American Airlines and JetBlue had a fantastic partnership that allowed customers to earn miles and have reciprocal elite benefits when flying the partner airline. This made them a real competitive force in New York. While the deal had been approved by the federal government in 2020, it was opposed in 2021 – and ultimately beaten in court.

The end of the partnership has been bad for customers, and bad for American and JetBlue which are in a tough spot trying to compete against Delta and United in New York. Neither one can grow there, and both are too small on their own to really matter.

There’s a chance that they could try to re-start the partnership that was dismantled last year. Both carriers say that they want this.

American/JetBlue Partnership Is Good For Passengers, Competition

The Northeast Alliance really was the best plan for marketplace relevance for both American and JetBlue, for the customers of both airlines, and even for customers of United and Delta in the Northeast who would have benefited from their carriers facing a more vibrant competitor. Instead, we’ve seen American mostly ignore the Northeast in favor of the Sunbelt and JetBlue cutting flights as it tries to stem losses.

• The number of slots at New York JFK and LaGuardia are fixed. Regardless of the number of airlines in the market, and both American and JetBlue were among smaller players, the partnership did not reduce the number of flights. It may have shifted who flew which flights, but the total number of flights were the same.
  
• The partnership increased the supply of seats in the market which tends to lower prices. American and JetBlue had to give up slots to get Trump administration’s approval for the deal and would have had to give up more slots if they did not increase seat capacity. The two airlines accomplished that through increase of gauge. In other words, bigger planes. While the number of slots are fixed, this deal meant more seats per slot. Without the deal, you get fewer seats and higher prices.

American and JetBlue partnering was good for consumers. It created a third viable competitor in New York. Customers benefited, from mileage accrual and redemption to reciprocal elite benefits. That meant AAdvantage status members getting extra legroom seats and bags free on JetBlue (and vice versa). The government took that away.

The Lowest Level Court Made A Weird Decision

After the federal government approved the American-JetBlue partnership, it sued to stop it. The only difference was the party in power. That’s not how rule of law is supposed to work.

The Department of Justice prevailed against the partnership at the federal district court level. American continued to appeal, JetBlue did not. JetBlue preferred to focus on their acquisition of Spirit Airlines, which was a weird choice since they only really needed Spirit’s planes and pilots because of the growth that American partnership represented. JetBlue was operating a lot of American slots out of New York, and they didn’t have the capacity to bulk up Boston, too.

The district court judge’s decision was weird. Traditional anti-trust law looks at consumer benefit or harm. The judge ruled that the partnership was per se illegal because it allowed the two airlines to coordinate who flew which routes. His ruling acknowledged growth in New York as a result of the NEA and also that “American’s slots at JFK and LaGuardia have been used more heavily and efficiently” as a result of the NEA. Both are good for consumers!

However, the judge expressly said that a partnership like American’s with Alaska Airlines would have been fine. However, the injunction in place from that ruling prevents them from doing any kind of partnership with JetBlue, not just restarting the Northeast Alliance.

American Is Still Appealing The Ruling

In June, American Airlines told an appeals court that they still want to go forward with a JetBlue partnership. While that was necessary to rebut the argument that their appeal wasn’t ripe for adjudication, presumably the lawyers were representing the actual position of the airline (it would be very problematic for them if they were not).

In fact, at American Airlines Investor Day airline CEO Robert Isom said that “if there’s an opportunity down the road to partner with JetBlue] we’ll take it.”

American Airlines needs a New York partnership because government slot controls prevent them from growing. As former Chief Commercial Officer Vasu Raja used to say, American is ‘too small to win, too big to walk away’ in the New York market.

And without enough size in New York they aren’t relevant to New York consumers, not just for flights but for co-brand credit card wallet share. The value of their credit card deal rises or falls with their ability to attract spend in this important market.

Notable, American’s pilot union, though not in a decision-making role, now supports the partnership.

“By restricting partnerships, regulatory agencies have bolstered the Delta and United duopoly in NY,” said APA spokesman Dennis Tajer in an interview. “A broader New York partnership, underpinned by metal neutral service by American and JetBlue, would better serve passengers and employees while creating increased competition.

“Right now, Delta and United have a government provided shield of protection from loyalty competition, at a time when loyalty programs are wildly more valuable than they were a year or two ago, as reflected in the financial results for each of them,” Tajer said.

JetBlue Wants Back Into The Partnership

On the JetBlue third quarter earnings call, airline President Marty St. George acknowledged that one of the major holes in the carrier’s strategy is lack of partnerships. They’re looking at partnering and “It certainly could be with American.” Although if not American, then someone else.

So I’m cautiously optimistic that we might have an opportunity at some point in the future. It’s not a gigantic number that’s going to make this plan pivot, but I think it’s certainly one of the tools that could be in the toolbox to try to achieve JetForward. Now second thing is with respect to speed, I think it’d be too early to say. I think it depends on what the structure of the partnership is, but we have a lot of experience at this, and I’m — it will be the appropriate speed for whatever size partnership we choose.

What Would It Take To Do A New Partnership?

If American Airlines wins its appeal, the two airlines would be free to partner. Otherwise they need to go to the government first, even though a partnership that looks more like the American-Alaska deal was explicitly considered permissible by the judge in their case.

However there’s some possibility that the outcome of the election on Tuesday would matter here, too, since the original deal was approved by the Trump Department of Transportation and only opposed once the Biden administration took office.

That’s not dispositive with respect to what position a future administration would take, regardless of which candidate wins.

A Harris administration, for instance, might recognize that subsequent events left United and Delta in a stronger position in New York while hindering overall competition, and that prosecuting JetBlue’s acquisition of Spirit successfully has left Spirit on the brink of bankruptcy. Meanwhile, the Biden DOT has seen this and approved the Alaska acquisition of Hawaiian. Hawaiian was a financially weak player and this strengthens them for continued competition.

American had planned to sponsor JetBlue for membership in oneworld. That’s an alternative universe that would really benefit JetBlue customers, but that could still wind up in our future.