Why Paisly Was the Key to the JetBlue-United Deal

JetBlue would not accept a partner that wouldn't boost its vacation package business, a senior executive told me.

Dear readers,

After the Northeast Alliance showed potential but ultimately failed when a federal judge blocked it, many insiders (including me) expected JetBlue would partner again with American, the competitor that best complemented its network and would help it take on United and Delta in New York. But a top JetBlue executive told me last week that negotiations with American fell apart when American declined to adopt Paisly, JetBlue’s vacations arm.

Jamie Perry, president of Paisly, was clear that American didn’t see the value in JetBlue’s package business and didn’t want to switch from its in-house platform. "They didn't," Perry said, repeating it twice for emphasis. Meanwhile, United wanted access to JFK and more relevance in New York City and South Florida so much that it was happy to adopt Paisly even though it meant switching vacation providers.¹ As usual, Scott Kirby got what he wanted — a deal with JetBlue that wounds American.

It is very rare for an airline to prioritize the package business so highly, even though the segment is lucrative. In a discussion with me last week in Los Angeles (where Perry had traveled to meet investors), Perry helped me understand why Paisly was a deal-breaker for JetBlue. He reminded me that — unlike JetBlue, the actual airline, which is trying to shrink itself to its first profits since the pandemic — Paisly is thriving with big margins. Unfortunately, JetBlue has been Paisly’s only customer, and having only a single and stagnant airline as its client was stifling Paisly’s growth. JetBlue, which owns all of Paisly, wants to grow the business, and that requires Paisly to offer packages tied to airlines besides JetBlue.

I have chatted informally with executives from JetBlue and United, and people at both companies told me this was a brutal negotiation that wasn’t finished until right before the announcement. Both airlines were unhappy with certain items — Perry confirmed for me, without providing detail — and I asked him whether some of this animosity might be related to the package business. Did United merely acquiesce because it wanted access to New York?²

“I think both those things can be true,” Perry said. "There's certainly a lot in the rest of the deal that they want, right? And they were very open and transparent about that, and that's fine. But they were also very open with us. In the first conversation we had, the people we spoke to were like, 'this is super exciting. We know we don't do this very well, and we believe that you can probably do it better.'"

I have known Perry for a long time,³ and I have found him to be among the more brutally honest people in the industry. If he says this thing has potential, I believe him. I also believe him because it's an open secret that the package business has very high margins, though most airlines haven't invested the resources to harness it. They either half-ass an internal product, or use a white-label solution and collect payments from OTAs. I suspect United may improve its package revenue by working with Paisly, and if that happens, Perry may be able to use that fact to attract more airline customers, because having the world’s biggest airline as a customer is a big deal.

What makes Paisly so great? Here are some things I learned from Perry.