) and American Airlines announced Monday, March 10, the termination
of their partnership which allowed them to split passenger revenues
on a limited number of flights originating from New York's JFK and
Boston's Logan airports. We figure this development is a
result of the American-US Airways merger, which brought US Airways'
extensive east coast network to American Airlines. Consequently,
American no longer needed to partner with JetBlue to augment its
relatively weak position in these east coast markets.
However, we figure JetBlue's gains from the American-US Airways
merger, namely its acquisition of the slots vacated by American at
the Washington Reagan National Airport, far outweigh its revenue
losses from this partnership termination. In our opinion, the
American-US Airways merger has overall been favorable for
We currently have
stock price estimate of $9 for JetBlue
, marginally above its current market price.
See our complete analysis of JetBlue here
American-US Airways Merger Resulted In Termination Of
In 2010, American Airlines and JetBlue entered into a
partnership agreement called 'Interline', which allowed passengers
to book their itinerary involving both these airlines on a single
ticket. This agreement between American and JetBlue was applicable
on a few dozen routes starting from New York's JFK and Boston's
Logan airports. We figure JetBlue's strong presence on domestic and
Caribbean routes connecting New York and Boston was beneficial for
American, whose own network on these routes was not as extensive.
At the same time, JetBlue customers benefited from American's
extensive international network connecting New York and Boston.
The merger with US Airways, however, disrupted this mutually
beneficial partnership as American's east coast weaknesses were
plugged by US Airways' extensive presence in these markets. A
reciprocal frequent flier program between JetBlue and American that
allowed their passengers to earn miles through each other's flights
is also set to expire from April 1, 2014.
Slots Gains Overshadow Impact From Partnership
We figure that the revenue loss to JetBlue due to the
termination of this partnership will be more than offset by the
additional revenue that will come its way from the 12 new round
trip flights that it will start from the recently acquired slot
pairs at the Washington Reagan National Airport. American, in
accordance with the merger approval conditions laid down by the
Justice Department, gave up 52 slot pairs - specific take-off and
landing timings - at Washington Reagan National Airport. JetBlue
acquired 20 of these slot pairs along side Southwest (
) which acquired 27 and Virgin America which acquired the rest.
Additional JetBlue flights from these slots in a high fare market
like Washington will add to growth in the carrier's 2014 flying
capacity. In turn, this additional flying capacity will raise
JetBlue's passenger traffic and revenues offsetting the minor
revenue loss from the termination of Interline agreement with
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