JetBlue, Lufthansa Launch a Unique Code-share; Is This the Future?

Posted by: Justin Bachman on October 01

A glimpse into the possible future of domestic air travel occurred Oct. 1 when Lufthansa began selling seats on JetBlue (JBLU) flights to a dozen cities. In this small code-sharing arrangement one can see the faint glimmer of a time when larger, financially stronger international airlines control a meaningful portion of U.S. air travel.

To date, partner airlines in the big alliances such as SkyTeam and Star Alliance have sought government approval for trans-Atlantic joint ventures and have been largely successful. New such deals across the Pacific are also likely if the U.S. is able to complete “Open Skies” talks with Asian nations. But we have not before seen the kind of deal that Lufthansa and JetBlue have begun, in which a U.S. discounter feeds traffic for the global network carrier. The Dept. of Transportation approved the application on Sept. 15.

The idea is that you can now book a Raleigh-to-Rome or Berlin-to-Buffalo flight on the various travel distribution systems with Lufthansa able to serve the full route, connecting at New York’s JFK Airport. “It’s an industry first,” says Martin Riecken, a spokesman for Deutsche Lufthansa AG. The first 12 cities were selected based on current flight connecting times and traffic patterns, the airlines said, and are focused heavily on Florida, a destination for many Germans. The actual flights begin Nov. 11. Neither airline would discuss how the revenue will be split, although JetBlue won’t sell any seats on Lufthansa flights. The companies expect to add additional routes in 2010 from JetBlue’s 58-city network, most likely focused on the Caribbean. Lufthansa doesn’t fly there, while JetBlue hits major tourist spots such as Aruba, Barbados, Cancun, Puerto Rico, the Dominican Republic and the Bahamas. Lufthansa was further keen to seal approval for the JetBlue code-shares because its partners in the Star Alliance, United (UAUA) and US Airways (LCC), have little presence at JFK.

The codesharing arrangement comes less than two years after the German airline acquired a 19% stake in JetBlue. If Congress were to ever relent on foreign ownership rules, Lufthansa almost certainly would increase its position. Other airlines, such as Air France-KLM and Singapore, would likely seek to expand in the U.S., the world’s largest air-travel market. Any number of combinations could work – with JetBlue/Lufthansa as a template.