Low-fare King Expands its Empire with AirTran

The $1.4 billion deal between Southwest and AirTran could be good news for some fliers.


"If you want to fly on a low-cost carrier, your options in terms of places you can reach on that carrier will have increased even though the number of low-cost carriers will have decreased by one," Kasper says.

"America needs this now," says Tom Parsons of BestFares.com. "With this deal you can now go just about anywhere in the country, and to the Caribbean and Mexico, on Southwest. ... All the legacy airlines will have to set their prices based on whatever Southwest does."

Other carriers may also have to worry about the new mega-carrier in their midst. American, once the biggest airline in the U.S., fell behind in size and global reach when Delta acquired Northwest Airlines two years ago, and now may be further challenged by the United-Continental merger and the proposed combination of Southwest and AirTran, some analysts say.

"This puts more pressure on AMR (American's parent company), which will find it even more difficult to merge its way to prosperity because the remaining potential merger partners offer far less attractive financial and strategic benefits," says Vicki Bryan, an analyst at Gimme Credit, an independent research service on corporate bonds. "AMR has been scrambling to reinvent its business model, and following the United/Continental and Southwest/AirTran mergers it could be potentially without dominance in any lucrative market."

Other carriers that may be threatened by the wave of consolidation include US Airways, which merged with America West in 2005; Alaska; and JetBlue.

Terms of Monday's deal call for AirTran stockholders to get a combination of Southwest common stock and cash valued at $7.25 to $7.75 per share, depending on the price of Southwest stock prior to the merger. At least $3.75 will be cash, the companies say.

Airline-industry insiders long have considered a Southwest-AirTran merger to be inevitable because the combination of their two networks, which overlap on only 19 routes, could have significant appeal to travelers.

Travelers see upside

Some travelers were pleased with the prospect of a broader route system that gives them more appealing destinations when they redeem their loyalty program points, as well as the chance that Southwest's entry into new markets could drive down ticket prices at other airlines as well.

New Southwest flights to cities now served by AirTran "can help restrain" other airlines from setting high airfares and fees, says Dave Simonson, the president of a computer consulting company in Antioch, Tenn., who's flown more than 40 Southwest flights since the beginning of last year.

But others worried that the best aspects of each airline -- be it Southwest's customer service or AirTran's assigned seating -- could be lost in the merger.

"The Southwest culture is unbelievable, and its employees have the highest passion I've ever seen in the industry," says Don Schmincke, a Baltimore-based author and speaker. "Can they convert AirTran employees?"

DaWane Wanek of Sugar Land, Texas, says he stopped flying AirTran and other airlines connecting through Atlanta because of flight delays and missed connections. Atlanta's Hartsfield-Jackson airport has one of the worst records of all airports for on-time flight arrivals and departures, according to Transportation Department statistics for the first seven months this year.

"I am concerned that Southwest can handle bringing the beast -- Atlanta -- into the network," says Wanek, a sales director in the computer hardware industry.

But some perks are set to remain. Southwest, which prides itself on not charging for the first two checked bags, unlike most of its peers, will maintain that policy at the merged airline, eliminating AirTran's bag fees.

AirTran's planes will also become a single class, like Southwest, and be painted in Southwest's colors.

AirTran was founded in 1992 as ValuJet Airlines.

The company nearly failed following the 1996 crash of ValuJet Flight 592 into the Florida Everglades, which killed all 110 people on board. In 1997 it merged with the much smaller parent company of Orlando-based AirTran. The damaged ValuJet name was jettisoned, and the company quickly acquired younger aircraft to replace the small fleet of nearly 30-year-old McDonnell Douglas DC-9s it had flown since its launch.

We Recommend