Southwest Airlines Co. on Monday said it plans to buy U.S. discount rival AirTran Holdings Inc. for $1.4 billion, in a move that is likely to intensify pressure on network carriers on the U.S. East Coast.
The deal promises to be transformational for Dallas-based Southwest, the largest U.S. carrier of domestic passengers, by providing access to the large Atlanta business-travel market for the first time, as well as potential expansion to smaller cities and international destinations.
"This absolutely changes things," said Gary Kelly, Southwest's chairman and chief executive, during a call with analysts.
The definitive agreement marks the first combination between major U.S. low-cost carriers.
Southwest Airlines, the nation’s largest low-fare carrier, said on Monday that it had agreed to buy its smaller rival AirTran Airways in a transaction valued at $1.4 billion, expanding its foothold in New York and Boston and allowing it to move into the nation’s largest airport, Atlanta’s Hartsfield-Jackson.
Southwest said the purchase had been approved by the boards of both companies, although it still needs regulatory and shareholder approval. The deal is valued at $3.4 billion when AirTran’s debt and aircraft leases are included.
We can see The Times quickly notes that the merged "low cost" carrier will have a greater presence at major (as distinct from satellites such as KPVD and KMHT or KISP) airports in the Northeast. While presently both airlines offer KBOS-KBWI and KLGA-KBWI services, they do not offer "head to head" competition with the Acela, namely KLGA-KBOS or KLGA-KDCA. However with more gates and landing slots at any of these busy airports under their control and with a deregulated air transport industry, what's to stop them? With a considerably lower cost structure, and Southwest's renowned aircraft utilization expertise, when compared with the existing "legacy" Shuttle operators, namely Delta and US Airways, what's to stop them with head to head price competition with both the "legacies" and Acela? I do not believe that the Acela business model foresaw having to compete on price with "low costs' (LCC's in airlinese).
Should this combined carrier, which I guess will retain Southwest's name, as AirTran is still linked with ValuJet and that KMIA crash attributed to preventable airline negligence, use their increased Northeast presence to develop long distance markets, fine, as such will be of no concern to Amtrak. However, should they deem, say, KLGA-KDCA to be "lucrative", Acela patronage could be badly hurt in its "end point' markets.
Posts: 9976 | From: Clarendon Hills, IL USA (BNSF Chicago Sub MP 18.71) | Registered: Apr 2002
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For those of us who take the plane to catch a train, this is great news. While Air Tran serves nearby Charlotte, its route system is weak (and they charge fees). Would love to fly SW exclusively - they're always inexpensive, on time, with consistently good, if unremarkable service. I can't wait to say good by to US Airways.
I find it hard believe that any airline including SW make much, if any, money on the short haul northeast market. Seems those landing slots and aircraft would be better used on long haul flights.
Posts: 2397 | From: Camden, SC | Registered: Mar 2006
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Here's a link to the web page that has been set up by Southwest for information on the proposed merger.
Not only will this give Southwest access to Atlanta but also to Mexican and Caribbean destinations. I don't know what the status of their "relationship" with the Mexican LCC Volaris is or what has happened to the proposed and then delayed link with WestJet in Canada.
Even though I can pass ride on Continental (soon to be New United) to visit family in Nashville I much prefer to pay for the Southwest non-stop from LAX.
Frank in HOT SBA
Posts: 2160 | From: Santa Barbara, CA, USA | Registered: Oct 2003
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But what I wonder is this: Will the Air Tran aircraft be painted into SWA colors? If so, that will be very unusual. SWA is an all 737 fleet, and they own almost every single one of their airplanes (only a few are on lease). It will be interesting to see how this plays out. Good for plane foaming I suppose!
Posts: 2355 | From: Pleasanton, CA | Registered: Apr 2007
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I imagine that all the aircraft will eventually be painted in the Southwest colors. AirTran operates a mix of 737's and 717's. AirTran also offers two classes of seating. I doubt that will survive.
Very soon (perhaps as soon as October 1st) you will start to see Continental aircraft with United in place of Continental. There will be a small "Operated by Continental Airlines" under the United name until a single operating certificate is obtained. (Air Micronesia needs to be folded into Continental first.) Then United will be folded into the Continental operating certificate.
United planes will also be repainted in the current Continental livery.
Frank in very HOT SBA
Posts: 2160 | From: Santa Barbara, CA, USA | Registered: Oct 2003
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Now that the low costs are getting "engaged", what will happen to "legacy" American? I can't see them hooking up with US Air (they are essentially running two airlines with one brand name - their labor situation could well explode on them). Alaska; Aloha (edit: Hawiian; vice Aloha); where's the connectivity?
AA just may be the always the bridesmaid, never the bride.
Posts: 9976 | From: Clarendon Hills, IL USA (BNSF Chicago Sub MP 18.71) | Registered: Apr 2002
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Air Tran's newer planes are 737's as well..... though Air Tran is still flying a number of 717's with 2-3 seating. It should be noted that Air Tran does offer a small Business Class cabin.
