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American Airlines (AAL), JetBlue Partnership Wins DOT Nod

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American Airlines Group (AAL - Free Report) revealed that its previously announced strategic partnership with JetBlue Airways Corp. (JBLU - Free Report) has been cleared by the U.S. Department of Transportation (“DOT”).

According to a statement provided by the company after an approximate six-month review, the DOT has agreed to terminate its review of the alliance between the two companies. There were concerns that the tie-up might harm competition. Hence, the DOT nod comes with a series of conditions which the airlines must adhere to, and ensure that the partnership offers benefits to customers without harming competition. Some of these conditions include commitment to ensure capacity expansion and slot divestitures at New York’s John F. Kennedy airport and Washington, D.C.’s Reagan National Airport. Additionally, the airlines will refrain from “certain kinds of coordination” in some cities “where they are substantial competitors to each other and there is little service from other airlines.”

The partnership, announced last July, is aimed at offering customers seamless connectivity and wider travel options on routes to and from New York (JFK, LGA and EWR) and Boston (BOS). The carriers also believe that by attracting customers to the expanded choices and enhanced services, the partnership should help with their recovery from the pandemic.

After introducing the key features of the alliance in the first quarter of 2021, the airlines plan to implement other aspects of the partnership in phases over the course of the year.

The alliance is expected to provide growth opportunities to both airlines by significantly expanding connectivity between each carrier’s network in the Northeast. As part of the partnership, American Airlines will upgauge aircraft and operate all its services out of New York in first class by the end of 2021. Further, the carrier will introduce new services from New York to Tel Aviv and Athens.

As part of the tie-up, JetBlue plans to expand its service at New York LaGuardia Airport and other airports in New York as well as in Boston, MA. Later in the first quarter, American Airlines and JetBlue will start sharing their codes on each other’s flights, giving customers the option to fly on either airline. With the codesharing, JetBlue customers will have access to more than 60 new routes operated by American Airlines, while American Airlines customers will have access to more than 130 new routes operated by JetBlue. Later this year, customers of both airlines will be able to enjoy reciprocal benefits as well.

Both American Airlines and JetBlue carry a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the broader Transportation sector are ArcBest Corp. (ARCB - Free Report) and Herc Holdings (HRI - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of ArcBest and Herc Holdings have gained more than 58% and 99% in the last six months, respectively.

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