American Airlines Group Inc. (AAL) and JetBlue Airways Corp. (JBLU) announced a strategic partnership to operate codeshare flights and increase route options as the travel industry adapts to new trends resulting from the coronavirus pandemic.
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The partnership will provide new strategic growth opportunities for both airlines to recover more quickly from the aviation crisis, the companies said in a joint statement. The alliance agreement offers codeshare and loyalty benefits that will boost each carrier’s flight options in New York and Boston, providing strategic growth and driving value for customers of both airlines, they said. The codeshare deal will include more than 60 new routes operated by American and more than 130 new routes operated by JetBlue.
“This is an incredible opportunity for both of our airlines,” said American Airlines President Robert Isom. “American has a strong history in the Northeast, and we’re proud to partner with JetBlue as the latest chapter in that long history. Together, we can offer customers an industry-leading product in New York and Boston with more flights and more seats to more cities.”
Upon implementation of the alliance agreement, American will launch flights between New York and Tel Aviv and introduce new seasonal flights between New York and Athens next summer, to meet the strong local demand, as well as Rio de Janeiro. The new nonstop service to Tel Aviv and Athens will be the first long-haul international flights that American has operated from New York in more than four years.
As part of the partnership, the U.S. airline will also seek to add new long-haul flights in Europe, Africa, India and South America, while JetBlue customers will get access to international flights.
Shares in American have lost 56% of their value so far this year as stringent travel restrictions tied to the coronavirus pandemic have brought travel demand to an almost halt. U.S. airlines have been burning through billions of dollars in the first quarter incurring huge losses and implementing broad cost-cutting plans, as well as taking steps to shore up its cash buffers.
Separately, American notified 25,000 workers that they could be furloughed from October 1, sending shares down 6.6% to $12.56 in afternoon trading on Thursday.
Looking ahead, the $12.88 average analyst price target implies 2.9% upside potential in the shares over the coming year. (See American Airlines stock analysis on TipRanks).
Meanwhile, UBS analyst Myles Walton lowered the stock’s price target to $9 from $10 and maintained a Sell rating, saying that American’s “problem” isn’t the liquidity it has, but how much cash it burns to operate.
As the U.S. airline continues to burn cash, “the return to normalized earnings is so far out that material downside remains for the equity,” Walton wrote in a note to investors.
Overall, the rest of the Street has a Moderate Sell consensus on the stock with analysts divided between 7 Sell and 3 Hold ratings versus 3 Buy ratings.
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