JetBlue Wants Regulators To Review Transatlantic Joint Ventures

Filed Under: JetBlue

For years JetBlue has been talking about potentially launching transatlantic flights.

Their existing A321s should already have the range to operate some transatlantic flights, though they’ll soon take delivery of A321neos, which have even more range, and open up more routes. On top of that, the airline has the option to convert some A321neo orders to A321LR orders, and that plane has even more range.

Personally I feel like JetBlue needs to either launch transatlantic service or just stop talking about it, because they’ve been talking about it for years.

JetBlue did recently reveal that if they were to launch transatlantic flights, Boston to London would be the most likely first route they’d operate. That makes sense, given that Boston is a hub for them, and it’s also one of the shortest transatlantic flights out there.

Anyway, yesterday JetBlue CEO Robin Hayes made some interesting comments regarding transatlantic service, and I’m not fully sure what to make of them. Essentially Hayes is concerned about the control of important foreign markets that the “big three” US airlines have through their joint ventures.

As reported by Reuters:

“We believe that regulators should be doing everything they can to make it possible for new players and new models to have a fair shot at competing,” Hayes said.

Hayes believes competition authorities in the United States, the UK and the European Union should force slot divestitures to create a level playing field for new entrants, particularly in the wake of major consolidation among U.S. carriers over the past decade.

Generally I do think the “big three” US airlines have too much control, though personally I view that as more of an issue in the domestic market than the transatlantic and transpacific markets.

First of all, Hayes notes that we’re at “risk of decades of high fares because of legacy transatlantic partnerships.” Transatlantic airfare is as low as it’s ever been, in spite of the “big three” and their partners controlling 80% of the market share. That’s for a couple of reasons:

  • There’s simply too much capacity (personally I see transatlantic demand decreasing before it increases, so the only solution would be to cut capacity)
  • Transatlantic ultra low cost airlines have kept the “big three” and their joint ventures in check, though it’s clear the ultra low cost business model hasn’t necessarily been working that great

I do see merit to Hayes’ comments regarding wanting slot divestitures at congested airports, but I’m just not sure how practical that is.

For example, Heathrow slots are worth tens of millions of dollars each. You can’t just take those away from airlines and reassign them given what they paid, and I also don’t think it would even be economical for JetBlue to lease Heathrow slots from other airlines, given how much that would cost them per flight.

JetBlue is creative, and I feel like there are lots of other ways they could make transatlantic service work. If their product is good enough, they should be able to make a route work to one of London’s lower cost and less congested airports. The same is true in other major European markets.

So yeah, I’m not disagreeing with Hayes here, but I also feel like he’s not being completely realistic in terms of what regulators are going to do. If he’s waiting for regulators to control the “big three” and their joint ventures, I think JetBlue will never launch transatlantic flights.

Maybe that’s exactly his goal — to continue making excuses for why JetBlue won’t launch transatlantic flights (which may just be a good business decision), because it sure doesn’t seem like it’s happening anytime soon.

What do you think — will JetBlue ever follow through with transatlantic flights, and is there merit to what Hayes is saying?

  1. JetBlue will never launch Europe as long as Hayes, Geraghty and co around. They’re far too risk averse for any type of expansion outside of their transcon and latin american comfort zones. Hence why there staying far, far away from many mid west airports even from Boston.

  2. It would be very convinient if they started a JFK/DUB A321 service considering AA cancelled their 757 one….

  3. I’m guessing if JetBlue enters the market they would try to fly A321’s to the smaller markets and airports. BOS to London via Gatwick or Stanstead instead of Heathrow, Paris to Orly instead of CDG, etc.. Even with their superior product there is no way B6 can go head to head with a major carrier using a twin aisle jet, the math just doesn’t work out.

  4. They have been talking about it forever, but to be fair to them, they do need the capable equipment before they can announce service. I think its a combination of waiting on early operators of the A321LR to demonstrate real-world performance of the frame before fully committing, and also keeping Delta in the dark as best they can about exactly when they decide to jump in. Their biggest competition when you combine both Boston and JFK will be Delta right off the bat, and while its no secret the path to success is to start with BOS/NYC-LON, its probably a smart play to keep up the timetable smokescreen.

    I still think its a question of when, not if; provided fuel prices remain low. Their first A321neo is to be delivered next year, and I think we will know one way or the other about a firm order swap to the LR, and thus transatlantic service, before then.

    Haye’s comments could also just be seen as due diligence. Who knows what the chances are regulators ever do something about slot control, but could you imagine if his comments worked? Doesn’t cost them anything to make a stink about it, and the on very, very small chance they actually got the EU and FAA to force slot divestiture, it would be a massive money-saving coup for B6. Literally just seeing what sticks.

    Also, I think its fair to say their future investment into Terminal 6 and 7 at JFK would be pretty overkill if they weren’t committing to transatlantic service. Just reading the tea leaves.

  5. Check back in 6 months if IAG buys Norwegian. But Quite frankly, this is where we need to stop taking the airline industry at their word.

