Sorry for the delayed post this morning, but, well, there was an embargo in place, so I had to wait until now. American today is announcing a partnership with JetSMART. Your first question is probably… who the heck is JetSMART? And if you do happen to know who they are, then your question is mostly likely… why on earth is this happening?
There is much we don’t know about this partnership just yet, but let’s see what we can decipher. American will be putting money into JetSMART. We don’t know how much, but it’s a minority stake, and it’s small enough that a disclosure isn’t required. The partnership will allow American AAdvantage members to earn and burn miles on JetSMART flights. There will be a codeshare between the two airlines.
If you think this is a poor substitute for LATAM, you might be right. Then again, you might not be. See, JetSMART is hungry, and has big plans. The airline is one of the Indigo Partners airlines which includes Frontier, Volaris, and Wizz Air. There is plenty of money behind the company.
The airline started in Chile, but it had already moved into Argentina before it bought out the remains of Norwegian Argentina. So I think this means we can safely say that American is partnering with Norwegian. There’s your headline.
Here’s the combined route map between the two airlines, though I made a revision and removed Manaus since American dropped that one recently and apparently forgot to wipe it off the map.
Right now, the airline has 20 airplanes. It looks like there are five A320s in Argentina along with six in Chile. It also has nine A320neos in Chile, I think.. This is not a large airline, so you might be scratching your head, but it has another 79 — yes, 79 — aircraft on order, all Airbus narrowbodies. At one point, there were even some A321XLRs on order, but that order was split between all the Indigo airlines, so I don’t believe where anything will end up until I see it. What is clear, however, is that this airline will be at 100 airplanes pretty quickly if all goes according to plan.
JetSMART is an ultra low-cost carrier. It has one class of service, and other than some extra legroom seating, it’s all coach. The JetSMART A320s have 186 seats. American’s have 150. And nearly all of JetSMART’s routes operate less than daily. So to echo an earlier question, what is American thinking?
The key here may very well be the minority stake. American wants to exert some level of control or it wouldn’t have bothered. I can’t imagine JetSMART desperately needed the cash. It smells opportunity. The problem is understanding exactly what that opportunity will be.
Right now, JetSMART can connect some people off American in Santiago to other Chilean destinations while in Bueons Aires, it still requires an airport change since American is at long-haul Ezeiza while JetSMART is at close-in Aeroparque. It’s the same problem Aerolineas Argentinas faces in its own operation. Though I’m sure there’s enormous demand for connections to Chiloé on Tuesdays and Fridays — those are the only day it operates — the flights don’t even connect off American’s arrivals.
I have to assume there will be work done to improve connectivity, but let’s be honest here. American doesn’t need a huge amount of connectivity in Chile. JetSMART has already started sniffing around Peru and Colombia may be part of the plan too if we’re looking at important markets. But ultimately this doesn’t bring a great deal of value to American’s home market in the US. Instead, this has to be a different play.
American has long been the leading US airline in Latin America. Though I wasn’t able to get numbers, American did talk about how it has a huge AAdvantage presence in South America. People have flown American for years to get to the US, and they’ve previously flown LATAM within South America.
When Delta took LATAM away from American, it started a proxy war. Delta and LATAM together would handle long-haul while LATAM could handle short-haul. American lost its ability to be relevant to those in South America who wanted a solution to fill all their needs. So, American started scrapping.
It first added Delta’s jilted partner Gol in Brazil, and now it’s adding JetSMART to seemingly fill in the blanks in these and eventually more markets considering how many airplanes are coming. But for this to have even a shot at working, JetSMART can’t just keep flying sub-daily in markets. It is going to have to create a network that will try to challenge LATAM in business markets.
But wait, LATAM is a full service airline and JetSMART is not. That may be true in name, but LATAM’s short-haul premium product is a lot like that on European airlines. It’s a blocked middle seat and not much else except for some extra perks. It wouldn’t be hard to offer those perks to people paying for the front row on JetSMART. It’s not like they need to try and replicate a domestic US First Class.
For this to work, however, American and JetSMART need to convince people to fly JetSMART locally. And for that to happen, it needs a lot more frequencies in key markets. So, will JetSMART play ball? American owns some stake in the airline, so presumably that was done to make it clear what it believes needs to happen. I can’t imagine other airlines were knocking at JetSMART’s door to be a partner. This is a very different kind of thing.
If it works, it bolsters American’s long-haul product to South America, potentially taking share back from Delta/LATAM and making American more relevant. If it doesn’t work, well, we don’t know how much American has at stake. I should hope it’s not too much. We’ve seen how those investments can blow up in your face. But in the scheme of things, it’s probably a drop in the bucket. And it’s not like there’s another obvious option.