American Airlines’ strategic partnership with JetBlue Airways is designed to stimulate both carriers’ northeast air travel business amid immediate and long-term challenges to demand and loyalty stemming from the global pandemic.

The partnership appears to be fairly complementary to both airlines with very little redundancy. In a way, the deal represents a reunion of American’s and JetBlue’s previous alliance, which ended when American merged with US Airways in 2014.  

According to the companies’ joint press release, American will launch international flights from New York (JFK) to destinations such as Tel Aviv (TLV), Athens (ATH), and Rio De Janeiro (GIG). American will continue to operate long-haul flights to London (LHR) and Madrid (MAD), as JetBlue prepares its first transatlantic service in 2021, a plan that’s been in the works for more than a year.  

The arrangement with American helps JetBlue expand its greater New York City offerings by adding flights at LaGuardia (LGA) and Newark (EWR), while also increasing its existing presence at JFK for seamless connections to American’s expanding international network.  

By boosting its east coast service, JetBlue will also deepen its ties to strategic markets on the west coast and the southeast. In addition, working with American allows JetBlue to build on its recently announced service between EWR and nine other markets.

Perhaps the clearest mutual benefit comes in the mix of American’s primarily business travelers and JetBlue’s loyal leisure customers, says Henry Harteveldt, principal for global travel consultancy Atmosphere Research Group.  

Certainly, the Covid-19 crisis has created unanticipated challenges to elite frequent flier programs like JetBlue’s TrueBlue Mosaic and its premium Mint service, which is offered on JetBlue flights to New York, Newark, Boston, Los Angeles (LAX), San Francisco (SFO), Seattle [SEA], Las Vegas [LAS], Fort Lauderdale [FLL], and six Caribbean locations.

“This is a bit of a boost to JetBlue,” Harteveldt tells Kambr Media. “JetBlue does not have a traditional connecting operation at Kennedy. By design, it has limited the number of connecting passengers in and out of JFK because it wanted to focus on more profitable local market travelers starting or ending their trips in New York. But JetBlue has two larger competitors in New York: Delta at Kennedy and United across the Hudson River in Newark.”

JetBlue has limited presences at LaGuardia and Newark, Harteveldt noted. Therefore, American’s partnership and connecting routes could make JetBlue’s TrueBlue program more compelling, particularly to corporate customers in the New York and Boston area.

“The frequent flyer program tie-up has yet to be formalized,” says Jay Sorensen, president of the Product, Partnership and Marketing Practice at travel industry consultancy IdeaWorksCompany. “If it's a generous relationship, in which a member of either program can freely accrue and redeem with the other airline, that can move market share to benefit JetBlue. That's the style of the Alaska-AA FFP relationship.”

American’s Alliance Advantage

American and JetBlue were reportedly attempting to reignite its alliance just before the pandemic hit.  

At the time, American was in a particularly active mood to strike alliances to better compete with Delta Air Lines and United Airlines on the west coast. That was the thinking behind American’s February agreement to broaden its 40-year partnership with Alaska Airlines, which is focused on the growth of international flights to Asia out of Seattle.

Now, airlines are forced by the pandemic to get more creative, as coronavirus cases spike in the west and the south. The worsening health crisis has turned attention from the dire global market to new challenges for the future of business travel and domestic demand. By building up options for northeast travelers, American and JetBlue are adjusting to realities that are continuing to unfold.

And yet, this pact speaks more to a competitive landscape that existed pre-Covid that remains intact, even if it’s greatly diminished, says Chris Anthony, co-founder of Kambr Inc. and head of its Advisory unit [Full Disclosure: Kambr Media and Kambr Advisory are independent units operating under Kambr Inc.].

“Airlines feel threatened by Delta,” Anthony says. “When Alaska felt it had to address the Delta threat in Seattle, it cozied up to American on terms that were probably less favorable than they got before. Now, Delta has been aggressively expanding in New York and Boston. Well, whose most important two cities are New York and Boston? JetBlue.”

American has picked up on Alaska’s and JetBlue’s sense of danger in their respective home markets, Anthony says.

‘A Genius Move’

The point of the new American and JetBlue alliance is not to completely upend the competitive landscape in the northeast. But it certainly should dent Delta’s and United’s efforts to carve out bigger share of bookings tied to the region.

“American is siphoning up available partners in the U.S.,” says Sorensen. “First, Alaska Airlines and then JetBlue. It's a genius move, because it blocks United and Delta from these relationships.”

In sizing up the competition in the region, Harteveldt notes that United is not that large of a player in Boston, while it’s maintained a strong and growing presence in the New York area.  

