JetBlue “played the field” before reaching an agreement with United Airlines on a partnership, a shrewd move that forced United to pay up for a partnership of, at least in its initial stage, questionable value.

Report: JetBlue Played The Field Before Settling On United Airlines Partnership

The revelation comes from a Brian Sumers interview with JetBlue President Marty St. George, who shared that JetBlue spoke to American, Delta, United, and even budget carriers Frontier and Spirit (after the merger attempt failed) in search of the best offer:

“Over time, St. George called at least one executive from nearly every U.S. airline, reading from a script for each call, presumably to ensure he would not botch a talking point or run afoul of regulators. Amazingly, even Delta’s Glen Hauenstein — who probably has done more than anyone to thwart JetBlue’s ambitions in New York and Boston — was on St. George’s list. It even included low-cost airline executives, though an agreement with Spirit or Frontier was very unlikely.”

American and United emerged as the two finalists and United won out in a partnership dubbed Blue Sky, not because JetBlue was particularly inclined to go with UA over AA, but because United offered the better deal:

“St. George said he had been agnostic about JetBlue’s counterparty. It all came down to money, he told me, or more specifically the net present value of each airline’s offer. He said Hauenstein was cordial (“I had a very nice conversation”), but ultimately the two finalists were American and United.”

Why no codeshares? It’s not to avoid regulatory muster, but because JetBlue does not currently have the backend technology in order to do this while effectively managing dynamic pricing.

View From The Wing argues that United CEO Scott Kirby was inclined ot “overpay” for the deal because United is desperate to return to New York JFK and because Kirby still harbors personal animus against American Airlines when Doug Parker made Robert Isom his heir apparent rather than Kirby.

That’s a fair assessment and probably a correct one, but I would argue (based on Kirby’s own words ot CNBC) this is more about Delta. United was willing to overpay for this deal not so much for its own direct gain, but to slow the defection to Delta in the New York and Boston markets. If loyal JetBlue customers can fly United instead of Delta when JetBlue does not fly to their destination, they are unlikely to defect to Delta for all flights. The problem of course, is that Boton Logan and New York Kennedy customers have limited options on United, but the hope is that United can bank on JetBlue’s loyalty to draw people away from Delta (and to a lesser extent, American).

Of course, any analysis of overpayment is predicated on incomplete information: we don’t have the actual agreement to review or what may come next in future phases.

Kirby did tell The Wall Street Journal on Thursday that, “There’s a lot of brain damage that goes with doing a merger, and so I’m reluctant to do a merger.” (which is still different than denying the merger is the ultimate goal).

CONCLUSION

It’s no surprise that JetBlue played the field in its search for an airline partner, though I’m a bit surprised that it came down primarily to which carrier offered the most money. United may well have overpaid for what it gets in return from JetBlue, but United hopes (like any front-loaded investment) that the deal will pay for itself many times over as time passes.

Is Kirby a genius or did United likely overpay for its new Blue Sky partnership with JetBlue?