And like Palmland as someone who regularly uses the plane to reach the train, I am excited by the idea of having Southwest in Charlotte..... More exciting though would be seeing Southwest offer non-stops to KBWI and KMDW from my nearest airport, Asheville, NC. These are flights I would use often to 'interface' with Amtrak.
Presently, however, AirTran serves Asheville with a single tri-weekly flight to Orlando. I'm not optimistic that Southwest will deem Asheville significant enough for it's post-merger route system.
-------------------- David Pressley
Advocating for passenger trains since 1973!
Climbing toward 5,000 posts like the Southwest Chief ascending Raton Pass. Cautiously, not nearly as fast as in the old days, and hoping to avoid premature reroutes. Posts: 4203 | From: Western North Carolina | Registered: Feb 2004
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Frank....so I'm a bit confused by the UAL/CO merger. When all is said and done, and everything is complete, what will all of the aircraft end up looking like? Will they all say Continental, or will they all say United? Do you know if UAL's famous logo will disappear? Or will CO's globe go away?
Posts: 2355 | From: Pleasanton, CA | Registered: Apr 2007
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Eventually, all of the aircraft will be painted in Continental's livery with the replacement of the name Continental with the name United. The United "Tulip" will disappear. The globe will be the logo of the "new" United.
Mr. Norman--
Aloha is long gone. There has been some talk of a merger of AA with BA but that might be a bit too complicated. BA and Iberia are in the throes of a merger right now.
Frank in HOT SBA
Posts: 2160 | From: Santa Barbara, CA, USA | Registered: Oct 2003
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Thanks, Frank. No more UAL Tulip? Wow....And I'm trying to picture a Continental livery with "United Airlines" painted on the side. And the globe on the tail! Never thought I'd see anything like that.
Posts: 2355 | From: Pleasanton, CA | Registered: Apr 2007
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It's just a change of the current CONTINENTAL to UNITED. No "Airlines". It's a different font than currently used by CO and I don't especially like it. I'm sure you can do a google and come up with pictures. They've been in several newspapers.
Frank in HOT SBA.
Posts: 2160 | From: Santa Barbara, CA, USA | Registered: Oct 2003
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Even though last week, when "my" still Battleship Grey United A-320 was taxiing at KORD, I was talking with my friends in Fredericksburg (FA announced OK) and when we parked next to a new liveried B-757, I could not help but remark "such an attractive paint job they now have, and just think they're going to scrap it (United is the "preferred carrier" at her DOD Contractor)"
But regardless of "Burple' or Green, there could well be a serious 'culture clash" at an SWA-AT airline. AirTran has adopted the traditional "hub" model of the "legacies' - and that is attributed to their post 9/11 "tailspin'. SWA's route structure is simply a "connect the dots', and in view of their success in a deregulated environment, the efficacy of the hub model must be questioned. It would be fun to be that fly on the wall in the Conference Rooms as the 'Greens" try and take on the "Burples' over that issue.
There is also the matter of aircraft utilization; this is an area in which SWA is acknowledged as being "the best in the business'. They obviously have groomed a culture of "keep 'em safe (they have yet to loose a hull), but keep 'em flying". Obviously that they have "standardized" on one aircraft "family", the B-737, lends to greater aircraft utilization. While of course there are many variants of the B-737 within the SWA fleet, they have tried to have them "one in the same'. It is my understanding that they have even foregone the latest avionic 'bells and whistles' simply to keep a standardized Flight Deck, while likely not the whole truth, it is largely the truth that any Aircrew member is qualified aboard any of their aircraft; not certain to what extent that is applicable over at Air Tran.
Discussion over at www.airliners.net seems to hold that Air Trans fleet of B-717 (a latter day variant of the Douglas DC-9) will soon be taking an indefinite "Desert vacation", this would appear to be a waste of reasonably economic and efficient aircraft. But they are reportedly "mechanical oddballs' equipped with Rolls Royce engines. Something tells me the "Burples' will win on this one and fifty some B-717 aircraft less than 10 years old will join the 'cacti and thistles'.
Regarding labor matters, the above linked Journal article briefly addresses the issue:
The merger also could unravel if unionized pilots from Southwest and AirTran fail to reach agreement on how to combine seniority lists, which determine salaries. Southwest pulled out of a bankruptcy-court auction for Frontier Airlines Holdings Inc. last year after pilots couldn't quickly agree to terms.
