Does JetBlue's bid for Spirit put its American Airlines partnership at risk?
JetBlue's surprise announcement on Tuesday that it is bidding to acquire Spirit Airlines could raise questions about the future of JetBlue's most strategic alliance.
The Northeast Alliance that JetBlue formed with American Airlines in 2020 has been a boon for both airlines — and also invited a still-pending lawsuit from the Department of Justice. In its press release announcing the $3.6 billion bid, JetBlue expressed confidence that the Northeast Alliance will continue, even if JetBlue fully integrates Spirit, which it intends to do.
"The combination of JetBlue and Spirit – coupled with the incredible benefits of our Northeast Alliance with American Airlines – would be a game-changer in our ability to deliver superior value on a national scale to customers, crewmembers, communities, and shareholders," JetBlue CEO Robin Hayes said in a statement.
Both American and JetBlue have used the Northeast Alliance to grow their presence in New York and Boston, offering a codeshare with complementary routes. As part of the deal, JetBlue moved to LaGuardia Airport's (LGA) Terminal B to co-locate with American, and both airlines began an airside shuttle-bus service between their two terminals at John F. Kennedy International Airport (JFK).
But, in the same release, JetBlue attacked the so-called "big four" airlines, which include American — despite AA being a key partner to JetBlue.
"The combination of JetBlue and Spirit would create the fifth-largest domestic airline, better positioning it on a national level as a customer-centric, low-fare alternative to the dominant 'Big Four' airlines," the release said.
More: JetBlue makes surprise bid to buy Spirit, could upend Frontier deal
JetBlue's assumption that the NEA would be able to continue might be based on the fact that Spirit offers a fraction of the capacity that JetBlue and American do out of the three major New York airports and Boston's Logan Airport (BOS), according to Cirium schedule data.
Still, two analysts TPG spoke to following the bid announcement were highly skeptical that the NEA would continue.
"It potentially reduces JetBlue's need to rely on American Airlines as an alliance partner and would potentially, as a result, lead to the end of the current Northeast Alliance between American and JetBlue," said airline industry analyst Henry Harteveldt, the president of Atmosphere Research.
Regardless, Harteveldt also expressed doubt that the DOJ — which already has filed suit over the NEA — would allow it to continue with a super-sized JetBlue as part of it.
Even Frontier, Spirit's existing suitor, wondered aloud about how regulators might view a deal with JetBlue.
"Unlike the compelling Spirit-Frontier combination, an acquisition of Spirit by JetBlue, a high-fare carrier, would lead to more expensive travel for consumers," Frontier said in a statement to TPG. "In particular, the significant East Coast overlap between JetBlue and Spirit would reduce competition and limit options for consumers. It is surprising that JetBlue would consider such a merger at this time given that the Department of Justice is currently suing to block their pending alliance with American Airlines."
JetBlue's bid introduces uncertainty for American Airlines, said analyst Robert W. Mann, a former airline executive.
"I don't know what it does for the American relationship," Mann said. "Now you bring in something the size of Spirit with ultra-low-cost point-to-point structure, I'm not sure how this works out for American."
American declined to comment.
As Spirit's board, shareholders and regulators ponder this potential deal, the debate over the future of the NEA will be an important aspect of the process to focus on.
For now, though, nothing will change for existing customers as the airlines — and, eventually, regulators — are left to sort out the latest pieces of the industry's race to consolidate.
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