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The News God > Blog > Business & Finance > American Airlines and JetBlue Are Entering Into Partnership
Business & Finance

American Airlines and JetBlue Are Entering Into Partnership

Sampson Gaddah
Last updated: October 4, 2020 4:38 pm
Sampson Gaddah
July 16, 2020
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8 Min Read
American Airlines and JetBlue Are Merging Up
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JetBlue Airways and American Airlines Group have reached an agreement to integrate their operations in the United States, according to a report by Bloomberg News.

It is another sign of industry consolidation as airlines seek to return to profitability in a world of sharply reduced air travel. And, according to a report by Bloomberg, a major source of information on the matter, the two companies will formally merge in the coming weeks.

American Airlines’ (AAL) partnership announced Thursday will include code-sharing and network cooperation, “American Airlines Eel said in a ticker-ticked statement on its website on Thursday. In addition to American Airlines’ services, JetBlue will expand its network by more than 60 routes and expand its presence in the United States and Canada, as well as Europe, Africa and Asia. JetBlue plans to add flights to LaGuardia and Newark and increase its presence at JFK to connect with American Airlines’ international flights.

American Airlines will serve more than 130 routes operated by JetBlue, with a total of 1,000 flights a day to the United States. America’s chief executive, John D. Kennedy, said the agreement will allow him to establish new international links, including flights to Tel Aviv, Athens and JFK. However, the company said the deal would include loyalty benefits for customers of both airlines, without saying whether customers could redeem those points on the other network.

According to Cranky Flier’s blog, the partnership largely covers the Boston and New York markets. The airline will compete with the Boston market for a total of 1,000 flights a day, according to the blog.

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There was also speculation that a code-sharing deal between American Airlines and JetBlue was being struck that would significantly disrupt the airline’s business. This is a big deal for American Airlines s, who has long sought to get more passengers on domestic and international flights to New York. The inclusion of JetBlue could improve feeder systems at some of the smaller regional airports, according to the New York Times.

It will eventually lead to code share, frequent flyer partnerships, according to Cranky Flier.com. This means that the loyalists of both programs will now be able to meet most of their needs without having to stick with their preferred airline or partner.

The deal could also anchor the industry’s pre-consolidation – and possible merger – process. The airline has made job cuts in recent years and plans to lay off thousands of staff as it tries to return to profitability with a smaller revenue base. The American Airlines said Wednesday that it will cut 25,000 jobs in the first quarter of 2017 as part of its payroll support for the Cares Act.

United Airlines Holding (UAL) made a similar announcement last week, as did United Airlines Group (USAA), the parent company of United, United Express and United Continental. Last week, Delta Air Lines (DAL) said it expected a third-quarter loss of $1.5 billion due to early retirement and employee severance agreements. Bernstein analyst David Vernon told Barron’s: “The airlines are trying to figure out how to rearrange the pieces of chess.

As the industry wants to market more products with much less capacity, it will have to look for ways to market more products with less capacity. If we learn one lesson from Covid, it is that a small number of well-capitalized airlines can handle it better.

The only catch, of course, is that American Airlines does not have the equity to make a stock deal, and that is a big problem for the company. Debt soared by more than $38 billion late last year, while the stock’s value shrank to $6.5 billion in market capitalization. JetBlue’s equity is about $3 billion, based on its market capitalization, a decline from $6.5 billion in 2009. That’s about $1.4 billion of the company’s total value, which includes debt and cash, according to the company’s most recent financial report.

A spokeswoman for American Airlines told Barron’s, according to a company statement, that “we have no intention of merging.” A JetBlue spokesman said: “We continue to believe that our independent, organic plan will deliver the best results for our investors and for us.

It strengthens our ability to offer our customers lower fares and better service through our low cost, high quality and high quality services. If JetBlue were to go up for sale, it would likely be more valuable than the old aircraft carrier, according to analysts at Goldman Sachs and Morgan Stanley.

One reason is that American Airlines and JetBlue operate fleets of fleets of fleets of planes, according to a recent Wall Street Journal report. JetBlue’s assets, which are mainly Airbus aircraft, would be worth more as part of an airline that operates a fleet of older aircraft and could generate further cost savings by refreshing its offering. American Airlines will spend billions of dollars to build a new fleet after its merger with US Airways, according to a Wall Street Journal report.

With the focus on trying to maximize returns from the marginal dollar, there is no other airline that needs JetBlue more than American Airlines, Vernon said. One airline that could afford JetBlue and benefit more from its assets is united, he says, but one airline that could not only afford it, but also benefit more from Jet Blue assets is American Airlines. United’s presence at New York’s JFK is strategically better suited, but the carrier’s fleet is not as young as JetBlue’s and not as large. But “if you take what JetBlue can afford and what we can get the most value for, it would be United and American Airlines,” Vernon said.

United left JFK in 2009, sold its 26 slots to Delta, and moved operations to Newark, the New York Times reported.

United has long wanted to return to the market but is under pressure from its parent company American Airlines. In April 2017, United’s chief executive Scott Kirby, who was previously the airline’s president, told United employees that leaving JFK was the wrong decision. A United spokesman said the airline would not comment on the merger speculation, according to a statement from Chief Financial Officer David Lasseter.

This story was initially published on Barrrons

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