In yet another sign that US carriers are looking past the pandemic recovery process, American Airlines intends to invest in Chilean ULCC JetSMART, expanding its footprint in South America. JetSMART is a portfolio airline of Indigo Partners. Indigo holds stakes in several other ULCC airlines, including Frontier in the USA.
This proposed investment in JetSMART would give customers access to the largest network, lowest fares and best travel loyalty program in the Americas.– Vasu Raja, American’s Chief Revenue Officer
A key AAdvantage
The companies propose extensive code share operations, as well as integration of their loyalty programs. American’s Chief Revenue Officer Vasu Raja suggests the deal would “make AAdvantage the largest travel loyalty program in the Americas, creating more ways for customers to earn travel rewards and use their miles to access new destinations and elite benefits globally, no matter whether they earn in Latin or North America.”
Ultimately the partnership should include full earn-and-burn and elite benefits for travel on JetSMART. The Chilean carrier does not operate a traditional loyalty program today, and AAdvantage does not act as the program of record for other airlines. This integration process should be interesting.
No product changes
Raja explains that the deal will catalyze growth for both airlines “while preserving the best aspects of each carrier’s business model.” Don’t expect the products or market approach to change, other than passing passengers between the two at major airport connection points.
American will continue to bring travelers between the US and South America on its long-haul fleet. JetSMART will continue to operate its A320 max-capacity aircraft focused in Chile and Argentina, along with connectivity to Brazil, Peru, and Colombia.
Connecting between a full service and ULCC operation could prove confusing for some travelers, depending on how the fares are structured. That said, American’s model is sufficiently unbundled today that its regular customers should at least be aware of the chance they’ll need to pay extra for various services.
JetSMART also holds orders for 10 new A320neo-family aircraft, part of the massive Indigo Partners order placed in 2017. Fourteen of these are expected to be the A321neo. Whether those frames are delivered in the regular, LR, or XLR configuration could influence the carrier’s ability to reach the US or Mexico from its Santiago base.
The deal comes as American seeks to reestablish local connectivity in the region following its breakup with LATAM and that carrier’s eventual partnership with Delta Air Lines. American signed a similar agreement with GOL to help cover its needs for connectivity within Brazil.
Under the proposed transaction, American would invest in JetSMART to facilitate this growth and give American a minority ownership stake in the short-haul South American carrier. Additionally, American and Indigo Partners would jointly commit to provide additional capital to fund potential future opportunities in the region. That American has cash to invest in foreign carriers, even as it has not returned to profitability in its core operations, raised the ire of some employee groups.
American expects the deal will enable it to strengthen and grow its South American network and to attract more travelers in more markets. The carrier believes this proposed partnership would also give American customers access to more low fares and travel options on a network that is twice as big as other alliances.
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