As rumors swirl regarding a JetBlue alliance with Southwest, JetBlue President Marty St. George spoke enthusiastically on Wednesday about the carrier’s onetime partnership with American Airlines.
In May 2023, a federal judge in Boston halted the American alliance, known as the Northeast Alliance, in what was seen as a win for the Biden Administration Justice Department, which perceived a threat to competition and higher fares. The ruling was generally viewed by the airline industry as shortsighted.
At an investor conference in Miami, Barclays analyst Brandon Oglenski asked St. George to identify JetBlue’s ambitions. St. George responded, “The NEA was never fully played out. Just as we were getting to the back half of the ramp, the judge struck it out.”
He referred to the ruling, “which we’ve all read in excruciating detail many times.”
Regarding the NEA, he said, “The biggest benefit is on the loyalty front” and noted that JetBlue “had not really gotten to full earn and burn with American before that deal was struck down.
We think there is a lot of upside. We don’t really have full global earn and burn, and that would be very helpful.”
Near the end of the chat with Oglenski, St. George returned to the topic of loyalty. He complimented Barclays, which not only conducted the Miami conference but also is JetBlue’s credit card issuer, saying “Barclays has been with us for ten years” and done “a good job of helping the credit card program be successful,” he said.
“We’re looking forward to some sort of partnership” that will enhance that value of the program, St. George said.
He also referred to JetBlue’s early days as a unique airline with high passenger loyalty, saying “We still have a somewhat fanatical customer base who loves JetBlue.”
That commitment speaks to the value of the JetBlue credit card. However, JetBlue’s geographical reach is limited.
This year, JetBlue has been the subject of multiple merger rumors, partially an indication that with hub newspapers no longer the primary source of airline news, the standards for publication have diminished.
On Jan. 31, United responded to rumors by publicly declaring that it “is not in negotiations or discussions with any other airline regarding a merger, acquisition or similar strategic transaction and has not been in any recent discussions with any airlines regarding the same.”
Rumors about a JetBlue acquisition or partnership then became focused on Southwest. Hedge fund Elliott Management now holds 10% of Southwest stock.
What do hedge funds do? On Monday, Southwest said it will cut 1,750 jobs at its Dallas Love Field headquarters, representing about 15% of its corporate workforce, the first non-voluntary layoffs in the carrier’s 53-year history. Besides cutting jobs and targeting union contracts, hedge funds look for deals that will increase shareholder value.
Here it is probably worth noting that Southwest operates an all-Boeing fleet, while JetBlue is moving towards an all-Airbus fleet. This used to be something that was considered in airline mergers.
Apart from not discussing mergers, JetBlue is restructuring its route system, putting more capacity back into its key East Coast markets.
“We are the biggest leisure airline in three of five biggest areas on east coast,” St. George said, referring to New York, Boston and Fort Lauderdale.
He said the carrier had conducted “ a lot of other explorations” elsewhere, such as various Los Angeles area airports, but had realized that “without any large-scale partnership that was not really going to be good for us.
“During that time period we lost ground on the East Coast,” he said. Then JetBlue realized “We could put capacity back there and reclaim customers. About 40 or 50 markets are new markets or ramping up,” he said.
In New York and Boston, St. George said, competitive capacity from the big four carriers is flat to up a half point. “We see capacity cycle in and out,” he said. “This is the blessing or the curse of being in big metro areas.”
Currently, he noted, the biggest challenge has been Boston because “We put a lot of capacity in there” and “Delta put a lot of capacity in there.”
As for bankrupt Spirit Airlines, St. George said, “They made their cuts. They were very much focused on the legacy hubs, where they had a skimming strategy.” He said Fort Lauderdale is the only piece of Spirit “that’s going to be sustainable long term,” and “I don’t think there’s a massive tailwind from that.”