“United has a major hub in Newark, so this deal means that United lost an opportunity to partner with JetBlue and have a proxy presence at JFK,” Harteveldt says. “There have been rumors circulating for quite some time about whether United or American would partner with – or even attempt to acquire – JetBlue. Obviously, once Covid-19 hit, any merger talk subsided.”  

American’s Awkward Timing

In these times, a partnership without an equity stake or other complicated entanglements is likely to be viewed as a safe bet by Wall Street analysts when American hosts its Q2 earnings results on July 23.  

Nevertheless, Harteveldt found the timing of American’s announcement a bit discordant considering the carrier’s letter to employees that it may furlough up to 25,000 members of its workforce by Oct. 1 as a result of low demand caused by the pandemic, as reported in the Wall Street Journal and elsewhere.

“I give American a lot of credit for pursuing this,” Harteveldt says. “This is a bold, creative move, and should benefit both American and JetBlue.

“However, the timing of the announcement couldn't be more awkward,” Harteveldt adds. “Less than 24 hours after it sent Federally-required WARN letters to its 25,000 employees , American and JetBlue announced this partnership, where JetBlue is going to provide proxy presence for American.”  
“So American's employees have to feel, for one thing, uncertain,” Harteveldt continues. “It would be perfectly understandable if they felt somewhat betrayed by their employer. A lot of American Airlines employees and their unions are rightfully going to ask, ‘Why isn't American just going to expand domestically? Why wouldn't American, or one of its existing regional partners, operate some of the domestic routes that JetBlue is operating to compete with that airline and provide a truly seamless connecting experience or compete for local customers in and out of New York and Boston?’”

Are There Any Potential Partners Left?

The American/JetBlue announcement makes a point of mentioning that JetBlue won’t be joining oneworld alliance, which represents 13 airlines, including American, British Airways, Qantas, and Japan Airlines.  

That’s in contrast to Alaska’s expanded deal with American, which has speeded up its timetable to join oneworld this month as opposed to by the end of 2020 as previously planned.  

“Several people have asked, ‘Will JetBlue go into Oneworld?’ either the oneworld alliance or the American Airlines transatlantic joint venture with IAG, parent of British Airways and Iberia, for now,” Harteveldt says. “But that is today. As Wayne Gretzky once said, ‘Don't look at where the puck is, look at where the puck is going to go.’ There's nothing to stop JetBlue from entering oneworld. Right now isn't the time. JetBlue has partnership arrangements with 50 foreign flag carriers, so there’s no clear need for JetBlue to join oneworld at the moment. I believe JetBlue is trying to hedge its bets by saying, ‘Let's see how things go with American before we commit to anything beyond just this enhanced partnership agreement.’”

As for American, Harteveldt notes that there aren't as many airlines available for American to partner with.

“Frankly, there aren't that many markets where American Airlines needs assistance,” Harteveldt says. “That’s not to say that American couldn't partner with an ultra-low-cost carrier. But that also doesn't fit with the American Airlines' passenger profile. For the most part, American continues to be an airline used by a lot of business travelers and up market leisure travelers, and those are not the folks who are most likely to want to fly an ultra-low-cost carrier. Plus, those airlines don't operate traditional hub and spoke operations, nor do they even operate multiple frequencies on most routes they fly. ULCCs rarely operate more than one flight a day on a route, and most of them have less than daily service.”

In Sorsensen’s view, Hawaiian Airlines would appear to be the only other U.S. airline that could "fit" within a traditional airline codeshare arrangement.   
“I just can't see Spirit, Frontier, and Allegiant filling this role,” he says. “But [Frontier president and CEO] Barry Biffle is most certainly an out-of-the-box thinker, so who knows?”

An alliance between JetBlue and Hawaiian had seemed like a good idea for years, says Anthony, though he says such a deal was “probably not going to happen in this environment.”  

Instead, American’s agreement with JetBlue could send United closer to Hawaiian, Anthony says.  

“United would probably be the only real, tangible player to make a move right now,” Anthony says. “You have American tying itself to Alaska and JetBlue. You have Delta basically saying it doesn't need anyone else.”

With an eye towards the larger economic climate, the waves of demand shocks across practically all industries is forcing companies to seek out ways of combining forces with complementary rivals.  

“We’ll probably see a lot more partnership activity over the next year or so,” Anthony says.

As for how this deal will cause other carriers to respond, Sorensen says American’s and JetBlue’s arrangement opens the door for other global players to make a grab for smaller codeshare partners in the LCC realm. 

“EasyJet in Europe is a natural candidate with its good reputation for service and a giant network,” Sorensen says. “The connection possibilities at Gatwick are stunning.”