AA Stakes N.Y. Claim: New Routes, JetBlue Pact

American Airlines is advancing a slew of initiatives to grow its New York City presence, including the launch of new routes, the appointment of a dedicated city manager and a pact with JetBlue Airways that combines a limited interlining deal and proposed slot-swap.

American's growth initiative follows what one analyst described as a languishing presence in the city where one of its chief competitors, Delta Air Lines, has continued to assert itself.

"It's the first evidence of any American response to Delta, which has been aggressively on the hunt there for a number of years," said Robert Mann, an airline analyst and head of R.W. Mann & Co. "American has really done nothing but cut back a bit at Kennedy. There was a question about whether American was serious about New York. With the Delta and Northwest network combined, it was clear that unless American did something, it was going to get edged out."

Among its efforts to bulk up, American plans to swap with JetBlue eight slot pairs at Washington Reagan National and one at Westchester County Airport in White Plains, N.Y., in exchange for 12 John F. Kennedy International Airport slot pairs. The proposed swaps are subject to regulatory approval.

JetBlue, meanwhile, stands to gain an additional five slot pairs at National if the U.S. Department of Transportation approves a pending US Airways/Delta slot swap proposal. Once JetBlue can take advantage of those National slots, Mann said the carrier likely would "fly some out of Boston and some out of New York," but he added that giving up slot pairs at its home airport suggests that "JetBlue doesn't think it has any more options at Kennedy."

American clearly sees options. Independent of the slot swap, the carrier last month announced it will begin service on several new routes through year-end. The routes will increase its total number of New York-originating destinations to 63 from 50, and increase daily departures at JFK and LaGuardia to 216 from 200.

Among new destinations from New York, American and its American Eagle subsidiary plan new service to Austin, Texas; Columbus, Ohio; Cincinnati; Fort Lauderdale, Fla.; and Minneapolis/St. Paul. This month and next, the carrier will add new international service to Madrid; Manchester, England; and San Jose, Costa Rica.

American CEO Gerard Arpey told Business Travel News that while the short-term impact of the initiative would be, "pretty neutral," he added, "Long-term, it will mean growth in LaGuardia and Kennedy, hopefully, subject to slots. We're going to build a lot of traffic to New York."

According to U.S. Bureau of Transportation Statistics data, American carried slightly more than 18 percent of LaGuardia's domestic passengers in 2009, while Delta had the second largest domestic passenger share at the airport with nearly 14 percent. At JFK, JetBlue carried nearly 42 percent of arriving and departing domestic passengers; and Delta had nearly 20 percent passenger share to American's 14 percent.

American's biggest New York competitor, Delta, hasn't stood still. "We continue to grow," a Delta spokesman said. "Since 2006, we've added more than 30 international routes from JFK, where we have 160 peak-day departures from 43 gates to 90 worldwide destinations, including 44 international. We're continuing to work very strongly in New York to be successful."

Delta also is poised for a capacity surge at LaGuardia, where it already offers 159 peak-day flights to 34 destinations. If the US Airways transaction gains approval, Delta would gain an additional 110 slot pairs at LaGuardia, propelling a plan to expand its terminal.

"Delta's a great company, a great competitor," Arpey told BTN, but insisted, "Nobody is going to dominate New York. It's just too big of a market. Our job is to just do the best job we can for our customers and compete vigorously with everybody."

To oversee its New York strategy, the carrier appointed 30-year AA veteran Art Torno as vice president for New York operations. Arpey said the carrier is investing $30 million in improvements at LaGuardia and evaluating a proposal to pump $1.3 billion into JFK's Terminal 8, where it would collocate with British Airways, American's Oneworld affiliate and would-be joint venture partner, subject to the DOT's final approval. If approved as expected, Arpey said he anticipates a burst of international service options with AA's partners from New York.

Partners and Adversaries

The interline agreement inked last month between American and JetBlue centers on leveraging JetBlue's domestic strength at JFK and Boston Logan with American's international reach.

During a March 31 event in New York, JetBlue CEO Dave Barger said customers would be able to book a single itinerary on 18 JetBlue routes to Boston or New York that connect with 12 AA international destinations, including Buenos Aires, London and Tokyo. Domestic JetBlue markets covered under the agreement include Denver; Fort Myers, Fla.; Houston; Nantucket, Mass.; New Orleans; and Salt Lake City.

Barger said the interline agreement, which could be in place by June, facilitates "the seamless purchase, baggage handling and check-in process" on those routes. The deal does not include a codeshare, something JetBlue enjoys with Lufthansa, a JetBlue shareholder and a founding member of the Star Alliance.

"Interline agreements are pretty common; we even have that with AA as well," a Lufthansa spokesman said. "Our existing agreement is really not affected by this. We have a 15.6 percent stake in JetBlue, and we support every step they take to improve their business proposition."

Mann similarly was not impressed by the interline deal. "From a passenger's perspective, it's not particularly attractive," he said. "It is basically a ticketing and baggage agreement, which is pretty primitive in today's scheme of things."

Both carriers left the door open for "exploring other commercial cooperation, including establishing a reciprocal frequent flyer program," Arpey said, though the carriers would not elaborate.

Asked if JetBlue is queuing up to join American's Oneworld alliance, Barger said, "Our teams are real open to the path forward, whatever that may be, as we look at collaboration or partnership."

Arpey, however, made one thing clear: "Despite the deal we're announcing today, our two airlines will continue to be adversaries in many markets where we compete today."