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Let me know if this is crazy. JetBlue will buy Norwegian.
So do you all remember a few months back when Alaska viciously stole Virgin America from jetBlue? Okay so technically they paid more, but I think that absolutely everyone agrees that Virgin and jetBlue where made to go together more than any airline merger we could have imagined. Well, hell hath no furry like an airline scorned. I think that is how the saying goes, right? JetBlue is embarking on what seems to be a relentless mission to destroy Virgin America and take down Alaska with them, and they are going to win.
First of all, everyone that knows jetBlue, loves them. This isn’t like your standard person who is loyal to American because of the (now much less awesome) benefits. These are people who would fly jetBlue absolutely everywhere if they could. Travel bloggers are coming around as well. You have TPG as one of the earliest supporters of the plus card and can’t say enough about Mint which is the best domestic business/first class period. Now with this points match promotion, status matches, and free flights to Californians everyone is starting to come on board. Lucky just got his card and his thousands of points and more and more will continue to flood in and write about how great jetBlue is.
People also love them because they seem to be the only airline that cares about its customers. Their rewards cards are, get this, rewarding. You can earn almost 18 points per dollar or more if you leverage all the earning options jetBlue offers. They obviously have the best economy in the world for short haul outside of maybe JAL. This is because they actually care that the customers are comfortable while still offering great fares. They also have great community outreach as evidenced by their support for the victims’ families in Orlando. Their response to this tragedy was immediate and vocal. Alaska just cannot match up. Flying on them is just depressing with generally sad excuses for products across the board. Yes, they are loved in Seattle and parts of the west coast. To this I offer two explanations: 1. Those people haven’t flown jetBlue yet; 2. People from the northwest are stubbornly local. They will support anything local because that is who they are and I commend them for this. Unfortunately, they now have the upper hand in the war for airport slots, so how does jetBlue beat them? By expanding.
Everyone seems to expect jetBlue to buy Hawaiian, but this will not happen for at least 5 years. While Hawaiian would be a great match from a West coast and metal standpoint, they don’t have the strategic slots to help jetBlue. Also, their foreign routes really make no sense to jetBlue being that they require a massive west coast network to capitalize. So who does jetBlue buy/merge with? Well Norwegian of course. The networks match up perfectly. Norwegian has routes to JFK, Boston, and FLL, all of jetBlue’s major focus cities and all points where jetBlue can feed Norwegian’s gorgeous 787’s. Norwegian can then dish out leisure passengers to all of its numerous European destinations (and even Dubai and Bangkok). That is the other point, both specialize in low cost leisure travel, but jetBlue is much better at it. Imagine 34 inches of pitch across the Atlantic for $400 round trip. Imagine a Mint seat from JFK to Gatwick. It is every leisure traveler’s dream not to have to fly Iceland Air or pay every fee known to mankind or cram into 28 inches of pitch to have a good vacation
This makes good business sense too. European airlines are down. Brexit has caused a depression in their stock prices and now is the best time to buy a European airline. Furthermore, the issue of fleet compatibility isn’t really one. For starters, Norwegian is investing in new A320 series aircraft and you need a different plane for long-haul anyway so why not the best plane flying? Norwegians 737s stay in Europe and JetBlue’s A320s stay in the US and Caribbean and you just don’t mix them. Furthermore, this would allow jetBlue to basically corner US east coast leisure travel to Europe. The east coast already loves jetBlue and having a vastly superior product to every other trans atlantic service in economy (and I would argue business) would entice pretty much everyone. Couple this with the low cost backdrop and wow do we have a winner. The big question is how does this help jetBlue beat Alaska?
By getting bigger, jetBlue will automatically have more influence, but not necessarily on the west coast. While jetBlue expands eastward, they can also build their west coast network slowly, specifically in Las Vegas which just happens to be another Norwegian destination. Currently the jetBlue base on the west coast is Long beach, but there is zero reason why Las Vegas cannot become a hub for them. It is an extremely popular destination with lots of space and a good strategic location for a west coast hub. This will also give them the needed experience to fly to other parts of the world (including Asia) while having a network to support cross continent travel.
