***Update at 22:00 UTC on 01/12/2020 – US DOT approves JetBlue-AA Partnership. Read more here ***
As is the norm in the United States, cutthroat competition and heavily slot-controlled airports mean airlines look cautiously upon partnerships between their rivals. When American and JetBlue announced their partnership, competitors did not instantly come out against it. However, after evaluating the market and partnership, Spirit Airlines and Southwest Airlines are raising concerns over the American Airlines and JetBlue partnership.
Airlines raise objections over JetBlue-AA partnership
Spirit Airlines was the first to file an official complaint about the JetBlue-American Airlines partnership. The airline believed the codeshare hub at New York City, the largest air market in the United States, would continue to stymie access for low-cost carriers to enter into the market.
The airline noted that, in the New York airports, American, Delta, and JetBlue combined, would have a share of 90.8% of New York departures. In addition, getting access to New York-JFK or LaGuardia is difficult already. Newark is not much better.
Spirit’s concern is that JetBlue and American Airlines would not so much compete with each other, as they would be running a “monopoly” on many routes and markets.
Southwest Airlines, in its own lengthy filing, also outlined its concerns over the partnership. Southwest does not mind a “strategic partnership” en toto, but it has concerns over what the two airlines actually plan to do.
Southwest’s concerns are over some comments Mr. Vasu Raja made in an interview indicating that the airlines could be partnering more deeply than its press releases and filings indicate. Two concerns were over Mr. Raja implying that JetBlue could be coordinating service and pool slots and facilities at airports, such as LaGuardia, where JetBlue has a limited presence, but American has a more extensive one. American has been open that it believes the partnership will be beneficial to the airline and its passengers.
Another concern is over the New York-Los Angeles market, in which American does not have a lot of coach capacity on its Airbus A321Ts, but JetBlue does on its Airbus A320 aircraft, even though it does have Mint onboard. According to the Southwest filing, Mr. Raja had stated that JetBlue could help catch American’s coach customers it spilled over while letting American remain a “corporate shuttle” on the route.
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Spirit’s concern is market consolidation
American Airlines has had partnerships with other airlines in the US, including Alaska Airlines. Spirit has some concerns with the precedent from the Alaska-American partnership and how it could play out between the American-JetBlue partnership.
Spirit Airlines noted that, in July 2020, Alaska Airlines announced it would launch new routes from Los Angeles International Airport (LAX) to Eugene, Fresno, and Medford– all regional destinations in the United States. Within a week, American Airlines exited those markets.
American Airlines has also had a strange position in New York in the past. To a lot of key markets, the airline is flying 50-seater planes, which are inefficient and way too expensive to operate out of an airport like JFK. American and JetBlue have both highlighted, in the past, the ability for American to remove those 50-seaters out of JFK and LGA and give JetBlue, with its A320s and now A220s, a chance to operate those routes.
JetBlue and American actively compete with each other in 26 markets spread between Boston, LaGuardia, and JFK. Spirit believes that the two airlines will cease to compete against each other and either leave one airline operating those routes or else both operating them under a monopoly-style arrangement.
Reagan-National is getting a lot of attention
Both Spirit and Southwest highlighted concerns with Ronald Reagan Washington National Airport (DCA). In 2012, JetBlue acquired 16 DCA slots from a slot-swap and another 16 at New York LaGuardia Airport (LGA) as part of a DOT_mandated slot divestiture allowing competition at the airport.
In 2014, JetBlue acquired a total of 40 DCA slots after the American-US Airways merger led to another forced slot divestiture at DCA. The goal was to enhance competition and get independent low-cost carriers in the airport. The route the DOJ most celebrated was Reagan-National to Boston Logan International Airport (BOS).
Southwest Airlines has some serious concerns over this route. First, it believes that JetBlue would no longer be an independent low-cost-carrier. American and JetBlue, if they do coordinate services under their partnership, would get a monopoly market between DCA and Boston.
American and JetBlue, combined, have the lion’s share of the DCA-BOS market. Delta provides some limited service using regional jets on the route. American offers extensive mainline jet service, as does JetBlue.
Out of DCA, American Airlines controls 57% of slots. JetBlue has a 7% share. Combined, AA-JetBlue would have access to 64% of slots. While the two airlines are not planning to cooperate extensively out of DCA, the concern is consolidation on the DCA-BOS route.
50% of JetBlue’s slots out of DCA are used for flights to Boston. That means, under the partnership, American would have influence over more slot pairs out of DCA with another 30 slot pairs. Southwest worries this could increase fares on the route.
For its part, Southwest Airlines explicitly stated it would be interested in acquiring DCA or LGA slots if the DOT mandates divestiture. Southwest declined to comment on the potential for more service out of DCA, even perhaps to Boston.
What will the DOT/DOJ do?
Slot-controlled airports have recently been a point of concern for the DOT and Department of Justice (DOJ). Recently, the DOT blocked a WestJet-Delta joint venture over concerns that Delta would unduly influence WestJet’s share of LGA slots (which amounted to 1% of slots at the airport). Delta and WestJet were outraged, to say the least, and abandoned their joint venture plans.
If slot-controlled airports are still a focus of the DOT, then expect the agency to reconsider the American-JetBlue partnership.
Reviews can take time, and the current DOT does not have much time left in its term. The new administration will likely also take over the investigation, assuming the DOT cannot wrap it up in time.
The mission of the DOT does not change much from one administration to the next. So, expect these airlines’ grievances to still have some weight with a new team at the DOT and DOJ.
What once seemed like a partnership that would sail through, the American-JetBlue partnership could soon come under plenty of additional scrutiny, which could water down the partnership. Or, the DOT and DOJ could turn a blind eye to this partnership and let the two airlines do what they want to do now and decide what to do later.
Ultimately, if the DOT and DOJ conclude that fares will increase on New England routes, then expect the DOT and DOJ to seek some reprieve. A slot divestiture would not be out of the question to low-cost carriers, like Southwest or Spirit.
Do you think the DOT should mandate slot divestitures as a result of the JetBlue/AA partnership? Or, should the DOT let the partnership go through as is? Let us know in the comments!