Southwest Airlines paid $1.42 billion to merge with AirTran, which is also a large discount airline in the U.S.. Southwest could be able to compete with international carriers with the expansion that also gives it access to key eastern hubs. Travel experts were confused when it happened. Some say that fees because of the Southwest/AirTran merger can be going up without as much competition within the discount market. Unless other air carriers combine, there can be a lot less competition as well. Southwest promised to keep its policy of no baggage fees which can be good for any AirTran customers.
The east coast getting some Southwest Airlines
Southwest Airlines’ purchase of AirTran for $1.42 billion continues a trend of airline consolidation. There was a different merge in 2008. Delta and Northwest were merged. Continental and United Air carriers will be the largest airline within the world after merging on October 1. USA Today reports that the deal gives Southwest a major presence in primary travel hubs for instance New York’s La Guardia and Washington, D.C.’s Reagan National. Southwest now has a foothold in Atlanta, the world’s busiest passenger airport, where it will compete with Delta in its backyard.
AirTran stock options gets Southwest bump
Southwest Airlines is based in Dallas. Astonishingly, more passengers ride with Southwest in the United States of America than any airline. AirTran is on the list too. It was the eighth largest carrier before it was bought. The Associated Press reports that depending on Southwest’s closing share price on Friday, Southwest’s acquisition is worth $7.69 per AirTran share–a 69 percent premium over AirTran’s closing price of $4.55. $670 million could be paid with accessible money by Southwest. Southwest took on more than just a company. It also took $2 billion in debt from AirTran. The deal should be closing fairly soon. In fact, by the first half of 2011, it should be closed. There can be one more change by 2012. AirTran planes will all get a paint job to be Southwest planes.
Will consumers fare better or worse with merging airlines
The merging of Southwest and AirTran could be bad. This might mean low air fares could disappear. The Consumerist reports that passengers benefit when you will find more carriers competing for their business. There is not as much pressure to keep flights at low prices if there is not competition in the discount realm. George Hobica of Airfarewatchdog told The Consumerist the Southwest AirTran merger will even lead to more airline consolidation, further reducing competition and consumer choice. Southwest can have to choose whether to just raise its prices or continue to profit off of low fares, says Hobica. Other larger companies may be forced into lowering their prices. This would only be if Southwest becomes a competitor to them.
Discover more information on this subject
USA Today
usatoday.com/money/industries/travel/2010-09-27-southwest-airtran-merger_N.htm
Associated Press
google.com/hostednews/ap/article/ALeqM5hFjJQqYUno_x04Nx3mAvf9Na1EwwD9IGC59G0
The Consumerist
consumerist.com/2010/09/what-does-southwest-buying-air-tran-mean-for-consumers.html
