free-for-all in the airline industry that results in consolidation to no more than 3 or 4 airlines but I think there will be a lot of kicking and screaming on the way to allowing that to happen.
And, even if it does, there are multiple combinations and internal growth possibilities that would lead to far greater market shares than B6/UA.
again. great dialogue…. thank you
You said: “We differ in that you think that the answer is to either allow full-throated consolidation – survival of the fittest regardless of market share or else reintroduction of government controls.”
I never said or implied that. Go back and read my comment. In an environment where anti-competitive levels of market concentration are allowed to persist and grow, the best strategy in my opinion is not anti-trust “down-punching” at little guys trying to consolidate to better compete as happened with B6/NK, but to allow further consolidation in a way that preserves some competition and prevents the creation of new localized market monopolies. I even proposed some percentages and numbers.
You stated, “You also selectively believe that market share is measured solely by airports and that is clearly contrary to the fact that the DOJ has consistently evaluated airline concentration by metro area.”
Nope. More straw-manning. I definitely do not believe that. Furthermore the DOJ doesn’t “consistently” do anything. They cynically twist their antitrust beliefs as needed to win the very politically motivated cases they arbitrarily decide to pursue. Case in point, the very recent B6/NK suit. The most concentrated hub created under the proposed B6/NK tie-up would have been Fort Lauderdale at somewhere around 50%. Maybe a hair more, maybe a hair less. Fort Lauderdale is clearly part of the greater Miami-Dade South Florida metroplex, and Ft. Lauderdale plays a secondary spill-over role to the much larger, busier Miami International where American Airlines has a whopping 73% market share, yet 50% market share was deemed an inappropriate level of concentration for Jet Blue at a secondary airport in the same market. A few months later the DOJ waived the Alaska-Hawaiin merger through with no challenge and no divestitures required, despite pre-merger Hawaiian already controlling 67% of HNL and Alaska holding a dominant 52% share of SEA. They were also #2 and #3 competitors on the Hawaii to mainland US routes. Now a dominant #1. There is no consistency in US antitrust enforcement and JetBlue had a very good argument for judicial estoppel in the Spirit merger trial after the DOJ’s arguments in the NEA trial. I think they should have gone that route in court.
I’m done here. I don’t debate with people who twist my words or mis-state my positions. Have a nice day.
I don’t want to see you walk away from a good conversation… but I am trying to put together what appears to be contradictory statements.
You open saying that allowing UA to get 20 slot pairs would be enough for UA to no longer have an interest in acquiring/merging with B6 and then end your post above saying a UA/B6 merger would be good and should be allowed to proceed.
Then you talk about high market shares by the big 3 but yet believe that any kind of asset transfer between UA/B6 would be pro-consumer. I’m trying to reconcile those points.
and, yes, the DOJ has consistently viewed airports in the same metro area when considering market share. UA is already the largest airline in the NYC area regardless of whether it serves JFK or not.
and the issue with the NEA and B6/NK was that both involved a higher cost/fare airline acquiring a lower cost/fare airline. The DOJ specifically objected to the NEA because the NEA would remove B6 as a lower price carrier. B6 was very specific about converting NK’s assets to B6′ model which would have resulted in eliminating an airline’s worth of ULCC capacity.
If we really want the free market to work, then AA and B6, which are both financially weak, should be allowed to progress to their next economic destination which might be chapter 11. At that point, UA could make a bid in bankruptcy court for AA or B6′ JFK assets. But that process takes time.
Allowing UA to start JFK transcon service would definitely have a serious negative impact on both AA and B6 – on top of concentrating UA’s presence in the NYC market – and likely DL’s which would likely add its own EWR service.
and all of this just got a little more acute with UA’s announcement today that they are cancelling a couple dozen more flights at EWR due to persistent delays due to runway construction and FAA staffing/technology. UA is asking again for EWR to be slot-controlled again, something which the FAA eliminated about 10 years ago because UA, the largest slot holder at EWR at the time, underutilized its slots.
NYC aviation has never been for the faint of heart.
My two cents:
Upside:
– United is chomping at the bit for access at JFK. B6 subleases two gates to UA.
– In exchange, UA shepherds B6 into Star alliance (UA has veto power should B6 attempt solo application)
– New T6 at JFK will be heavy with Star carriers and has a direct connection to T5 which is JetBlue
– None of B6 Euro footprint overlaps with main Euro Star carriers (Lufthansa Group) at T6
– B6 providing domestic legs for Star carriers at JFK
– B6 provides domestic legs to Star carriers at BOS, FLL, and SJU as well
– TrueBlue can redeem on Star as Star can redeem on B6 making TrueBlue more valuable, more revenue rich.
Downside:
– B6 is making a Pact with the Devil (aka UA)
– Once in, UA will never return those JFK gates. If in doubt, look at DL at Dallas Love Field. More money spent on legal fees compared to revenue generated for DL to hold on to one gate with just 5 flights a day
– Eventually, B6 will realize the volume and revenue it perceives from the deal is not enough
– In a few years, I see a White Knight, Black Knight, and Stalking Horse in its future.
I don’t get why code-shares are seen as an answer to anything. What do they do that can’t be done by simple acknowledgement of partnership benefits/fares?
As witnessed by the continued mess of AA/AS/HA codeshares that combine schedules without fares, cause IT screwups even when they do – why are they not only allowed but encouraged to perpetuate this sham? Everyone at least has to take all the time/space/energy to inform people of the multiple variations going on – as well as mingling confirmation numbers etc. And for what? AA/B6 was notorious for offering flights that had no fares – or substantially higher – in codeshare form.
Just declare that you can mix/match airlines and get the same benefits/fares.
” I assume people are just getting hung up on hearing “Omaha or Boise,” but that’s just silly.”
Well, its clear in this article that you didn’t let yourself get hung up on Omaha and Boise, and instead ran a full sprint to your own extrapolated conclusions on what Marty St George wants for JetBlue. And you’ve gone from the desire for a domestic mileage “earn and burn partner” to slot exchanges and acquisitions and mergers.
One quick question though. Would the 8K that United filed 3 months ago addressing these rumors and saying they were not in discussions with any airline regarding acquisitions or strategic partnerships not be illegal if, in fact, they have been in discussions for a strategic partnership with JB? Or is perjury and securities fraud so last year?