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JetBlue Airways Corporation Is Going Global -- Virtually

Within the U.S., low-cost carriers like JetBlue Airways Corporation (NASDAQ: JBLU  ) and Southwest Airlines (NYSE: LUV  ) provide some element of competition to the three big legacy carriers.

However, the legacy carriers have maintained their dominance for most international travel. U.S. low-cost carriers have not acquired the widebody aircraft they would need to fly to Europe, Asia, or southern Latin America.

Recently, though, JetBlue has been looking to provide long-haul international flight options for its customers. To do this, it isn't going out and buying lots of new long-haul airplanes. Instead, it is building an international route network virtually -- through forming interline and code-share partnerships with dozens of other airlines.

A critical position
JetBlue has been in a very good position to negotiate partnerships with other airlines due to its large presence in key markets, particularly New York and Boston. At New York's JFK Airport, which is the top international gateway airport in the U.S., JetBlue is the largest domestic carrier. JetBlue is also the top carrier in Boston, which is a significant international gateway in its own right.

JetBlue has a big presence at major international gateways in New York and Boston. Photo: JetBlue.

Partnering with JetBlue allows international airlines to pick up connecting traffic in New York and Boston (and to a lesser extent in other cities that JetBlue serves). Numerous airlines that don't belong to any of the three global airline alliances have taken advantage of this opportunity to reach potential customers in cities that they could not profitably serve themselves.

Interestingly enough, many airlines that do belong to one of the alliances have inked partnerships with JetBlue anyway. These carriers get most of their U.S. connecting traffic from their U.S. alliance partners. However, JetBlue provides additional connecting options in New York and Boston that none of the legacy carriers can match.

A look at JetBlue's partners
JetBlue signed its first interline parntership agreement (with Aer Lingus) in 2007. Since then, its roster of airline partners has grown to 31, most of which are foreign carriers.

JetBlue's list of foreign partners includes Emirates. Photo: Emirates.

This includes a number of major airlines that do not belong to any of the three big airline alliances. Emirates -- the largest airline in the world in terms of international passenger traffic -- falls into this category, along with other carriers like Etihad Airways, Aer Lingus, Icelandair, and El Al.

JetBlue's partner roster also includes many carriers across all three global airline alliances. For example, JetBlue has agreements with LATAM Airlines Group, British Airways, and Japan Airlines from Oneworld, Lufthansa and Asiana Airlines from Star Alliance, and Korean Air and China Airlines from SkyTeam.

Leveraging international connecting traffic
Since launching its first international partnerships back in 2007, JetBlue has become increasingly savvy about using them to support its own domestic route network. For example, earlier this week, Emirates began nonstop service between Boston and its global hub in Dubai.

On the very same day, JetBlue began nonstop flights between Boston and Detroit, including evening flights timed to connect with Emirates' service. JetBlue noted that Detroit has the largest Arab community in the U.S., and that its flights will also connect with future service on Turkish Airlines (another JetBlue partner) to Istanbul.

Foolish bottom line
JetBlue isn't going to rival the legacy carriers in terms of the breadth of its international network anytime soon. However, JetBlue's partnerships with foreign carriers generate incremental revenue in the form of passengers connecting from JetBlue flights to international flights. The international flight options also help JetBlue compete for corporate travel accounts.

In short, while this network of partners cannot get JetBlue to parity with the legacy carriers in terms of flight options, it helps narrow the gap. JetBlue's amenities -- like extra legroom in coach, free satellite TV, and (increasingly) fast onboard Wi-Fi, can do the rest of the work to win over customers.

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Adam Levine-Weinberg

Adam Levine-Weinberg is a senior Industrials/Consumer Goods specialist with The Motley Fool. He is an avid stock-market watcher and a value investor at heart. He primarily covers airline, auto, retail, and tech stocks. Follow him on Twitter for the latest news and commentary on the airline industry!

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8/31/2015 3:59 PM
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JetBlue Airways CAPS Rating: ****