Slot swappin’ – How New York operations could shift for American Airlines and JetBlue

When the deal was first announced JetBlue and American Airlines chose to keep quiet about potential slot swaps at New York City’s airports. With some time now passed, however, both sides are sharing more. And – pending regulatory approval – it is clear that they have big plans together.

We envision being able to take out things like 50 seat regional jets, which are on a many ways really uncompetitive product and a place like New York or Boston and arrange a number of slot moves within JFK and LaGuardia such that certainly and we can grow [JetBlue’s] mainline presence. That’s where you see us adding more long haul services in New York.

– Vasu Raja, AA’s Chief Revenue Officer

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More than just codesharing

To be sure, extensive code-share agreements are part of the deal. Nearly two hundred routes are expected to be shared across the partnership, with AA adding its code to approximately 130 JetBlue-operated flights and roughly half on the inverse. Frequent flyer opportunities are also part of the deal, as is the ability to share corporate travel deals, assuming corporate travel returns at some point.

But the shifting route networks and the associated slot swap potential becomes very interesting very quickly.

American’s motivation

In the company’s earnings call last week AA’s Chief Revenue Officer Vasu Raja laid bare the challenges the company faces in the Northeast and also on the west coast, where a similar deal is developing with Alaska Airlines:

Our hubs excluding the Northeast that is New York and Boston and the West Coast produce unit revenue premiums of 10% to 12% higher than the industry… This is important because about 22% to 23% of our 2019 capacity is deployed on the West Coast and the Northeast… So we have a material amount of our capacity in these markets in both of these cases but the West Coast and the Northeast infrastructure is constrained. And we’re in a situation where we’re really too small to win and too big to go and exit. And so we need to figure out a way and it’s just such a massive customer base that we need to find a way to go and access that revenue.

That’s nearly a quarter of the company’s operation that’s delivering revenue premiums well below the rest of the network. And with the operating expenses associated with those markets, generally costing the company more, too. But American is not ready to walk away.

The chosen solution for the carrier is to effectively yield that traffic to former competitors under these new deals. American wants to see these partners expand, to back-fill markets where it is leaving or reducing service. But those flights will still provide feed to American’s long-haul network, keeping the international traffic humming along.

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Culling the RJs

American’s operation at LaGuardia features far too many 50-seat jets. It is an inefficient use of the scarce slots and a relatively poor passenger experience. But the carrier doesn’t have the cost structures in place to otherwise succeed in those markets. The hope now is that JetBlue will step in, taking over those slots and swapping in its larger (and more comfortable) jets. JetBlue’s SVP Airline Planning Scott Laurence confirmed that in today’s earnings call, “American has talked about things like LaGuardia where they’re going to be removing 50-seat airplanes. That creates some room for JetBlue at LaGuardia as slots are freed up.”

Fixing the feed

Laurence sees options across town as well, with JetBlue shifting its afternoon/evening schedule to focus more on feeding the AA network, “Certainly in the afternoon at JFK that allows our transcon network to arrive and feed American’s long-haul network, but it also brings competition in some of those long-haul markets.”

JetBlue’s current transcon feed splits into two main tranches: Frequent service in higher yield markets (including Mint) and redeyes filling in lower margin routes. The latter group all arrive at the wrong time for these evening connections. And the former generally overlap with existing AA services. American already started trimming some of those feed routes on the West Coast, yielding to Alaska Airlines in several of those markets. Of course, these shifts are not coordinated. That would violate anti-trust rules and get the airlines into a lot of trouble with the regulators reviewing their codeshare applications. Instead, the airlines are focused on pushing the message that they will all be stronger and more competitive as a result. Raja explains it as “entirely about creating different and creative, competitive alternatives to the larger networks that our competitors offer on the coasts. So, we continue to go and build our Seattle hub and together with Alaska, we will go and create the best of the network on the East Coast with JetBlue.”

A terminal shift?

Supporting this cooperation, and generally improving the passenger experience, means potentially consolidating operations where feasible. The two carriers are not planning on sharing space at JFK; the logistics of that are simply too hard. But at LaGuardia the opportunity exists. JetBlue can return to the Central Terminal Building from its Marine Air Terminal operations, putting it in the same security area as American’s operations. Most of the LGA traffic is local rather than connecting, though that could change as the route maps are redrawn.

It is confirmed that JetBlue offices exist in the new LaGuardia CTB, supporting this theory. Further details on timing for such a move remain unclear, though sources suggest it could happen as quickly as next week. Ideally the move would be made as JetBlue resumes operations at LaGuardia following a suspension earlier this Summer, though the construction timing might not work out perfectly for that. The company declined to comment on possible terminal moves.