Is a Merger inevitable between Alaska and JetBlue? (Part 1 of 3)

Is there an Alaska Airlines and JetBlue merger coming? That’s a hot topic in aviation, mostly overlook as the industry is battling the COVID-crisis. Aviation reporter Alex Martinez Rivera is looking deeply into the Alaska-JetBlue merger possibility in this three-part article series. In this first part, conducts an analysis of the two airlines, positions, and their current strategies.

Airlines are weak and Congress still debates over the second round of the CARES Act. However, people wonder whether the shrinkage and network holes could spur a second round of consolidation?

The analysis looks at one option.

Summarizing and Reviewing a Southwest Acquisition

In a previously published article, I mentioned a possible Southwest merger with either JetBlue or Alaska. Southwest, merging with either choice of airline, would become the largest US airline.

This is the type of signal that competitors and regulators don’t want to see as it places pressures in the marketplace and in the regulation space.

The road is treacherous except…

Any airline merger/acquisition would create a hard operating-solution to the domestic market, except an Alaska and JetBlue acquisition!

An Alaska and JetBlue merger would be one of the equals

Alaska has a market share of 6.4% (Pre-COVID levels). Meanwhile, JetBlue has a market share of 5.5% (also Pre-COVID levels). Alaska has a networking hole to the East currently filled by American Airlines through the Oneworld Alliance.

Additionally, JetBlue, since its departure from Long Beach (LGB) to Los Angeles (LAX), the investment they left at LGB is going to be written as a loss. The lack of vision from Long Beach officials made JetBlue weak on the West Coast.

In Long Beach, JetBlue had 34 flights in its heyday. Meanwhile, as part of a 2025 plan, JetBlue aims for 70 LAX-flights.

JetBlue’s West Coast Focus City Expansion changes to LAX. BusinessWire and JetBlue.

JetBlue is weak in the West – Alaska is weak in the East

Can these weaknesses elevate the best of both airlines?

Both Alaska and JetBlue are two airlines of the same leaf.

  • For Alaska, its strength is west of the Rocky Mountains.
  • The strength of JetBlue lies east of the Mississippi River.

JetBlue’s expansion could not have come at a worse possible time or in a worse situation. JetBlue’s change of strategy to focus on LAX means the airline wants to compete with its arch-nemesis Alaska Airlines!

JetBlue held hope for Long Beach to reconsider for far too long

Here is what I consider a strategic mistake:

JetBlue held up the hopes for Long Beach (LGB) to reconsider its stance as an International Airport that would compete with Los Angeles (LAX).

However, as an old saying goes: if one can’t beat them one must join them.

That without a doubt became JetBlue’s conclusion. The Long Beach stubbornness of not competing with Los Angeles became an Achilles heel for JetBlue, by not having a better network structure.

Airlines overall have a U.S. market share of about 15%-20% at LAX (Los Angeles), according to the Bureau of Transportation Statistics.

Source: Bureau of Transportation Statistics.

A strategy of expanding in times of crisis may sound like an unwise strategy.

JetBlue’s move to an airport (LAX), already with a capacity at near maximum with no space to expand, may seem foolish.

But the airline has experience in these matters. At least in theory.

Time for another loan is running out

There is hope in Washington for a second stimulus for the airlines. While hopes springs eternal in D.C. there isn’t the drive to push it in Congress for a Presidential signature. CNBC Phil LeBeau Reports. Credit CNBC/Youtube.

The CARES Act money flow stops in October, and still, Congress isn’t in the agreement with whether to pass an additional money lending instrumentality to the airlines.

Placing my political hat, as time gets closer to November, the parties will retrench to their respective corners.

If nothing is on the table for both Alaska and JetBlue through my respective sources which preferred to go unnamed told this contributor that half the weakest flights could go out of business entirely.

If no help is available to the airlines it would mean a downsizing of the airline industry at epic proportions.

That would automatically trigger a tenth round of consolidation if we start counting the first one as being the American Airlines and TWA merger at the beginning of the new century.

Do you have questions or comments? Please contact Alex Martinez Rivera here.

In part 2 of 3, Alex Martinez Rivera will analyze scenarios around who would potentially buy who in the event of an Alaska and JetBlue merger.

Featured Image: JetBlue and Alaska.

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