Earlier today, United Airlines and JetBlue announced a new “Blue Sky” partnership that includes a return to JFK for United, an interline agreement, and reciprocal frequent flyer benefits. United CEO Scott Kirby has explained what is behind this move: more effectively competing against Delta Air Lines (and sidelining American Airlines as a viable premium competitor).

United’s JetBlue Partnership Aims To Contain Delta, Suppress American

Appearing on CNBC’s Squawk Box shortly after the news was announced, Kirby explained what is at the heart of this deal:

“Delta’s a really, really good airline. They’ve done a great job. In fact, a lot of what we’ve done at United has been copies of some of the things Delta has done successfully. JetBlue’s number one competitor is Delta at JFK, Boston, and even in Florida and the Caribbean, and this makes JetBlue more competitive.

“If you’re a frequent flyer and you like JetBlue…but if you’re flying out of New York, for example, Delta can get you all over the world…now you can use them [JetBlue miles] to fly United. You can earn on JetBlue and say I want to take a vacation to Cape Town and use your miles to go to Cape Town on United.”

You can watch his full interview here (where Kirby also admits Newark has been hit hard, forcing United to lower fares despite more limited traffic):

United’s Strategy: Keep American Airlines Behind, Catch Up To Delta

Kirby, always one who speaks his mind and does not hold back, gives away the playbook here.

As JetBlue wrestled with whom to partner with, its realistic contenders were Alaska, American, and United. While Alaska made the most sense in terms of a partnership due to their limited overlap in major markets, American was quite attractive because its strength in Florida and New York could have helped JetBlue grow in a smarter and more directed way. While the “Northeast Alliance” was deemed illegal, a more limited partnership made a lot of sense and likely would have passed regulatory review.

But United offered JetBlue what is undoubtedly a very good deal…a path to meaningfully and substantially improving its TrueBlue loyalty program in exchange for a smattering of gates at JFK in two years. Loyalty programs are the cash cows of network carriers…take those away and there is no profitability.

Yet JetBlue has struggled to offer a meaningful loyalty program to its frequent flyers. This partnership with United will bring in millions of potential new customers who will suddenly see the option to use their United miles on JetBlue or fly JetBlue and credit to United. Making TrueBlue more valuable does not solve JetBlue’s network issues, but it just may help solve the carrier’s financial issues if it can better market TrueBlue and particularly its portfolio of co-branded credit cards.

As for United, this partnership is aimed at trying to surpass Delta. United hopes that with a partnership with JetBlue, passengers will be less incentivized to fly Delta out of New York and Boston. If New York and Boston customers can fly JetBlue domestically and then fly United internationally, there is a lower risk of diversion to Delta, which can serve all destinations worldwide with its own route network and partnerships.

The partnership also makes it harder for American Airlines to grow in compete in the premium market, which currently is a two-way race between Delta and United.

CONCLUSION

While too early to tell if this will work, United hopes to keep New York and Boston customers from defecting to Delta Air Lines via this partnership. It further hopes to keep American Airlines in a distant third place by robbing it of a proven (based on the Northeast Alliance) path to growth.

This is a multi-dimensional chess game and even if United only ends up with a paltry handful of gates at JFK and no merger with JetBlue, the practical effect of this new “Sky Blue” alliance could be to further slow AA’s growth and keep Delta from becoming even more dominant in markets like New York and Boston. At least that is what Kirby is hoping for…

image: Bill Abbot / Flickr