Southwest Airlines shocked the airline world with an announcement that it had agreed to acquire AirTran Holdings for $1.4 billion in cash and stock. This is a merger that few pundits saw coming. Southwest gets a big foothold in Atlanta and take-off and landing slots in slot-controlled airports.
It appears that Southwest has bid for the AirTran route structure as well as coveted gates in Atlanta, Washington, DC, Boston and New York’s La Guardia. Together with the leasing deal forced on Continental that resulted in Southwest having a significant presence in Newark, the largest airline
Southwest Airlines agreed to acquire AirTran Holdings Inc. for $1.4 billion in cash and stock, the first major merger among healthy U.S. discount carriers.
The proposed deal follows Southwest’s failed effort to acquire Denver-based Frontier Airlines earlier this year and would revive its stalled efforts to launch international services by accessing AirTran’s network to the Caribbean.
Southwest Chairman and Chief Executive Gary C. Kelly said the move gives the company “significant opportunities” in Atlanta—the largest U.S. market the company currently doesn’t serve—and expands its presence in other major airports including New York LaGuardia, Boston and Baltimore/Washington, as well as gaining entry to many smaller domestic cities.
Southwest says “it has entered into a definitive agreement to acquire all of the outstanding common stock of AirTran Holdings, the parent company of AirTran Airways (AirTran), for a combination of cash and Southwest Airlines’ common stock. ”
Stay tuned as we examine this bockbuster deal that will change the airline world, even more than the United/Continental deal. Southwest is already the largest U.S. airline in terms of passengers carried. With the addition of AirTran their passenger count will grow dramatically.
From the Southwest/AirTran press release:
The acquisition of AirTran Airways by Southwest Airlines will bring together two great companies and create one even stronger low-cost carrier. The two airlines currently serve 106 communities from coast-to-coast, Mexico and the Caribbean, with 685 all-Boeing aircraft and nearly 43,000 dedicated, fun-loving Employees.
“This agreement is great news for our Crew Members, our shareholders, our customers and the communities we serve. Joining Southwest Airlines will give us opportunities to grow, both professionally as individuals and as a group, in ways that simply would not be possible without this agreement,” said Bob Fornaro, AirTran Airways’ chairman, president and chief executive officer. “This agreement with Southwest is a testament to the success and hard work of the more than 8,000 AirTran Crew Members who have built this airline. I am tremendously proud of the things we have accomplished together and look forward to continuing that great work during this next exciting chapter of our history.”
The AirTran Board of Directors, on the unanimous recommendation of a Special Committee of independent directors, approved the merger agreement and recommends that AirTran Holdings, Inc., shareholders approve the transaction.
Completion of the transaction, which will require both regulatory and shareholder approvals, is expected to close by the first half of 2011. Commercial and operating integration is slated to culminate in 2012, with both carriers operating under Southwest Airlines’ Federal Aviation Administration operating certificate in Dallas.
We know the route structures are relatively complimentary. Surprisingly, both airlines serve 69 destinations. I thought Southwest was much larger in terms of airports served. AirTran serves 37 airports not served by Southwest. The additional smaller markets are as perhaps as important as the major slot-controlled airports.
What about labor relations? What about reservation and IT systems? What about equipment and planes? All in all, this should be a plus for consumers and a big pain for legacy carriers.
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
