In a bid to rejuvenate its connections in South America, Fort Worth-based American Airlines is buying a minority stake and forging a partnership with low-cost airline Chilean airline JetSmart, which has the same majority owner as Frontier Airlines.
The two airlines announced plans for the ownership stake and a code-sharing agreement Thursday, helping American Airlines rebuild the network in South America that it lost when LATAM Airlines broke off its deal with American in favor of Delta taking an ownership share.
JetSmart started flying in 2017 and is an arm of Indigo Partners, the same group that has major ownership stakes in Frontier Airlines in the United States, Volaris in Mexico and Wizz Air in Europe. It has a fleet of 20 Airbus A320 jets and 77 more on order and flies to 33 destinations in South America in Chile, Argentina, Brazil, Colombia and Brazil.
“Our partnership is very much a partnership to grow and expand in South America; it’s not a partnership with any existing North American operator,” said American Airlines chief revenue officer Vasu Raja.
Indigo Partners managing partner and Frontier Airlines board member Andrew Broderick said the deal doesn’t include any partnership with Denver-based Frontier Airlines, which is known for its low fares and no-frills service. The two airlines are run completely separately, Broderick said, even though Indigo employees serve on the board of directors for both companies.
The two sides did not disclose how much the minority stake was sold for.
Frontier only flies within the U.S. Its network includes a few connections to Mexico but none to South America.
However, Raja said the partnership could expand further in the future as American looks to expand its network even further.
“We believe that this is a model which, done right, can scale really across the continent and even beyond that to other places in the world,” Raja said.
The deal gives American even better access to smaller markets in South America, allowing it to fly from Miami and Dallas to destinations such as Lima, Peru and Santiago, Chile, and then connect on short-haul flights to smaller cities such as Cali, Colombia and Córdoba, Argentina.
In particular, JetSmart has a strong presence on the western side of South America, while American’s other code-share partner in South America, Gol, is stronger in Brazil.
It’s perhaps one of the most aggressive partnership deals American has agreed to with a foreign airline. It’s only the second such ownership deal American has with a foreign carrier, with China Southern Airways being the other.
JetSmart customers will also have complete access to American’s loyalty program, AAdvantage, even for flights that only take place in South America on JetSmart flights.
Despite American’s status as a legacy full-service carrier in the U.S. and JetSmart’s position as an ultra-low-cost carrier in South America, Raja said the two airlines can complement one another.
Don’t be fooled by the name, Raja said. “The quality of products that [ultra-low-cost carriers] are offering is not just competitive with more traditional network competitors in the area, it’s very often superior. These are new airplanes with modern seats, and a great schedule and travel pattern for connecting customers, especially nonstop customers.”
JetSmart also has plans to grow in South America, Broderick said, and the deal requires that American would help with that growth. JetSmart already has plans to add 79 more Airbus jets to its fleet.
The deal needs regulatory approval in both countries to become official.
The pilots union at American Airlines, which filed a grievance this week over hotel rooms and transportation from airports, questioned the timing of the deal.
“It’s very concerning that instead of focusing on American Airlines’ reliability and providing hotels for our crews, they are focused on other airlines,” said a statement from Allied Pilots Association spokesman Dennis Tajer.
This article originally appeared on Dallas Morning News