Southwest acquires AirTran for $1.4bn

[Chris McGee]

Southwest Airlines said on Monday that it would acquire rival AirTran in a $1.4bn deal that will widen its network of destinations and join two of the biggest discount airlines in the US. The cash and stock deal values AirTran at $7.69 a share, or $1.4bn. That represents a 69 per cent premium to its closing share price on Friday.

The combined company will be based in Dallas and operate under the Southwest brand. Southwest said that Mr Fornaro would be involved in the integration process and that it expected to generate annual synergies of $400m by 2013.

http://www.lowfaresfarther.com/

[Arthur Heiser]

The question is, what are they going to do with all those 717's? I hope to God they don't slap Southwest colors on those. Sell them and buy more 737's is what I say.

[Brad Littlejohn]

The question is, what are they going to do with all those 717's? I hope to God they don't slap Southwest colors on those. Sell them and buy more 737's is what I say.

I posted this over at FlightAware, But I'll post it here as well.

Generally SWA wouldn't do something like this unless it smelled blood somewhere, but I'm not entirely sure which 'blood' they smelled. But there are a number of things I can see that come into play.

• Atlanta. With SWA's model of avoiding the major hubs of other (legacy) airlines, I'm wondering if they would go straight into KATL. Is there another airport capable of handling a B737, B717, or DC9? If so, could they move shop to there, similar to how KDAL is to KDFW?
  
• This creates a HUGE advantage to SWA over FFT/MEP/RPA at KMKE. That is MEP's hub, and SWA started up service there, because they smelled blood from MEP being bought by RPA. MKE is also TRS' hub, so with SWA landing this deal, they are going to have a huge presence there. Could this be the battleground between Republic and Co. and SWA from the fallout of SWA being the loser in the bidding for FFT?
  
• New York. SWA obviously gets more service to LGA from this, but how would this adversely affect their EWR service that they will be starting? we know that SWA got a huge deal on the EWR gates (basically handed on a silver platter) as UAL/COA had to give them up for that deal to go through, but would more service from either one positively or negatively affect the other? Remains to be seen.
  
• Aircraft. Sorry, ladies and gents, but expect the B717s to go. SWA is still receiving B737-700s they ordered, and still have some on the books to receive. I can see those replacing the B717s they have, since they will be gaining 50something B737-700s from TRS. I believe SWA has enough B737s on order still to offset the B712s they'll be getting. But over time, those will go, and go for another reason outright (see below).
  
• Destinations. We already know that the -700 has the range for it, but this gives SWA the access to Mexico and the Caribbean that they've wanted. MKJP, MMUN, TJSJ, MYNN, etc. Perhaps TNCM could be started? Either way, like with WJA, expect their deal with VOI to fall through.

Like I said.. I don't know whose blood they smelled: TRS being in trouble (which nothing really indicated that they were), DAL/NWA having issues (once again, nothing indicated), response to UAL/COA (once again, nothing, since that merger was just approved), out of spite with RPA for losing FFT, or simply "just because".. Either way, this helps SWA out a lot, especially with winter vacation season coming up, and even more so if this gets DOT/DOJ approval.

BL.

[Arthur Heiser]

4.  Aircraft. Sorry, ladies and gents, but expect the B717s to go. SWA is still receiving B737-700s they ordered, and still have some on the books to receive. I can see those replacing the B717s they have, since they will be gaining 50something B737-700s from TRS. I believe SWA has enough B737s on order still to offset the B712s they'll be getting. But over time, those will go, and go for another reason outright. . .

Praise to the heavens! Hallelujah!  

[Brad Littlejohn]

Praise to the heavens! Hallelujah!

I spoke too soon. Kelly intends on keeping the B712s. What they'll be used for is a good question. But I still expect them to be phased out (read: sold to HAL, or scrapped). I could see them still being used on the KEYW route, though it has me wondering what the minimum TODA is for a B737-700. currently, the shortest runway SWA uses is 5701ft, at KSNA. KEYW is 4801ft, so the -700 would have to be pretty light to get off in less than a mile.

