I wrote on Monday that partnership talks between American Airlines and JetBlue were off. American Airlines confirms this. In fact, they’ve sued JetBlue.
Here’s what Vice Chairman Steve Johnson shared with employees,
Team,
In recent months, we had been exploring an opportunity to further enhance our network by renewing a partnership with JetBlue. As always in considering partnerships, the objective was to advance our business strategy and enhance our customer proposition by building on American’s network position and giving a partner’s customers access to our global network and the world’s best loyalty program in AAdvantage.
Although we proposed a very attractive proposition to JetBlue and its customers and team, it became clear over time that JetBlue was focused on different business priorities. Ultimately, we were unable to agree on a construct that preserved the benefits of the partnership we envisioned, made sense operationally or financially, or was consistent with the travel rewards and co-branded card business objectives that are so important to our strategy and our customers.
Looking ahead: We remain intently focused on and are competing aggressively in New York and Boston, and we are committed to enhancing our customer proposition in the Northeast. Over the past year, we have added more than 20 new routes from LGA and JFK using the slots returned to us after the NEA ended. Together with our partners, this summer we will offer New York travelers more than 250 daily nonstop flights to 100 markets around the world – from two exceptional terminal facilities, including the best lounges in our system. At JFK, we continue to improve connectivity by co-locating at T8 with our partners, including British Airways, Iberia, JAL, Qatar, and, as we recently announced, Alaska and Hawaiian.
The continued growth in AAdvantage enrollments in the region makes us confident that the New York market is sufficiently large and lucrative to support and value multiple competing networks. And of course, New York is a key business and leisure travel market for customers around the system, so we will also continue to optimize the “halo” effect for our network by providing convenient schedules to New York for travelers who live in cities throughout the U.S. and around the world.
We are proud to connect customers to more than 1,000 destinations around the globe, with an outstanding group of partners who share our belief that alliances are meant to provide customers with the experience they deserve and benefits they prefer. We will continue to build American’s network organically and through growth and investment in these partnerships.
One final note, in case you see it in the news. We filed a lawsuit against JetBlue today to recover money owed to American following the unwinding of the Northeast Alliance. We understandably tabled this claim while we were in discussions with JetBlue, but now that those conversations have concluded, we need to address the accounting and reconciliation following the termination of the NEA.
Thank you for your help as we continue this important work.
Steve
American Airlines Premium Check-in New York JFK
I had 6 reactions reading this note.
- When I first saw a copy of this note, I questioned whether it was even real. Reaching the bottom, seeing the reference to the lawsuit and verifying that, is what made me realize I wasn’t being punk’d. This seemed like such an overshare.
- Without JetBlue, American Airlines remains undersized in New York. They cannot grow in any meaningful way. Both New York LaGuardia and New York JFK are slot controlled, so the number of flights they can offer is capped – at a level far lower than Delta, and in a way that cannot compete with United’s operation at Newark. It’s possible to grow incrementally through slot leases and purchases but there’s no deal out there of the size of JetBlue. (JetBlue’s slots were gifted to them at launch by Senator Chuck Schumer.)
- This lays out a return to the original US Airways strategy for American Airlines in New York. Since they aren’t big enough to offer convenient flight schedules to New Yorkers in a way that competes against United and Delta, a decade ago the airline laid out a plan to be the airline that brings travelers to New York rather than serving New Yorkers. Johnson, who is also ‘Chief Strategy Officer’, writes (emphasis mine):
New York is a key business and leisure travel market for customers around the system, so we will also continue to optimize the “halo” effect for our network by providing convenient schedules to New York for travelers who live in cities throughout the U.S. and around the world.
New York LaGuardia - It’s odd to say that the New York airports have “the best lounges in our system.” Among Admirals Clubs the best ones are Washington National E Concourse, Denver, and Newark. And among business and first class offerings, the Chelsea lounge was a huge downgrade in food and views compared to the old Flagship First Dining at New York JFK that came before it.
