American Airlines and JetBlue Alliance Must End in 30 Days. Delta Is a Winner.

Undoing the alliance in such a short space of time will be a logistical headache for American (ticker: AAL) and JetBlue (JBLU), who use the partnership to pool their gates and takeoff and landing slots at four airports in the Northeast. They code-share on 175 routes, which is where one airline can market and sell another’s flight as its own, also sharing revenue generated through the alliance.

The timing, just ahead of the busy summer travel season, couldn’t really be worse. Though it may not quite be the end of the matter.

“We believe the decision is wrong and are considering next steps,” American said in a statement. “The Northeast Alliance has been a huge win for customers and anything but anticompetitive,” it added.

If the partnership is really over–both airlines are evaluating their next steps–then
Delta Air Lines
(DAL) and
United Airlines
(UAL) could be set to benefit. After all, the alliance was introduced to better compete with those two, creating a “third, full-scale competitor in New York,” as the then-CEO of American Doug Parker said in response to the DOJ’s lawsuit in September 2021.

“Delta’s methodical long-term pursuit of dominance in New York and Boston suggests to us that it is optimally positioned to further increase its share of consumer and corporate wallets,” J.P. Morgan analyst Jamie Baker said. “As divorced entities, neither American nor JetBlue can offer the same network and loyalty opportunities for passengers as can Delta,” he added.

The court’s ruling is a big win for the Biden administration, which is also attempting to block JetBlue’s proposed merger with
Spirit Airlines
(SAVE). TD Cowen analyst Helane Becker said the decision could have “negative implications” for the deal.

When it comes to airline stocks in general, the ruling isn’t having a huge impact in premarket trading Monday.

For investors, there are more important factors at play for the sector. Namely, whether carriers can meet their own full-year guidance. Airlines are largely bullish on summer travel demand and confident when it comes to their earnings power this year, but the market isn’t so sure amid concerns over tough macroeconomic conditions and the impact to travel spending.

“With shares of several airlines trading around five times estimated 2024 earnings, it doesn’t strike us that much good news is bring priced in to begin with,” Baker said. “Rather, the market simply doesn’t believe in the achievability of consensus forecasts,” he added.

JetBlue did not immediately respond to a request for comment early Monday.

Write to Callum Keown at [email protected]