American Airlines to Partner with South American ULCC JetSmart

American Airlines plans to expand its South American network by partnering with ultra-low-cost carrier JetSmart in a deal that includes codesharing and an investment in the carrier, American announced.

The two carriers have signed a letter of intent that would tie American’s network to JetSmart’s short-haul network covering 33 destinations throughout South America with Airbus A320 aircraft, largely out of Santiago and Buenos Aires. Besides codesharing, members of American’s AAdvantage program would be able to earn and redeem miles on JetSmart flights, and American would take a minority stake in the carrier to facilitate its growth.

“This would enable JetSmart and American to grow aggressively and profitably across Latin America as demand recovers while preserving the best aspects of each carrier’s business model,” American Airlines chief revenue officer Vasu Raja said in a statement. “This partnership would also make AAdvantage the largest travel loyalty program in the Americas.”

JetSmart is part of the portfolio of Phoenix-based private equity firm Indigo Partners, which also has investments in Mexican low-cost carrier Volaris, European low-cost carrier Wizz Air and the Philippines’ Cebu Air. In addition, Indigo Partners holds a controlling stake in Frontier Airlines, which went public earlier this year. Per the agreement, American and Indigo Partners each would commit to providing additional capital for further growth in the region.

Both the codeshare and investment plans depend on a definitive agreement as well as governmental and regulatory approvals.

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