Southwest Agrees to Buy AirTran for $1.4 Billion

[joeyb747]

"Sept. 27 (Bloomberg) -- Southwest Airlines Co., the largest U.S. low-fare carrier, agreed to buy AirTran Holdings Inc. for about $1.4 billion in cash and stock, giving it access to Atlanta, the world’s busiest airport."

"Atlanta, AirTran’s biggest hub, is the largest U.S. market Dallas-based Southwest doesn’t already serve. The purchase also fulfills Southwest’s goal of adding flights to Mexico and the Caribbean, and expands its presence at New York’s LaGuardia and Boston’s Logan airports."

"The combination will add Boeing Co.’s 717 to Southwest’s fleet of Boeing 737s. The fleet will total 685 active aircraft."

From:

http://www.businessweek.com/news/2010-09-27/southwest-agrees-to-buy-airtran-for-1-4-billion.ht

[joeyb747]

More info here:

http://www.lowfaresfarther.com/

[Eric M]

Part of Southwest's basis for low-overhead operations is having only one kind of plane in its fleet (the 737). Will adding 717's raise operating costs? Or will Southwest just divest itself of AirTrans' fleet?

[mk]

i hear SWA will keep Air Tran B737s, slowly sell the B717s to Delta to replace the DC9s, and replace Air Trans B717s to all B737s...which makes sense all around

[atcman23]

i hear SWA will keep Air Tran B737s, slowly sell the B717s to Delta to replace the DC9s, and replace Air Trans B717s to all B737s...which makes sense all around

That makes the most sevse as SWA was talking about adding newer B737s to the fleet... such as the -800 series and possibly the -900 series.  That would make sense if they plan on expanding beyond the U.S.

[rpd]

What will happen at an airport like BWI where TRS and SWA both have hubs?

[joeyb747]

http://www.nytimes.com/2010/09/28/business/28air.html

[tyketto]

What will happen at an airport like BWI where TRS and SWA both have hubs?

Nothing. BWI is a focus city for TRS, while it is a major base for SWA. I think it will be a non issue there.

I posted this over at the FlightAware forums, but it's relevant 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.
[list=1]

• 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.

To this, I'll add that I'd see some routes going away completely, let alone some destinations:

• ROC is about an hour's drive from BUF.
• ACY is 45 minutes from PHL.
• PNS? Maybe an hour from PFN, which SWA is starting service to.
• CRW? nothing really out there at all.
• BMI? Maybe, just to keep an eye on how AAY does in Peoria, but even that is chartered. MLI? I don't think they could fill enough seats on either of those routes to stay profitable. Though I think it would be nice if they tried; it would provide a go-between for MDW/STL or MDW-OMA, so pax wouldn't have to drive as far.
• BBG? Maybe 2 hours to LIT, 3 to TUL. If the tourist trap doesn't dry up..
• UTA? gone. SWA will use MEM instead.
• GPT? hour from MSY.
• AVL? see CRW.
• FNT? Hour and a half to DTW.

Tough call on those routes. The one that would be really interesting though, would be EYW. IIRC, TRS used their B712s on that route from ATL. Seeing that that runway is less than a mile long (somewhere around 4800ft), a B737 would need to be rather light to take off there. I could see it being of use though, as it is the closest US port of call to MMUN (and Havana).

BL.

[alltheway]

  This might hurt some, if so just don't read it....

Was it bargain sale?

[atcman23]

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.
[list=1]

• 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.

To this, I'll add that I'd see some routes going away completely, let alone some destinations:

• ROC is about an hour's drive from BUF.
• ACY is 45 minutes from PHL.
• PNS? Maybe an hour from PFN, which SWA is starting service to.
• CRW? nothing really out there at all.
• BMI? Maybe, just to keep an eye on how AAY does in Peoria, but even that is chartered. MLI? I don't think they could fill enough seats on either of those routes to stay profitable. Though I think it would be nice if they tried; it would provide a go-between for MDW/STL or MDW-OMA, so pax wouldn't have to drive as far.
• BBG? Maybe 2 hours to LIT, 3 to TUL. If the tourist trap doesn't dry up..
• UTA? gone. SWA will use MEM instead.
• GPT? hour from MSY.
• AVL? see CRW.
• FNT? Hour and a half to DTW.

[/quote]

I think CLE is going to take a hit on this one too.  If the COA/UAL merger isn't bad enough, the carrier that they were hoping to expand in Cleveland will likely leave I believe.  Air Tran does not operate out of CLE however, they operate out of nearby CAK (Akron/Canton, about 35 miles South).  Air Tran has a decent operation there and it's far cheaper in all aspects (landing fees, gate leases and for customers) to travel out of CAK compared to CLE and there is virtually no delay our of CAK where there is a slight delay in CLE (after all it is a bigger airport).  CAK fits Southwest's business profile better than CLE (they like to fly out of the smaller nearby airports compared to the larger airports) and they would probably be able to expand better at CAK sooner than at CLE (which would be contingent on what the COA merger does).  So, sorry CLE, but I think it's a lose/lose for you with two airlines now.