    Something is clearly wrong when a $600.00 transcon “J” flight is superior to a $12,000 transatlantic “F” flight. It was a good first step for the Port Authority to kick out BA from their terminal (and hilariously enough, give it to JetBlue) after 2020 after decades of being slumlords, but if they’re delivering a garbage product (which they are) despite an inflated cost than it’s entirely fair for regulators to step in. These slots are owned by the public at the end of the day, and it’s well within their right to evict bad tenants.

  6. While I can see where JetBlue wants slots, if anything the JVs should benefit them because if the JVs are working, they are keeping prices high due to suppressed competition, which gives JetBlue an opportunity to come in with lower prices and steal share. If the US and European majors were competing with each other aggressively, in theory that should lower prices and create less profitable opportunities for JetBlue to enter.

    Overall though I think JetBlue is just stuck because they are something of a businessperson’s airline in Boston and a businessperson doesn’t want to fly to Stansted or even Gatwick, but JetBlue can’t get Heathrow slots (with or without the JVs). So what to do?

  7. I support Jetblue’s effort in this regard.

    The special governmental waivers and favors granted to the US3 TATL-flying cartel kingpins and their JV revenue-sharing EU buddies have been the cause of much that is bad for consumers in the air travel space. It’s never too late to undo this anti-consumer, competition-undermining scheme allowed by the US Government.

  8. I agree that JetBlue’s specific arguments are weak, but I do think they have a point on the basic idea that the JVs reduce competition.

    I don’t think JetBlue would have any problem launching service to London through an alternative airport. Given its good train connections to Victoria Station, I think Gatwick would be the best choice – yes, Heathrow Express is faster, but it’s staggeringly expensive. LGW could also offer an opportunity to work with EasyJet for connections to continental Europe. Luton and Stansted also have trains to London, but they run less frequently than Gatwick Express. Admittedly, more price-sensitive customers might prefer LHR due to the Piccadilly Line tube station and the eventual option of the Elizabeth Line.

    I think JetBlue should consider alternatives such as flying to Bristol or Cardiff. Continental used to offer EWR-BRS, I flew it twice and it was always packed, with a large amount of the traffic being Brits going to EWR to connect to other US cities. CWL has no nonstop service to North America at all, and BRS only has service to Orlando-Sanford. Getting to LHR or LGW is a major pain from the Southwest, and JetBlue’s network from BOS or JFK would offer great connection opportunities.

  9. @Br

    They just launched service from MSP to BOS, is that not a Midwest airport? I agree they’re risk-adverse.

  10. Perhaps a seasonal flight between East Coast and Belfast? Northern Ireland lost its only transatlantic flight when Norwegian pulled out. Could be a nice route to test out it’s first transatlantic flight.

  11. @Pedro I don’t see how you come to the conclusion that B6’s product is inferior to that of legacy carriers. Sure, the hard product on some airlines (AA, new AF J, Polaris… ) can be considered superior, but for the most part JetBlue mint is far superior than BA, LH, UA (non Polaris) and almost any other European J. And I’m not even taking into the equation how much more likely it is to get better the service on JetBlue in comparison to the US3 and many European carriers

  12. @Ben I think you misread my comment. B6 definitely has the superior product, but I don’t think that their product is superior enough to overcome the economic disadvantage of using a single aisle plane vs a twin aisle as the major players would be.

  13. With the introduction of their A220-300’s, a similar route to BA’s A318 JFK/LCY could be physically feasible from JFK and BOS as the planes have the range, (3,300nm, BOS-LCY is 2,837) and if they could pull off a SNN or DUB stop on the LCY-BOS leg, there’s enough runway at LCY. A modified Mint product (Could be similar to AA’s A321 Transcon First with 1-1 config or just forward facing seats in a 1-2 config) could be introduced there. The only problem is the A220 cabin is 1.3ft narrower than the A321 (in the case of AA Trasnscon first), so it would be likely the storage in the seat would be compromised. For a 1-2 Forward Facing config, you could probably get 20.5/21 inch width lie-flats. Delta’s first recliners are 21in for comparison. Since BA doesn’t have econ on this route, although not as profitable, might be able to fill up. Could be a creative alternative to LHR!

  14. I agree 100%. The US-EU joint ventures are fare collusion and should absolutely be illegal. Next time you hear American, Delta, or United complain about the ME3, just remember that they themselves engage in anti-competitive, consumer-unfriendly practices. Hypocrites!

  15. I don’t understand the ‘Gatwick isn’t for business travellers’ refrain. Thameslink connectivity into the City of London from Gatwick is quicker, cheaper and more seamless than HEX from Heathrow.

    Where are these business travellers going to from Heathrow? Not like Canary Wharf is easy to get to from there either.

  16. I don’t see Jetblue working with a premium centric offer out of London unless they fly to Heathrow. Most business Travelers will not fly in and out of Gatwick given the travel time. It’s simply a deal breaker. I would be very interested to see how Westjet’s service to Gatwick works out.

    I tend to agree with Hayes that there is way too much consolidation in the transatlantic market. There has also been considerable turmoil from various LCCs that have come and gone. Looking at the situation of Norwegian I don’t see an easy time for Jetblue particularly given macro environment right now. I believe they are wise to wait it out till things settle down.

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