American Airlines announces major new partnership with South American ULCC JetSmart

American Airlines is doubling down on South America — and moving past a pre-pandemic breakup.

The U.S. carrier on Tuesday announced a partnership with South American ultra low-cost carrier JetSmart (branded as JetSMART).

JetSmart, which was founded in 2016, operates primarily out of bases in Chile and Argentina. The airline has a fleet of 20 Airbus A320ceo and A320neo aircraft, with 79 more pending deliveries. It flies short-haul routes throughout the two countries, as well as to destinations in Brazil, Uruguay, Peru and Colombia.

It's owned by Indigo Partners, the private equity firm that owns a range of ULCCs including Frontier Airlines in the U.S., Wizz Air in Europe, Volaris in Mexico and Cebu Pacific in the Philippines, among others.

Under the partnership, the two airlines will codeshare, and American Airlines AAdvantage members will be able to earn and redeem miles on JetSmart. American will purchase a minority ownership stake in the ULCC, and American and Indigo will "jointly commit to provide additional capital to fund potential future opportunities in the region," the airlines said in a statement.

American operates flights to 17 cities in South America, while JetSmart currently services 33 cities. The airlines will offer connections in Cali, Medellin and Bogota, Colombia; Lima, Peru; Buenos Aires, Argentina; and Santiago, Chile.

The partnership comes alongside American's existing codeshare agreement with Brazilian carrier GOL.

Together, the two codeshare agreements help make up for American Airlines' still-stinging 2019 loss of its codeshare with Latam, which is the South American airline stemming from the 2012 merger of Chilean flag carrier Lan and Brazilian airline Tam.

In 2019, Delta Air Lines announced its own partnership with and ownership stake in Latam, effectively stealing the carrier away from American Airlines and its other Oneworld partners.

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

Still, American said, the impetus for the new partnership is to expand service for its customers based on current opportunities — not to make up for the pre-pandemic Latam breakup.

"What's unique is what JetSmart brings to the American Airlines network," Vasu Raja, American's chief revenue officer, said in a media briefing.

More: Americans can now visit 105 countries and territories — here's the complete list

"For a long time, American Airlines has been the largest long-haul carrier into South America," Raja added. "We've continued to bolster the network and we have plans coming out of here to be able to continue to grow in South America and grow, really, quite aggressively."

It was not clear when the alliance would fully take effect, however. Raja said that the airlines anticipate introducing the codeshare "as quickly as we can," but that the integration of the AAdvantage program could take longer.

"We want to be really thoughtful about how we roll out an entirety of benefits to the customers that preserves the integrity of these business models and fulfills our purpose behind the deal," he said.

Notably, Raja said, the partnership will help American appeal to potential customers who are visiting the U.S.

"As many as 65% of our customer base on these routes originates in South America," Raja said.

While American Airlines would prefer to be viewed as a mainline, premium carrier — on par with Delta and United, even if those competitors are more deliberately trying to appeal to customers as "premium" — Raja said he was not concerned that allying with a ULCC could hurt perceptions of the U.S. carrier.

"Don't be fooled by the name," Raja said of the ULCC moniker, referring to airlines based in non-U.S. markets around the globe. "The quality of product that ULCCs are offering, especially this ULCC, JetSmart is not just competitive with more traditional network competitors in the area — it's very often superior."

More: 6 things we learned about Delta this week during its earnings call

"These are new airplanes with modern seats and a great schedule and travel pattern for either a connecting passenger or especially a nonstop passenger," he added. "So ULCC notwithstanding, this is a product which certainly we'd be very proud to put our customers on, otherwise we wouldn't be engaging in a partnership such as this."