Other things come to mind, which graciously came from the guys at POSKY:

• DAL/NWA wins in this one. They get rid of a thorn in their side at KATL, but gain another one. TRS' aircraft layout is going away (read: no 2-class configuration, assigned seats), so the business class travelers who wanted an LCC alternative to the legacy carriers lose that alternative. So they may be enticed back to DAL/NWA.
  
• AAL wins in this one. TRS does have service to KDFW offering legacy service in the form of an LCC. The problem here is that SWA and AAL were two of the members who signed the Five Party Agreement pursuant to the Wright Amendment. That is important, because the provisions of the agreement stated that SWA nor any of its subsidiaries (ATA, and now, TRS) may operate from DFW. So TRS will have to shut down all DFW ops when the acquisition gets final approval.
  
• The Five Party Agreement also stipulated that SWA is restricted to 16 gates at KDAL, and that no international service can commence to any airport including KDAL within 80 miles of Love Field except to KDFW. A nasty Catch-22 here, because SWA can't have service at KDFW without giving up gates at KDAL.

Here is where that interlining deal with WJA and VOI was important, as WJA and VOI could do the int'l work for SWA/in SWA's place, and from KDAL, since SWA doesn't own them. The WJA deal is gone, and now that I look at their route map, they might keep the VOI deal. The only place they would have had competition with VOI at would be MMUN, but VOI flies to mainland Mexico from there, not the US. So they may keep VOI for a Mexican presence.

Tons of room for discussion/planning here.

BL.

[Daniel Hawton]

I spoke too soon. Kelly intends on keeping the B712s. What they'll be used for is a good question. But I still expect them to be phased out (read: sold to HAL, or scrapped). I could see them still being used on the KEYW route, though it has me wondering what the minimum TODA is for a B737-700. currently, the shortest runway SWA uses is 5701ft, at KSNA. KEYW is 4801ft, so the -700 would have to be pretty light to get off in less than a mile.

Other things come to mind, which graciously came from the guys at POSKY:

• DAL/NWA wins in this one. They get rid of a thorn in their side at KATL, but gain another one. TRS' aircraft layout is going away (read: no 2-class configuration, assigned seats), so the business class travelers who wanted an LCC alternative to the legacy carriers lose that alternative. So they may be enticed back to DAL/NWA.
  
• AAL wins in this one. TRS does have service to KDFW offering legacy service in the form of an LCC. The problem here is that SWA and AAL were two of the members who signed the Five Party Agreement pursuant to the Wright Amendment. That is important, because the provisions of the agreement stated that SWA nor any of its subsidiaries (ATA, and now, TRS) may operate from DFW. So TRS will have to shut down all DFW ops when the acquisition gets final approval.
  
• The Five Party Agreement also stipulated that SWA is restricted to 16 gates at KDAL, and that no international service can commence to any airport including KDAL within 80 miles of Love Field except to KDFW. A nasty Catch-22 here, because SWA can't have service at KDFW without giving up gates at KDAL.

Here is where that interlining deal with WJA and VOI was important, as WJA and VOI could do the int'l work for SWA/in SWA's place, and from KDAL, since SWA doesn't own them. The WJA deal is gone, and now that I look at their route map, they might keep the VOI deal. The only place they would have had competition with VOI at would be MMUN, but VOI flies to mainland Mexico from there, not the US. So they may keep VOI for a Mexican presence.

Tons of room for discussion/planning here.

BL.

This will also hurt Pensacola as part of the deal of Southwest getting gates at ECP (Panama City) was that, for 3 years, they couldn't provide services in Pensacola or Mobile.  AirTrans operates out of PNS.  So now we're loosing choices.  Thank god for higher ticket prices!

[Manuel Manigault]

No, there are no suitable commercial airports in the Atlanta area other than KATL.  There has been talk off and on about building another airport south of KATL near Macon or converting Robbins AFB to a commercial field, but either option is a long way off.