Posted on 09/27/2010 5:40:44 AM PDT by Dan Nunn
NEW YORK (CNNMoney.com) -- Southwest Airlines plans to acquire AirTran Holdings for $1.4 billion, the airlines said on Monday. Southwest (LUV, Fortune 500) said the deal values AirTran at $7.69 per share, a 69% premium over AirTran's closing price of $4.55 on Friday. AirTran's (AAI) stock surged to $7.27 in pre-market trading. Southwest chief executive officer Gary Kelly said the deal will allow his airline to expand into airports serving major hubs like Atlanta, Washington D.C., Boston, Baltimore and New York City. Southwest said the total deal, including AirTran's debt and aircraft operating leases, is valued at about $3.4 billion. The deal has been approved by the board of directors of each airline, and is now contingent upon the approval of regulators and AirTran stockholders.
(Excerpt) Read more at money.cnn.com ...
Interesting how this will change their business model. AirTran flies 717's in addition to 737's. Southwest was talking about adding the 737-800 to their fleet, the first plane they'd ever operate that sat more than 137 people.
Southwest put up an informational site about the merger but it appears to be down under the load:
http://www.lowfaresfarther.com
Why, why, why? Oh well, I guess having one consistently profitable airline (Southwest) was making the industry look bad.
This is not good. I relied on both these airlines to find low fares out of Orlando. Airtran has a lot of direct flights from here. Looks like my travel costs will be going up.
Glad to see Southwest is still an all Boeing fleet. Adding more -800s would be sweet for WA state.
I like this news. Southwest is a profitable airline, they provide a decent service, and I’ll be glad to have them servicing the east coast more.
And they still don’t charge for the first 2 bags of checked luggage.
I don't think they're interested in the 717s at all, and will probably phase them out. What they wanted, and what is far more valuable, are the gates.
There has to be some mighty happy pilots at Air Tran this AM...as well as the rest of the employees...
AirTran has actually been phasing out the 717s in their fleet in favor of 737s. The RR engines on the 717s are pieces of dog squeeze...
Wondering if SW will get gates at DFW?
Gotta LUV it!
Now if Southwest would only take over Useless Air. (kidding)
Don’t forget about Hartsfield in Atlanta.
This is a big blow to Delta. No more going to Birmingham to get on a SWA flight.
Mike
Don’t mention Hartsfield, am trapped there as we speak.
But yes, SW will shake things up, for the better.
Delta is looking flush with $, every flight is almost full. It’ll do em good to get their ears trimmed back a bit by SW.
You hit the nail on the head. One of the smartest things Southwest ever did was build their fleet around a single “family” of aircraft, the 737 series. That decision alone has saved them billions in training, fuel and equipment costs, which (in turn) helps SWA undercut the competition on fares.
The merger will also give Southwest a presence in markets they currently don’t serve, or have only a marginal presence. AirTran, for example, has gates at Boston’s Logan Airport, while much of SWA’s traffic (in that market) actually goes through Manchester, NH., roughly 90 miles away.
With access to larger markets, SWA will probably cut service to smaller, “nearby” airports. For example, why should Southwest maintain the same nbr of dlights into Islip when they will get AirTran’s gates at LaGuardia? And, in my neck of the woods, I’m guessing SWA will close AirTran’s gates at the Newport News, VA airport and force passengers to fly out of Norfolk, where Southwest has operated for years.
One thing is certain: air fares in/out of Atlanta will be very cheap. AirTran was very successful at taking away market share from Delta—and AirTran never had the financial reserves of SWA. Delta is still financially troubled, and the merger with Northwest didn’t help. SWA will launch a major fare war in Delta’s backyard to further weaken their competition.
Also, how long will Delta’s bag fees last with SWA coming to Hartsfield?
SWA would acquire all of AT's assets & liabilities. So they would get the gates.
I'm not sure Delta will be the most impacted. I think it will be AA and UA.
f you're Southwest, your doing this because your strategy requires it. Southwest is building a business traveler network that had a huge hole in it called Atlanta and Points From Atlanta, and AirTran has real market share ever since Delta Air Line's pricing guys took a sort of "peaceful coexistence" approach to AirTran instead of trying, say, a Northwest Airlines pricing approach that I'd call "Terminate with Extreme Prejudice."
The planes fleets between the airlines fit well enough, AirTran employees are eventually going to get raises, and Southwest's stranglehold on domestic traffic just got that much deeper. For an airline that has simply lost the interest of Wall Street -- through not much fault of its own -- in the past decade or so, it's a wake-up call to the finance world: We're back, and we're not taking prisoners.
Comments have indicated that Southwest will inactivate, sell or trade the gates at DFW. They have pledged not to operate out of DFW in order to get the Wright amendment lifted and get a new expansion at Love Field.
Let's hope that the pledge lasts longer than a politicians' promise.
Kiss business class on AirTran goodbye...
Oh, I heart Southwest....
YAY!
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