Southwest Buys AirTran, Grows Even Bigger

But business travelers prefer close-in airports. In New York, they would rather fly out of LaGuardia than Islip, Long Island. Washington Reagan is more convenient to them than Baltimore-Washington International. So Southwest decided to go where the business fliers were - New York, Boston, San Francisco, Denver and Philadelphia. The airline has paid the price - its on-time performance has slipped, but that seems to be a sacrifice Kelly is willing to make.

Buying AirTran allows Southwest to fill the last gaping hole in its route map: Atlanta. There, AirTran has a profitable hub despite competing with Delta. Bob Jordan, the Southwest executive who will run AirTran, thinks Atlanta can become Southwest's biggest base within a few years, surpassing Las Vegas and Chicago. Southwest also gains a foothold at Washington's Reagan National and picks up AirTran's gates at LaGuardia.

AirTran could run as a separate airline into 2013. Southwest will eventually drop AirTran's bag fees and first-class seats. AirTran CEO Robert Fornaro says that's the right thing to do. "Southwest's brand is bigger; it's better known. They've got a product that works."

Antitrust regulators saw no reason to block the AirTran deal. Some consumer advocates say it's not likely to send prices higher.

"As long as you have a strong Southwest and smaller independent airlines like JetBlue and Alaska, I don't see any monopolistic pricing in the domestic market," said Ed Perkins, an author of travel books and former travel editor for Consumer Reports.

The average trip on Southwest is shorter than on many other airlines, so it competes against the cost of driving as well. For the last week in May, Southwest recently had fares as low as $49 each way from Dallas to Houston. With gas at $4 a gallon, a traveler making the same trip in a car that gets 20 mpg would spend $48 on fuel.

Southwest also gets AirTran's routes to the Caribbean and Mexico. Southwest only recently began selling travel to Mexico on planes operated by a partner, Mexico's Volaris.

Darryl Jenkins, an aviation consultant, says buying AirTran gives Southwest enough growth opportunities to last five or 10 years. By that time, he says, the domestic leader might be ready to consider flights to Europe and other international destinations. That would make it - again - even more like the big, legacy airlines.