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New American Airlines-JetBlue deal expected to generate USD69 million

6-Apr-2010

The proposed slot exchange and interline deal between American Airlines and JetBlue is expected to add at least USD14 million to JetBlue and USD55 million to American’s operating income,” according to AirlineFinancials.com’s Robert Herbst. He added that the income increases could “easily double” as American connects 12 international routes with 18 JetBlue services.

“The reality of the industry is that without this American-JetBlue ticketing agreement, international passengers between any of the destinations above would likely choose Delta, United, Continental, or US Airways for their travel opposed to using JetBlue or American,” said Herbst in assessing the impact of the deal. “JetBlue now becomes a stronger domestic competitor by providing connecting service to American's international destinations. Without this agreement, the only way for American to compete for passenger traffic from the JetBlue cities above would require American to add costly domestic routes that would only drive fares lower due to unnecessary additional capacity. Each 1% increase in JetBlue's passenger traffic that is driven by American's international connections will add $6.9 million to JetBlue's operating income and four times that amount for American. This additional income comes at virtually no increase in costs to either airline.”

See related report: JetBlue/American Airlines interline and slot swap a watershed for US airline evolution

Saying current airfares are more-or-less what they were 25 years ago, Herbst, a mainline captain, added that if they were adjusted for normal inflation, fares would be approximately twice what they currently are. He concluded that the USD9 billion in industry losses came not from exhorbitant airline costs, but from not enough revenues.

As I have frequently stated, more focus needs to be on making the industry better and not just cheaper,” he said. “The only way for this to occur is for the airline industry to stop adding capacity until there is enough demand at a high enough fare to operate profitably. This new deal between American and JetBlue is a positive move in that direction and makes both airlines stronger.”

Herbst pointed out that JetBlue enjoyed the greatest market share at New York’s Kennedy International Airport at 41.7%, followed by Delta at 19.8% and American at 14.1%. JetBlue also had the highest market share at Boston at 17.4% where American has 15.1%. Meanwhile, at DCA, American ranked number two in market share at 15.1% to US Airways number one slot with 22.3% of the passenger traffic there, without counting the regional affiliate traffic.

Herbst also provided a list of JetBlue routes and passenger traffic into both Boston and JFK which could connect to American’s international flights. “Collectively, the daily average JetBlue one-way passenger traffic from all of the cities above to New York JFK and/or Boston was 7,547,” he said.

The numbers equals the average daily one-way passenger traffic based on the most recent data available:  

As part of the "interline ticketing agreement", the following are the American international destinations that JetBlue passengers will be able to connect with:


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