In another example of the consolidating airline industry, two of the nation’s largest low-fare airlines, Southwest and AirTran, will combine in a $1.42 billion deal.
Southwest Airlines agreed to purchase AirTran on Monday, moving the company into 37 new cities, including AirTran’s base in Atlanta.
Through the acquisition, Southwest will be able to fly out of Atlanta’s Hartsfield-Jackson International, one of the busiest airports in the nation. The airport also is a hub for business travelers, a highly sought-after demographic in the airline industry.
The deal will give Southwest a bigger piece of the pie in major East Coat cities like Boston and New York and a larger stake in travel hubs like New York’s LaGuardia and D.C.’s Reagan National airport.
Southwest’s efforts to expand internationally will also by bolstered by the acquisition of AirTran. Southwest gains routes to Mexico and the Caribbean, setting the airline as a rival to JetBlue. Together, Southwest and AirTran say they will fly more than 100 million passengers out of more than 100 airports when their companies fully merge in 2012.
Though many details of the merger are still unclear, Southwest passengers will not have to worry about paying for checked bags. Southwest has announced that it will not keep AirTran’s baggage fee.
AirTran charges customers $20 for the first checked bag and $25 for a second bag. Southwest has built a positive reputation by bucking airline trends by not charging for bags. The lack of baggage fees is a big part of Southwest’s marking efforts and according to the company has lured passengers away from other airlines.
The merger took many airline analysts by surprise. In April, AirTran Holdings Inc. CEO Robert Fornaro indicated his interest in merging his company, but did not indicate any specific airline.
Southwest, meanwhile, tried unsuccessfully in 2009 to buy the bankrupt Frontier Airlines, but lost to Republic Airways Holdings. Republic won the Denver-based Frontier last August for almost $108.8 million.
Southwest also bought assets of ATA Airlines out of bankruptcy two years ago. The purchase gave Southwest ATA’s takeoff and landing slots at LaGuardia Airport, giving the company an opening to serve New York.
AirTran, however, will be Southwest’s largest acquisition, making the company the fourth largest airline in the United States. Experts warn that the combination of the two low-cost carriers will hike up prices, especially in the Baltimore and Orlando markets where the companies overlap.
The merger also puts additional pressure on American Airlines and US Airways to find partners. Most recently, Continental and United Airlines merged and will join operations by October of this year, making it the largest airline in the world. Before that, Delta and Northwest merged in 2008.
By Adriana Padilla for PeterGreenberg.com.
Related Links: Associated Press, USA Today
Related Links on PeterGreenberg.com:
- United & Continental Shareholders Approve Merger, Form World’s Largest Airline
- Continental-United Airlines Merger on CBS News
- What’s Next For Delta-Northwest Merger?
- Iberia-British Airways Merger Raises Competition Concerns
- Airlines & Airports: Air Travel Section
- Southwest Airlines Takeover Bid For Frontier Airlines Stalled Over Pilot Unions Deal
- As Other Airlines Struggle, AirTran Posts Q1 Profit
