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An airline that surrounds a partnership of love. United Airlines and rival US carrier JetBlue announced last week that they would give what they each long for. History suggests that investors and passengers worried about upgrades and access to the lounge should check out fine prints to see how they will benefit.
United and JetBlue will be selling each other’s flights on their website through a transaction called Blue Sky. JetBlue’s northeastern customers will gain a larger US network and global destinations, and carriers will film several United flight slots at Newark Airport. The new partner, who is unhappy with issues at the New Jersey hub, will win seven round-trip slots daily at JFK, another major New York City airport, as well as providing Caribbean destinations.
True mergers between airlines often fall into national interests on competition rules and flagship carriers, and are often the only option for expansion. JetBlue knows everything about this and blocked a $7.6 billion spirit takeover on the playing field last year. For similar reasons, the court killed the 2020 partnership with American Airlines. Unlike that partnership, its United Alliance does not include adjusting flight schedules or revenue sharing.
Partners also allow airlines to avoid disclosure of many financial details. Qantas, Australia, trumpeted a loud partnership with Emirates in 2012. There, they provided a European network of partners via Dubai when jumbo size losses were forcing the sick red RO to cut the line. However, figures on financial outcomes did not prepare an annual report, and five years later Qantas recovered the bounce.
These partnerships also avoid the embarrassment that arises from airlines taking equity stakes from each other. Sorry, one example is Etihad. Middle Eastern airlines have lost more than $1 billion in stakes from India and Seychelles to Berlin via Alitalia and later collapsed airlines.
Successful alliances is to keep customers feeling good while minimizing cash. Airlines don’t always do this right. Frequent Flyers typically cannot use points to upgrade partner carriers. Lack of access to mutual lounges can be another nuisance. However, last year, the alliance that 15 airlines said Qantas could potentially use points to upgrade using American points. It will go in some way to set new standards and generate profitable loyalty.
Investors have not seen any obvious value in JetBlue and United’s moves. After announcing the partnership last week, their total market value fell by 1%. It ignores the fact that there may be some real advantages from the alliance and as long as the real merger is off the table, this is as good as it gets.
jennifer.hughes@ft.com
