There was a time in the not-too-distant past – like, six months ago – when U.S. airlines were operating at peak efficiency, high capacity, and making money hand over fist.
It seems like forever now.
The industry has been devastated by the coronavirus pandemic, with flights falling to an average of just five percent full back in April before slowly rebounding in May and June.
So to say that the announcement this week that American Airlines and JetBlue Airways would be forming a ‘strategic partnership’ is long overdue might sound crazy at first, until you stop and think that this isn’t a reaction to the current crisis. The two carriers actually began discussions with each other well before the pandemic began its deadly surge across the world, according to CNBC,
This is a smart move.
Now American and JetBlue can sell seats on each other’s flights, and passengers can accrue and share frequent flyer benefits, in what is usually a partnership between international carriers who have codeshare agreements. It’s risky for two domestic competitors to form such an alliance, but desperate times call for desperate measures.
The two airlines actually tried this before, forming an interline traffic agreement and reciprocal frequent flier accrual program that ostensibly would provide passengers flying into or through New York and Boston with more choices and connections. That was in 2010; it ended in 2014. Coincidentally, that was right when the airlines began an unprecedented run of financial success previously unknown in the industry.
Frankly, they didn’t need each other.
Now they do.
It’s obvious what JetBlue will get – access to the world’s largest airline and new routes American is introducing next year, including flights from New York to Rio de Janeiro and New York to Athens.
But don’t think American is getting the short end of the stick. JetBlue has hubs in New York and Boston, and robust routes to Florida, domestic strengths that American can take advantage of.
“JetBlue has always had great, great brand strength in New York and Boston. American for years, we struggled to be relevant in those two markets,” Vasu Raja, chief revenue officer at American Airlines, told CNBC. “By contrast, American has immense relevance for customers across the Midwest, the Southeast … and even a big global reach, too.”
Will there be merger potential? Sure, that’s something you can never take off the table. But that’s a discussion for another time. For now, both airlines just strengthened themselves at a seminal moment in the industry.
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