Flagship First Dining space became part of the business class Greenwich lounge - I was asked whether this could be some sort of hardball negotiating tactic, now that the whole world is trying to figure out seemingly counterproductive negotiating strategy on the public stage (claims of ‘3D chess’). And I can’t see how? A lawsuit might be a good stalking horse in the background, with the waiver of potential claims going into a calculation of the benefit of doing a deal But filing the suit, and laying blame on the other party for ending talks, seems more about controlling the narrative than aiming at a rapprochement.
- We know that JetBlue has been promising a partnership to investors. So it’s tough to walk away from one with American unless they have another good option. Could a deal be in the works with United?
American Airlines puts a strong face on their New York prospects, but the JetBlue Northeast Alliance which was struck down by a district court judge following opposition by the Biden administration (and prior signoff by the first Trump administration) positioned them to compete in New York and drove signups for the AAdvantage program and co-brand credit card conversions.
Without it, they are ‘too small to win, too big to quit’ in the words of their former Chief Commercial Officer. They can serve a number of destinations from New York, but without the frequency of their main competitors. Or they can focus on a few destinations – their 2018-era ’boutique airline’ strategy – but neither one gives them sufficient relevance in the biggest spend market.
Better than seeing them ‘in the street’–judicial review of disagreements is preferable to violence.
If you count the Chase Sapphire Lounge in LGA Terminal B as within their “system” it is perhaps an accurate statement.
AA has proven that it can’t win in the marketplace so will try to sue anybody – as if that solves the problem of AA not being able to compete.
and the real implication is that AA does not have a plan to compete in highly competitive markets and has been reduced to a southern focused airline in large metros – PHX, DFW, CLT and MIA – plus a lock on DCA.
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let’s be clear that AA was the largest legacy carrier in NYC for years – it was their former hometown.
Scott Kirby and Doug Parker sealed AA’s fate with the DL-UA DCA-LGA slot swap which not only vaulted DL into the largest carrier on the NY side of the big 3 airports but also ensured that AA would never effectively compete since AA/US was the only legacy combination that was left.
and AA/US ended up having to divest the equivalent of AA’s DCA slots or what they gained from DL in the slot swap (it was about the same number of slots).
and now AA and UA are both whining about trying to fix their competitive positions in NYC; DL was clearly the only one that was thinking down the road.
at some point, AA has to admit that Parker’s proclamation that the AA/US merger would allow it to compete with DL and UA has turned out to be a complete failure.
Yea. I am done with AA. This will be my first non-renewal EXP in seven years. They’ve lost their touch.
It’s tough to imagine any realistic scenario where United, already controlling a vast portion of the NYC market, would be allowed to take over another huge chunk through a merger.
With American out of the running for whatever reason the only viable candidate for a merger from a public perspective would be Alaska. The route networks would compliment each other in a particularly strong fashion. The dichotomy on fleets might be a tough hurdle though.
Delta will hopefully acquire AA soon.
thank you, Christian,
NONE of the big 3 can have a partnership with B6 that will be viable for B6 solely because the big 3 all overlap and have much more than B6.
UA can have wet dreams all night long about taking over B6 to get back into JFK but anyone in Washington can see that allowing any carrier to control 50% of the NYC market which is limited access to slots and capacity would be very bad for consumers.
and if UA does acquire B6, it opens up the potential for further mergers including by DL of either AA or WN, both of which have far more to offer DL than B6 can offer UA and DL doesn’t overlap major parts of AA or WN as UA does with B6.
but B6 made it clear in its earnings release that it intends to operate as a standalone carrier for now. They are a shrinking airline that is not financially viable long-term but AA hasn’t been for about 15 years and WN hasn’t been for a much shorter period of time.
