United Airlines and JetBlue recently announced a partnership that would allow them to sell each other’s flights on their respective websites. This collaboration, known as Blue Sky, has been eagerly anticipated by both airlines as it brings various benefits for each company. However, as history has shown, it is important for both investors and passengers to carefully review the details of this partnership to fully understand the advantages it offers.

One of the main advantages of this partnership is that it allows JetBlue, a popular carrier in the northeast region of the United States, to expand its network by offering a wider range of destinations through United’s extensive network. In return, United will be able to take over some of JetBlue’s flight slots at Newark airport, which has been facing a number of challenges. Additionally, United will also gain access to seven daily round-trip slots at JFK, one of the major airports in New York City, and a larger number of Caribbean destinations.

In the highly regulated airline industry, partnerships between airlines are often the only option for expansion as actual mergers are often hindered by competition rules and national interests. This was the case for JetBlue last year when their proposed takeover of Spirit was blocked on competition grounds, and their partnership with American Airlines was also cancelled due to similar reasons. Unlike the failed partnership with American Airlines, the United-JetBlue alliance does not involve any coordination of flight schedules or revenue sharing.

Furthermore, partnerships also offer a level of financial confidentiality for airlines, as seen in the case of Qantas and Emirates in 2012. Qantas utilized Emirates’ European network via Dubai during a time when the airline was facing significant losses and had to cut routes. However, the financial outcome of this partnership was not disclosed in Qantas’ annual reports and five years later, the airline had recovered and resumed using the more popular stopover in Singapore for their London flights.

Partnerships also eliminate the risks and potential embarrassment associated with taking equity stakes in other airlines, which has been a traditional means of showing long-term commitment in the industry. Etihad, for example, has suffered significant losses from its stakes in various airlines that have eventually collapsed.

Successful partnerships ultimately rely on minimizing costs while providing customers with a better experience. However, there have been instances where frequent flyers have been unable to use their points for upgrades or access lounges on partner airlines. In a positive move, One World, an alliance of 15 airlines, announced last year that Qantas may allow its frequent flyers to use their points to upgrade on American flights, setting a new standard for loyalty programs.

Despite these potential benefits, investors did not see significant value in the United-JetBlue partnership, causing their combined market value to drop by 1% following the announcement. However, it is important to note that this partnership offers tangible benefits for both airlines and is the best option for expansion in a market where mergers are not a viable option.