- The outgoing administration has approved a joint venture between American Airlines and JetBlue that could drastically reduce competition at busy airports in cities such as New York, Boston and Washington, D.C. — drawing objections from rival carriers, antitrust experts and members of Congress.
- The “strategic partnership,” as American and JetBlue dubbed it, calls for the two companies to share revenue, cooperate on their frequent flyer programs and let customers book tickets with routes across both airlines.
- The department placed conditions on the deal, including that the airlines divest some slots at capacity-constrained airports in D.C. and New York.
- But the DOT did not open the deal for public comment, and its disclosures don’t indicate whether the joint venture was reviewed by the Justice Department, which normally offers views on the potential competition concerns posed by airline alliances.
DOT also did not specify that the slots that American and JetBlue are selling off as a condition of the alliance go to low-fare carriers, a break with how the Obama administration handled similar arrangements.
- Low-cost carrier Spirit Airlines has filed a complaint with DOT about the deal, and Klobuchar urged President-elect Joe Biden’s administration to review the decision.
- American, the United States’ largest airline by the number of passengers carried, announced the proposed alliance with JetBlue in July. The partnership will allow customers to book tickets that span both airlines’ routes and schedules and receive reciprocity if they are a frequent flyer with one of the companies.
- These types of agreements are more typical between international airlines, not domestic ones.
- In most cases when airlines propose alliances, DOT opens a public proceeding where rivals, trade groups, unions and others can offer comments and propose remedies for any lost competition. That didn’t happen with the American and JetBlue joint venture.
- American and JetBlue combined “are essentially monopolists at DCA and duopolists with Delta at JFK and LGA, and with United at [Newark] EWR, with no possibility of new entry at any of those airports or even at Boston where there are virtually no available ground facilities,” Spirit said.
- “If American and JetBlue coordinate their services at these airports as the press reports indicate, JetBlue would obviously no longer be considered an independent [low-cost carrier] providing competitive discipline to American or other legacy carriers,” Southwest said in its letter this week.
- Diana Moss, president of the antitrust advocacy group American Antitrust Institute, said she was “very skeptical” the American-JetBlue partnership will benefit consumers.
- Southwest Airlines reached a final agreement with the United States Department of Treasury on the second round of funds for employee salaries, wages, and benefits, through March 31st, 2021. The carrier expects to receive a total of $1,727,370,400 (~$1.73 billion) under the second round of support.
- Southwest Airlines will provide the Treasury Department with a promissory note of $488,211,120 and warrants to purchase up to 1,054,907 shares of Southwest’s common stock under the terms of the PSP extension.
- Even as Southwest began selling its flights to capacity, the decline in revenue was significant enough to warrant concerns over involuntary furloughs or layoffs. Southwest Airlines also lost out on about $100 million in revenue due to blocking middle seats.
- For now, the outlook is that Southwest Airlines will have to endure some tough times before things improve. New and growing travel restrictions across the country have restricted travel to some of Southwest’s largest markets – including California.
- While demand is still strong for flights to sun destinations like the Florida beaches and the Grand Canyon, many other points remain relatively weak. Southwest has to comply with DOT service requirements, though the current Southwest schedules likely meet the DOT’s minimum service requirements.
- For now, the money will definitely help the airline out, though it will need to continue to monitor its operations and financials to prepare for an uncertain 2021 ahead.
- While things are still tough, the airline had a few bright spots heading into the first quarter and looks to hit cash break-even in the spring and perhaps even profitability by the summer.
- President of Delta Air Lines, Glen Hauenstein, stated that the airline’s coastal hubs are some of the weakest areas in Delta’s network. In particular, he cited New York and Boston, where demand in those hubs is only about 20-25% recovered.
- Since Delta can adequately serve Caribbean destinations out of its largest hub in Atlanta, the New York hub caters to more origin and destination travelers. But, these travelers have to deal with quarantines and testing requirements when they come back to New York.
- Looking at Los Angeles and Seattle, Delta is mostly connecting onwards to Hawaii and transpacific markets in Asia and Australia. In addition, some passengers are also heading to coastal destinations in California or else regional destinations in Washington or off to Alaska.
- Given how passengers can connect onwards to Hawaii, which is becoming more important as international beach destinations seem out of reach amid border closures and uncertainty, these hubs are doing a little better than New York or Boston, though still not back at 100%.
- Delta is exceptionally bullish on the return of business travel. Overall corporate travel remains weak, with only 10-15% restored in the fourth quarter of 2020. This was about three points higher than the third quarter and was mostly driven by small and medium accounts, which recovered about five points faster than large corporates.
- Delta’s executives stated that the airline would take up to 34 new planes this year. This includes higher gauge and more efficient aircraft that will offer more premium seats, produce lower seat costs, and provide a much better customer experience.
- Delta is still in the early stages of recovery. It expects an inflection point to come this spring, driven by vaccine distributions and the easing of travel restrictions, after which the airline will start to get to break-even and start to move toward profitability in the second quarter.
- SkyWest Airlines has reached a final agreement with the United States Department of the Treasury for payroll support extension. The airline expects to receive over $230 million in the second round of support.
- SkyWest Airlines must follow strict terms that limit furloughs, salary reductions, and layoffs through March 31st, 2021.
- SkyWest has fared much better than most other airlines throughout the crisis. In the third quarter of 2020, SkyWest recorded a profit of over $33 million. In the second quarter, it had a net loss of just under $26 million. However, in the first quarter, the airline turned a profit of just under $30 million.
- Despite some positive signs of rebounding travel in October and a pretty good holiday travel season, travel demand has reduced, and the airline may be forced to fly fewer block hours than it does now, which would mean less revenue for the carrier.
- Regional flying has become much more important in the current crisis. The airline’s smaller planes are now finding their way onto routes previously operated with mainline jets amid reduced demand.