This then gives them an excuse to buy Hawaiian. An airline that is also investing in new A321s, has A330s, is getting rid of their Boeing planes, and has a massive Pacific presence with the premier global leisure destination. With a hub in Las Vegas or Long Beach that can support feeding west coast passengers to Hawaii, jetBlue will have effective captured Leisure travel to all the major destinations in the Americas. These include, the Caribbean and Mexico, Las Vegas, and Hawaii. They will also have the premier low coast service traveling to Europe, something that IcelandAir, WOW Air, and Aer Lingus will lose ground against due to their subpar service. Finally, jetBlue would have a major presence in the rest of the world with Egypt, Thailand, Dubai, Australia, New Zealand, China, and Japan all being destinations where leisure travelers from the west can enjoy the best low cost service offered outside of Asia.
This would effectively create a new half-legacy carrier, but one that has an immensely better product for most people and a business product that is arguably better for the elites. Alaska would be an insignificant bug on jetBlue’s global windshield. They would essentially bypass Southwest, not caring about serving every airport in Wyoming and instead focusing on what jetBlue does best, leisure travel. I may be absolutely crazy, but if this happens, the US leisure air travel sector will never be the same again. Look out Alaska…
Just curious – do you work in aviation on a corporate level?
jetBlue’s business model is really focused on the domestic market with small planes. They only have A320 family and E190 aircraft. TATL routes are highly competitive and I’m not sure buying a foreign airline would be the best choice.
While there is disruption in the market with the Brexit vote, that hasent been finalized nor will we know the full implications until much later on – both when the UK officially starts the exit process and what happens during the 2 years that the UK/EU create an exit plan.
Both AS and VX has a strong presence on the west coast. HA is focused on traffic to and from Hawaii. If jetBlue bought Hawaiian, it’d create a bigger airline, but I’m not sure how it would help strengthen their presence on the west cost. At most, the new airline would be able to get more people to Hawaii.
jetBlue has codeshared flights with many airlines and partnerships with some of them, including Hawaiian. While a merger might not be a great idea, a partnership might work, if jetBlue is looking for another TATL partner
I do not work in the aviation industry anymore and do not know the current situation with jetBlue’s upper management. This was definitely not an insider report or anything like that.
I would argue that B6 has a business model thats main focus is leisure travel more so than what type of plane is used or anything else. Their main goal is to provide leisure travelers with a comfortable ride to popular travel destinations. I also said that they should NOT buy HA until they set up a significant west coast presence. I also argued they could do this at Las Vegas due to its connective ability with Norwegian, lack of potential at long Beach, and strategic location.
I specifically recognized Alaska’s dominance on that side of the country which is kind of why I hypothesized the whole thing in the first place. JetBlue obviously wants to expand quicky and there are two ways they could do that from their east coast bases. The first is a westward expansion which will be hard-fought and lengthy. The second is eastward with an easy acquisition to team up with another leisure focused low cost carrier and introduce their product into a market where it would flourish. Yes TATL is competitive but really only between different versions of the same seat. JetBlue would have something new to offer.
Finally, I was only mentioning the turmoil in Europe because right now travel stocks are down. It is a buyer’s market and it’s as good a time as any. Of course no one knows what will happen, but it’s not really what’s important.
Let me give you a short answer;
Yes you are crazy.
A bit longer answer;
Jetblue as a US company can not buy more than 49% in an EU/European carrier since that is max limit for owners set by the local governments. Aka they can not hold a controlling stake.
For the US the limit is 25% and the airline must be controlled by US citizens. Hence Richard Branson had no control over Virgin America except being a large shareholder.
You scenario is impossible with major changes to the laws that govern the aviation sector, which will probably not happen soon
You can dream up all kind of scenarios if you like, but this will not change the cold hard facts of the world since the aviation industry is one of the most heavily regulated industries out there.
