United Making Costly Gamble to Win JetBlue’s New Partnership Deal?

1 dzień temu

NEW YORK- JetBlue Airways (B6) evaluated offers from nearly every US airline before choosing United Airlines (UA) as its partner. The agreement allows United to re-enter New York’s JFK Airport (JFK) through a strategic slot acquisition, despite JetBlue not offering a codeshare arrangement.

United gained seven valuable slots at JFK and adjusted flight times at Newark (EWR), while JetBlue opted for the most financially advantageous deal, even if it meant rejecting simpler partnerships with better-aligned tech infrastructures.

United JetBlue Partnership

JetBlue’s executive leadership, led by President Marty St. George, meticulously evaluated proposals across the industry in what he described as a “beauty contest.”

Each offer was examined based on its net present value, and the final decision came down to two contenders, United and American Airlines (AA).

Despite cordial discussions with Delta Air Lines (DL) and others, United emerged with the most lucrative financial terms.

Interestingly, JetBlue’s selection wasn’t influenced by technology compatibility or strategic alignment.

In fact, St. George candidly admitted JetBlue lacks the backend systems to support a full codeshare, and United is limited by available flight numbers.

Yet, both airlines agreed the core benefits of the deal could be realized without codesharing complexities.

Why United Overpaid

While JetBlue’s stock declined by 3% following the announcement, United’s shares rose, signaling market confidence in the deal’s long-term value.

But industry analysts suggest United likely overpaid, motivated by unique strategic incentives beyond pure financials.

United’s CEO, Scott Kirby, had several reasons to aggressively pursue the deal. Regaining access to JFK was a top priority after the airline’s previous exit under former CEO Jeff Smisek.

Kirby also had an opportunity to block American Airlines’ growth in New York, a city that remains crucial for loyalty programs and credit card partnerships due to its high-spending customer base.

This may explain why United agreed to less visible provisions, including access to JetBlue’s vacation package network and integration into JetBlue’s in-flight digital advertising platform.

These components, while not publicized in detail, suggest that the value for United extended beyond just airport slots.

Limited Disclosure Raises Questions

Most of the financial and operational terms of the agreement remain confidential. Unlike the JetBlue-American alliance that revealed plans for oneworld membership during an antitrust trial, this deal’s intricacies are hidden from public view.

It’s unclear whether direct payments were made for JFK slots or if value is being transferred through bundled services and strategic concessions.

This secrecy fuels speculation that United may have committed more capital or future revenue guarantees than publicly acknowledged.

If true, the partnership might represent a “winner’s curse,” where the victor of the bidding war ends up overestimating the value of the prize.