Norwegian Air, JetBlue tie up to expand transatlantic network

© Reuters. The JetBlue Airways logo is seen on a revolving door entering John F. Kennedy Airport in the Queens borough of New York

By Victoria Klesty and Terje Solsvik

OSLO (Reuters) - Norwegian Air (OL:NWC) and New York's JetBlue Airways (O:JBLU) plan a partnership enabling passengers flying between Europe and the United States to continue to multiple destinations under a single booking, potentially boosting traffic and average fares.

The airlines said in a joint statement on Thursday that if agreed the partnership would come into effect in the middle of next year.

Norwegian, Europe's third-largest budget carrier, has shaken up the market for travel across the Atlantic with cut-price fares that challenge traditional carriers such as IAG's (L:ICAG) British Airways, but its breakneck expansion left it with high debts and in the red.

The partnership with JetBlue will connect JetBlue flights from around 100 cities in the Americas to Norwegian's network in New York, Boston and Fort Lauderdale, from which the carrier serves more than 20 European destinations.

The deal could help both airlines to boost traffic and the average fares they earn as transatlantic services are extended beyond the biggest U.S. cities, Bernstein analyst David Vernon said.

Norwegian already has a European partnership with London Gatwick-based easyJet (L:EZJ), but until now lacked a U.S. partner.

While Norwegian and other low-cost long-haul operators have challenged the big network carriers on their main intercontinental routes, the incumbents' connecting traffic to smaller destinations has so far remained largely out of reach.

"If you compete on a purely point-to-point basis, you're in the most commoditized, lowest-yielding segment of the market with no subset of passengers to destinations that rivals can't get to," Bernstein's Vernon said.

"This is an opportunity for Norwegian to capture some extra, more profitable traffic," he added.

Shares in Norwegian Air, which is cutting costs to try and return to profit, surged 10% on the news before giving up some gains to trade up 3.8% by 1248 GMT, outperforming an Oslo benchmark index (OSEBX) up 0.6%.

"Customers will have the possibility to book connecting flights on both airlines' websites by combining the best of our complementary and expansive networks," the airlines said.

JetBlue Airways Corp has said that it hopes to break into the low-fare, transatlantic travel market.

"This new agreement ... seamlessly connects JetBlue's robust network throughout the U.S., Caribbean and Latin America with ... exciting European destinations," JetBlue Chief Executive Robin Hayes said in the statement.