So I believe that the Virgin America case is totally different. First off, it was a U.S. headquartered airline. If the airline had been headquartered in the EU with some US registrations and operations, then Richard Branson could have had full ownership. If jetBlue acquired Norwegian, than it would be acquiring the assets and there is nothing preventing that or preventing US based companies from registering/operating planes/flights within Europe. Norwegian itself is a perfect example of being headquartered outside of the EU, but registering in Ireland to gain entry. Delta has flights that originate from CDG and I’m sure other US airlines have similar arrangements, I just cannot think of any off the top of my head. Furthermore, I am not sure where you are getting this 49% number from. Beyond the fact Norwegian is headquartered in Norway (not in the EU, though they do have Irish registrations), there is nothing that Norway can do to stop a US company acquiring their assets. I have found numerous cases of US companies purchasing majority stakes in Norwegian companies or completely taking over. There are also numerous cases of cross-Atlantic companies merging and picking a side to have a single headquarters. What I am proposing is not jetBlue buying a 51% stake. It is jetBlue and Norwegian merging (which has been done before cross-Atlantic) or jetBlue buying all of Norwegian’s assets and having it cease to exist as a corporation.
Let me try again, rules and regulation for the aviation industry is DIFFERENT from other industries when it comes to ownership.
49%, with no timeline to when change will happen. Just politician talk so far.
And NO a merger would also be impossible because it would end up breaking either the EU or the US rules when it comes to ownership. Either the 49% in the EU or the US-citizens requirement in the US as a minimum.
Norwegian has access to the intra-EU market because Norway and Iceland are part of the EU-US open skies agreement with the same rights as other EU airlines, no Irish license need for that.
Norwegian has 3 licenses, one from Norway (Norwegian Air Shuttle, NAS), one from Ireland (Norwegian Air International, NAI) and one from the the UK (Norwegian Air UK, NUK). Hence they will in the future be bound by the rules of Norway, Ireland and the UK, and it would just take one of those countries say no to make a take over by a outside buyer impossible.
This is because Norway is a partner to few open skies agreements, except the US and Thailand and Norwegian Air Shuttle need the Irish and British licenses for growth on their long haul part of the network, it has noting to do needing the license to operate in the EU.
Norwegian had planes stationed with local crew bases in the EU nations of Denmark, Sweden, Finland, Poland (closed), Spain and the UK long before they got their Irish license.
What I’m not sure about is if a US airline can operate a domestic flight in a European country, they can operate between 2 EU countries without problem. But domestic flight might different, and a lot of Norwegians short haul traffic is domestic inside Norway, Sweden, Finland and lately Spain.
Actually if you look at NAI’s wikipedia page (I am sure there are also more legitimate sources) it literally states “In February 2014, Norwegian Air International, received its operating license and AOC issued in [COLOR=#000000][URL=’https://en.wikipedia.org/wiki/Republic_of_Ireland’][COLOR=#000000]Ireland[/COLOR][/URL] [/COLOR]in order to access future traffic rights to and from the European Union.” [URL]https://en.wikipedia.org/wiki/Norwegian_Air_International[/URL]
Norway is not part of the EU. It is part of open skies, but open skies is notoriously vague on domestic routes as you pointed out. However the EU is much more lenient on the US and has historically allowed US airlines to fly what are essentially domestic routes. Which must be the case if other non-EU carriers (lets say Icelandair and Norwegian for the sake of argument) are able to do this via the aforementioned agreement.
Also Norwegian law does not forbade a foreign company from owning more than 49% of a Norwegian airline. This is after all a Norwegian company and therefore the law you cite of 49% will not be in effect here. Furthermore, as evidenced by wholistic non-EU ownership of it’s UK and Irish subsidiaries (which are still headquartered in Norway) an airline does not need less than 49% foreign ownership to operate an EU base.
The resulting takeover would be solely based in the US, eliminating the 25% rule (since it is jetBlue buying Norwegian which would result in all US ownership) and since Norwegian is NOT an EU airline, the 49% rule would not apply either. The resulting airline could continuing operation as a non-EU airline operating domestic routes within the EU as Norwegian already does.
Yes, it is crazy. You are projecting your fanboyism for JetBlue into an airline that’s neither reflective of reality or expectations.