@Christian — It depends. Is the judiciary still neutral and independent? If so, then a judge may evaluate this, in accordance with the law and the facts, and consider this dispute and others, including any potential mergers (between airlines or other companies), and then determine that the outcome, for example, if a merger would be monopolistic or not (it probably is anti-competitive at least, and I tend to think that more competition is usually better for consumers.) Of course, there may be appeals, etc. That’s the usual process. It’s tedious. It’s slow. It works though.
However, if we are no longer a ‘free’ country, run not by ‘rule of law,’ but by a literal or figurative ‘king,’ then it just depends on whatever the king wants, which can be completely irrational, (like those tariffs), on a whim (like threats to annex Canada), probably based on whoever strokes his ego best (pay $1 million for a lunch at my club, and I’ll support whatever you wish!) In that case, the winner is whomever appeases #45/47 the best-est. I don’t prefer this latter ‘system,’ because it is the lack of a fair, reasonable, stable system entirely. I don’t believe, but god help us.
Why do you think Kirby has been cozying up to the Trump Administration? An acquisition of JetBlue would solve it’s Florida and JFK problems. Sure there will be some route divestitures but JFK and EWR aren’t huge overlap markets for the exception of Manhattan residents. JetBlue will argue that it can’t become profitable as a standalone entity and thousands of jobs will be lost if they go out of business.
@1990 — Your TDS is showing a bit here. As someone who closely follows the M&A sphere, I can tell you “#45/47” has not been nearly as merger-friendly as many expected him to be. Several high-profile mergers have already been blocked by the DOJ in the first couple months of the administration. The administration is populist-right, not libertarian-right, and sees many big businesses as part of the “woke deep-state.” Don’t get me wrong, I absolutely despise 47 and see him as a clear and present danger to our country, liberty, and economy, but even now it’s an oversimplification to boil down what goes down in Washington to “47 is bad. Thing I Don’t Like is also bad. Therefore 47 will support Thing I Don’t Like, and Thing I Don’t Like will end up happening.”
I’m always fascinated how “partnership” becomes “merger” in these conversations. T6 is set to provide airside connection to B6 at JFK. Lufthansa group will be the largest airline group at that terminal. I don’t think merger would pass regulator scrutiny, but LHG could use some seamless domestic connections and UA can’t provide them. It probably isn’t an enormous amount of ongoing traffic, but some. I imagine the best UA could hope for in JFK is acquiring a handful of slots to push passengers to IAD, IAH, DEN, ORD, SFO. Maybe UA helps make a deal where B6 gets some onward east coast feed from LHG for a slot acquisition. LHG also has some feed in BOS. Also important that B6 does not directly compete with LHG on transatlantic flying right now.
I don’t know. A slot acquisition in exchange for a limited partnership (remember B6 is also the best AA competitor in the Caribbean) would probably also help B6 in FLL and SJU. It doesn’t have to be a merger. Any type of agreement will probably help both UA and help *A partners going into JFK. It would also help B6 a lot. I can’t imagine that B6 joins *A right away, but I can see those relationships developing quickly.
Jay,
thank you for speaking the truth about the current merger climate. far too many people believe that Trump is going to roll over and allow big business to screw consumers.
and Pam Bondi is the AG. People who think she rolled over to anyone in Florida clearly missed the plot.
Brent,
there is no reason why B6 would do a slot deal w/ UA unless B6 wants to sign its own death certificate. UA is going to compete on routes that B6 flies and they cannot negotiate a slot deal from stopping them from doing so.
UA is deadset on knocking off AA in Chicago and New York. THAT is what is driving this and the DOJ is just a tad bit smarter than alot of people give them credit. UA’s incessant yapping about knocking off competitors doesn’t leave a whole lot of doubt as to their intentions.
Jay,
thank you for speaking the truth about the current merger climate. far too many people believe that the current administration is going to roll over and allow big business to screw consumers.
and Pam Bondi is the AG. People who think she rolled over to anyone in Florida clearly missed the plot.
