JetBlue and American will share passengers in bid to fend off United and Delta

Key Points
  • The partnership will allow the airlines to sell seats on each other's planes and let passengers earn and burn frequent flyer miles.
  • Executives say it's an effort to capture more travelers in New York and Boston.
  • American formed a similar partnership with Alaska Air earlier this year.
American, JetBlue strike deal to battle Delta, United amid Covid-19 travel decline
American, JetBlue strike deal to battle Delta, United amid Covid-19 travel decline

American Airlines and JetBlue Airways are teaming up — again. 

The airlines, which ended a similar partnership in 2014, on Thursday unveiled a new alliance that will allow them to sell seats on each other's planes, giving them more market share in the New York area, JetBlue's home, and Boston, a longtime battleground among carriers. That could give them a better shot at fending off rivals like Delta Air Lines and United Airlines. Travelers can also earn and burn frequent flyer miles with flights on either carrier.

"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 of Fort Worth, Texas-based American Airlines, told CNBC. "By contrast, American has immense relevance for customers across the Midwest, the Southeast ... and even a big global reach, too." 

The airlines discussed the partnership, which is subject to regulatory review, before the coronavirus pandemic, which has led to billions in losses and threatened tens of thousands of jobs across the industry, said Scott Laurence, JetBlue's head of revenue and planning, but he said the airlines expect the deal to speed up their recovery from the pandemic.

Airlines have slashed hundreds of routes because of a plunge in air travel demand, particularly for their international networks. Carriers are seeking new ways to cut costs as much as possible as they shrink their footprints, and partnering with another carrier could be an quick and inexpensive way to gain more reach.

When asked whether the airlines would pursue a merger, an American spokeswoman said the companies were focused on this partnership.

It wasn't immediately clear how many passengers or revenue could be gained from the deal. Laurence said New York and Boston make up about two-thirds of the New York-based airline's network.

In addition to its big hubs in Dallas/Fort Worth, Charlotte, North Carolina, and and Chicago, American has a large operation in Philadelphia. JetBlue has an extensive network from New York and Boston, throughout the Caribbean and northern Latin America, and offers cross-country flights featuring its Mint business class. JetBlue is still planning to launch service to London from the East Coast next year, Laurence said.

American said it will grow its international network to include service from New York's John F. Kennedy International Airport, where it had previously scaled service back, and add flights to Tel Aviv, Israel, Athens, Greece, and Rio de Janeiro.

American is saying: "We're doing this deal under the nose of Delta," said Craig Jenks, founding president of Airline/Aircraft Projects, a New York aviation consulting firm, referring to how JetBlue's passengers in the Northeast could feed into new American Airlines' international flights.

In a turf war on the other side of the country, American and Seattle-based Alaska Airlines expanded their partnership in February to include international flights to try to get more high-paying business travelers from companies like Amazon.

"This [JetBlue deal] is chapter 2 of what we went through with Seattle," Jenks said.

American shares were down 7.1% in afternoon trading Thursday after announcing it could furlough 25,000 employees when the terms of federal aid expire this fall, while JetBlue's were off 4.2%. Other airline stocks were also trading lower.

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