There are laws every country has in place to protect majority ownership, EU or not. JetBlue is more likely to buy TAP Portugal (same ownership) or Azul (same founder). Why do you think Virgin Atlantic, Virgin America, and Virgin Australia are all separate airline entities with completely different programs, aircraft, workers? If Virgin could not unite under Richard Branson’s leadership, what do you think JetBlue has anything to make even a joint venture or alliance work?
The EU also does NOT allow US carriers to fly domestic EU routes. I don’t know where you got that crazy idea from. Even JFK-MXP for EK was pushing it as a fifth freedom: see the LAWSUITS.
Sorry, but this hypothesis is totally implausible and the fact that you are so committed to it makes you at a little crazy, at the very least.
What you say is not 100% correct, the EU does not allow true domestic flights aka FRA-MUC or LHR-MAN. But FRA-LHR would work since that is a 5 freedom flight.
Fedex does operate cargo flights inside Europe with US aircraft’s and crew if memory serves me, which is why they have supported the application by NAI and NUK in the US.
Norway is not a member of the EU, yes. They are however a member of the ECAA. Think like Schengen, but for airlines here.
As for why they got the Irish and British license, read this article. It explains it far better than I can.
Simply put it’s not about the US, it’s about rights to the rest of the world out of EU airports. Aka to and from the EU.
As for the Norwegian law and 49%, it does not matter. When NAI was formed they effectively became a EU airline. And this was possible as a Norwegian company because of the ECAA which the US is not member of, hence if Jetblue bought the Norwegian holding company they would have to give up the Irish and British license or sell those 2 subsidiaries same as what the EU did when Fedex bought TNT.
For regulatory purposes NAI is effectively a stand alone EU airline and hence under EU regulation when it comes to being purchased.
And if Jetblue bought Norwegian and effectively asset striped it for plane and crew for a EU operation under a US license they would have to give up true domestics inside one country and flights to countries that are not members of the EU-US Openskies agreement.
If Jetblue wanted to keep the NAS license and the Norwegian government and the EU let them do it, then they might a have a chance to keep the true domestics and flight to non members of the EU-US Openskies agreement, however this would require planes to be Norwegian registered and operated under the NAS license not a US license. So no US flight crews etc etc. Most flights out of bases in Spain and UK these days are operated by NAI and not NAS so you would have to completely turn the corporate structure upside down or sell part of it.
Yes it would be cool with Jetblue like service across the Atlantic and intra-EU, but it would be far simpler for Jetblue to start their own feeder operation doing 5 freedoms inside Europe under a US license rather than buying a European airline. The only good thing that would come from buying Norwegian would be access to more planes.
I was not aware of ECAA, so I see your point when it comes to that. This would effectively mean that the new combined airline could not operate in the EU and therefore would lose its licenses. As far as actually buying Norwegian, I think we have come to the conclusion that it is possible, but the operations would need to cease outside of Oslo/Non-EU to do it.
The new airline could continue to operate out of its main hub in Oslo flying into the EU, but probably could not operate domestic EU routes. This would destroy a lot of what Norwegian has done building hubs in LGW, Sweden, Rome, etc. So you are most likely right in that this no longer makes any sense based on ECAA. The access to planes doesn’t make any sense because the 737s would be useless without domestic routes. I was speaking under the assumption that Norway was considered foreign to the EU and did not have the ECAA.
I would disagree with NAI being effectively an EU airline. I think that oversimplifies it and seeing as it is headquartered and owned in Norway, incorrect. As you said though, it doesn’t really matter.
A couple closing points as obviously my little hypothesis probably cannot happen yet. As you said, the EU is looking at upping ownership from 49% which would allow this to happen. Also, if Britain allows foreign ownership once it leaves the EU in 2 years, then the new airline could operate both out of Gatwick and Oslo which would sustain most of the operation which would allow this to happen. The US itself is looking to raise it from 25% to 49%.
Of course I am going to defend my position. I obviously took a little while to think about it. It isn’t about being a fan boy, although almost everyone says B6 is the best US airline. Definitely from an Economy and service standpoint and arguably from a Business standpoint. This isn’t about being a fanboy, this is about being hopeful that US aviation eventually gets better than the constant downgrading of services.