Brent,
there is no reason why B6 would do a slot deal w/ UA unless B6 wants to sign its own death certificate. UA is going to compete on routes that B6 flies and they cannot negotiate a slot deal from stopping them from doing so.
UA is deadset on knocking off AA in Chicago and New York. THAT is what is driving this and the DOJ is just a tad bit smarter than alot of people give them credit. UA’s incessant yapping about knocking off competitors doesn’t leave a whole lot of doubt as to their intentions.
We have no idea what the current administration will do on airline antitrust in general, or a United deal to grow in NY in particular.
– There are many in the broader Trump takeover of the Republican party who are far closer to Lina Khan and Elizabeth Warren on antitrust than to traditional anti-trust analysis where consumer benefit has long been the standard. So they may be quite hostile to combinations!
– At the same time Trump himself ran an airline, and sought to take over American Airlines! He has views on the industry!
– And there’s still some pro-market elements at play here
– Plus, closeness to the administration seems to count for more than usual now, see recent pardons and dinner with the President for the largest *prospective* holders of the Trump shitcoin (driving money into the President’s pocket personally).
The truth is we just don’t know how these different elements will play out!
your points are valid, Gary.
However, many think that UA is closer to the Chief because UA touted giving money to his inauguration while DL did the same thing but doesn’t tout what it does near as much.
And there is no planet under which a combination of the big 4 with any other existing US airline is good for consumers.
olives,
DL is happy right now to eat AA one bite at a time. That way they don’t have to mess w/ AA’s unions.
AA and B6 codeshare is the only combination where either can compete with DL and to a lesser extent, UA. AA will someday be featured in business classes of how management took a good thing and self-sabotaged. They invested 25+ billion on new airlines to have the best fleet, other than a lack of sufficient widebodies, and offered strong union pay. But AA somehow managed to end up with customers who feel that their airplanes are worse than Delta and UA, with more delayed flights, which shouldn’t be the case with the newest fleet, and poor customer service due to poor morale, despite good pay. Didn’t think this was possible, but AA managed to do it. How? Stupid moves on NY as outlined above, spending $25 billion on planes but then going cheap on interiors, to “save” a few hundred million $$$, which has cut margins by billions each year, the ultimate in “penny wise, pound foolish,” by putting in uncomfortable seats with thin seat bottoms that feel like sitting on a board, with no seatback entertainment to boot. Things like serving horrible coffee and wine. Then top it off by having the largest domestic network ready to feed what could be the largest international network, which is the most profitable flying, but instead they inexplicably cut international and delayed widebody deliveries, which I thought was a joke when I first saw the headline.. All this led to poor morale as the employees see no focus on customer service and all these strategic mistakes. A slow, self-inflicted death by hundreds of nails in the coffin due to all these poor decisions. How to fix it? Put in comfortable seat bottoms and seatback entertainment, customer-focused decisions such as better coffee, wine, etc,, better customer experience. Grow international meaningfully. Get back with B6 to be competitive in NYC. Show the employees they are making a real effort to improve, not just half-heartedly putting lipstick on the pig, I’m pretty sure the employees would respond very well. Customers would respond with more demand at margins that are on par with UA if not approaching DL. Right now, AA is illogically positioning itself as a high cost airline with low customer amenities just a tiny step above Spirit and Frontier, while maintaining a pipe dream that better demand and higher margins will just somehow happen, despite all they are doing to discourage it from happening.
…meant to say “AA and B6 codeshare is the only combination where either can compete IN NYC AREA with DL and to a lesser extent, UA.”
…meant to say that the AA/B6 codeshare is only way for either of these two airlines to really compete IN NYC AREA.”
I hope JetBlue does deals with any other company but America Airlines. I have enjoyed my flights on JetBlue. If a merger/takeover takes place, I see JetBlue only getting worse. If I had to pick one to merge with, I would say merge with Alaska Airlines but I think ticket prices would go way up.