Now that the U.S. Department of Justice cast a pall of uncertainty on the proposed American Airlines-US Airways merger, speculation has turned to a JetBlue merger as a fallback plan for either carrier. Well, according to a well-reasoned and thorough research note published Friday by Wolfe Trahan airline analyst Hunter Keay, it's not going to happen.
Keay dismissed the speculation, propagated by recent articles in Reuters, Bloomberg and other media outlets.
First off, JetBlue "really, really doesn't want to merge," as evidenced by management's consistent stance beginning more than a year ago__prior to an AA and US Airways agreement__and continuing through this week, Keay wrote. That, he added, would leave a bad option for a scorned AA or US Airways should DOJ shoot down their merger: an attempt at a hostile takeover of JetBlue.
Secondly, DOJ hasn't taken too kindly to the AA-US Airways deal, so how would it feel about a potential JetBlue tie-up? "Regulators would likely hate it," according to Keay, because a merger would involve "eliminating a popular airline that keeps fares low" in the huge New York market. That aspect alone would make a merger deal "DOA at DOJ," according to Keay. Furthermore, DOJ has raised a stink about AA-US Airways overlap, but JetBlue actually has 34 nonstop overlapping routes with AA versus US Airways' 12.
Keay also noted "labor barriers likely higher than you think," suggesting that JetBlue pilots "might quickly unionize out of self-preservation fears," should a deal go into motion.
Also, Keay questions if a JetBlue merger would deliver what AA and US Airways are seeking. A key tenet of that deal is winning corporate business from Delta and United. Keay noted that JetBlue's network "is suboptimal for business travelers," with 77 percent of its New York JFK flights to leisure destinations. (The carrier does, however, have a stronger corporate presence in the Boston market.)
Meanwhile, JetBlue has advanced its own partnership strategy, first with the introduction of interlining, then one-way code share and now two-way code shares. "Why buy the cow if you can get the milk (JFK access) for a straight rate proration, two-way codeshare?" Keay asked.
But, as it turns out, there's not even a cow for sale.