In view of my railroad Labor Relations background, and remembering that both railroad and airline labor relations are controlled by the Railway Labor Act, I sure hope that one was given some thought. While we are hardly addressing the merger of a "legacy' with a "low-cost" as the case with USAir and America West or a "Union/non-Union' as the case with many crafts at Delta/Northwest. I can foresee difficulties merging the Seniority rosters of a "hub" with a "point to point'. Obviously the Air Tran flight crews will zealously "guard' their KATL "house' ('Those Burples think they're coming into OUR HOUSE....!!!!!"; I can hear it now), but management obviously dominated by SWA will want system-wide efficiency. Whatever the outcome, let's hope it is arrived at "on the property'. There are just as many 'zany" National Mediation Board arbitrators adjudicating airline matters as there are railroad matters). An aboulutely "off the wall" arbitration award regarding airline seniority rosters is discussed beginning on page 201 of "Skygods; the Fall of Pan Am" ISBN 0-688-04615-0.
I think there is consensus both here at over at Railroad Net that there will be little impact on Amtrak from this merger as AT-SWA will wish to deploy their new "market strength" to long distance routes rather than attempting to carve into Amtrak's majority market share in the Northeast.
Finally, to the "never flys' (and even possibly some "never haves never wills'), sorry for the diversion this topic represents from passenger rail matters.
Posts: 9976 | From: Clarendon Hills, IL USA (BNSF Chicago Sub MP 18.71) | Registered: Apr 2002
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Just a note. The first Continental aircraft, #442, has just had the name change made. I expect it will be flying well before the Oct. 1st date.
On a train related theme, we took GibG, who sometimes posts here, to The Spot today and saw a NB Surfliner and the very late NB Starlight. The Surfliner had the 10th anniversary locomotive and the Starlight had a PC and two private cars at the rear.
Frank in HOT (106 downtown yesterday) SBA
Posts: 2160 | From: Santa Barbara, CA, USA | Registered: Oct 2003
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Looks like Southwest is going to keep all 86 717 aircraft. Interesting! Still not sure about the -800's though (737). That's a lot of economy seats to handle. Here's an article:
DATE:27/09/10 SOURCE:Air Transport Intelligence news Southwest plans to keep AirTran’s Boeing 717 fleet By Lori Ranson
Southwest executives have confirmed that it plans to operate AirTran's 86 Boeing 717s once its acquisition of AirTran closes and the Atlanta- hubbed carrier is folded into the Southwest brand.
Southwest today unveiled plans to acquire AirTran through a combination of cash and common stock.
Both carriers operate the 737-700, and Southwest is evaluating adding the larger -800 to its fleet. Southwest also operates 737-300s/500s.
During a call with media to discuss the acquisition Southwest CEO Gary Kelly said the carrier has decided it wants to keep and operate the 717, and will operate the smaller aircraft in a single 117-seat configuration. Currently AirTran operates its 117-seat 717s in a dual class offering.
Kelly acknowledges the addition of the 717 requires a different type crew rating and establishing how the aircraft is scheduled into operations. But he believes the 86 aircraft offer enough scale and says Southwest has the ability to incorporate the aircraft into its fleet cost effectively.
"Our pilots have looked at it [the 717] and like it," Kelly states. The aircraft will also allow Southwest to operate in markets too small to support its 737 fleet.
Southwest's chief says the carrier is not prepared to make a decision on adding the larger -800 to its fleet. "We hope to make a decision soon," he says. Previously Southwest indicated it would decide on adding -800s in December and has negotiated a tentative deal with its flight attendants to operate the aircraft.
Commenting on the impetus to acquire AirTran Kelly states that after a tumultuous last couple of years in 2010 Southwest is finally comfortably profitable enough to strategically think about its future by examining its technology, fleet and possible acquisitions. Today he revealed Southwest also plans to replace its reservation system.
Posts: 2355 | From: Pleasanton, CA | Registered: Apr 2007
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Southwest keeping the 717's for smaller markets increases the chances that Southwest will serve Asheville, NC.
I'm hoping for as many as 4 daily SWA departures from Asheville going to BWI, MDW, and MCO....... with those I would never need to drive more than 35 minutes to reach an airport again!
Posts: 4203 | From: Western North Carolina | Registered: Feb 2004
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Nice catch on the acronym! I guess it could've been worse, had TWA still been around.
Posts: 391 | From: Schenectady | Registered: Jan 2002
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I would rather suspect A-Ts gates at hubs will be traded/sold as need to make the SWA markets it wants.
I know SWA wanted Atlanta. Like LA, the NCR airports, the NY airports, and Vegas, Atlanta is a major regional destination. SWA doesn't have to hub/spoke, it just realigns.
My suspicion, though, is SWAs increasing market presence nationwide will place pressure on all modes to lower fares...
Posts: 1404 | Registered: Oct 2001
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SWA is getting into Charlotte, NC also..... another huge southeastern market.
-------------------- David Pressley
Advocating for passenger trains since 1973!
Climbing toward 5,000 posts like the Southwest Chief ascending Raton Pass. Cautiously, not nearly as fast as in the old days, and hoping to avoid premature reroutes. Posts: 4203 | From: Western North Carolina | Registered: Feb 2004
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