Southwest and AirTran: Six Things You Need to Know

By now you’ve read about Southwest’s proposal to acquire AirTran. And you’ve probably even seen at least some writers’ views on what it means to consumers and who “wins” in the deal. Although the situation is fluid, I can already draw up a list of the six important things you need to know.

1. The deal is an acquisition, not a merger. Southwest would wind up running the show, and the show would be operated in accordance with Southwest’s policies. Basically, Southwest would add a huge market position in many areas where it is currently the weakest—a market position that would take many years to develop any other way. Acquisition would give Southwest its first entry into Atlanta and Charlotte, a strong “hub” presence in those two cities, near-dominant positions at Baltimore and Milwaukee, and established routes into the Caribbean—a jumpstart into Southwest’s announced intention to expand internationally. As with its earlier acquisition of Morris Air, Southwest would be buying a going concern, however, it would not be buying into the ongoing problems of a troubled line about to fail—as it would have been with the other rumored acquisition, Sun Country. {{{SmarterBuddy|align=left}}}2. The acquisition would extend several key customer-friendly Southwest features to former AirTran services:

• The “bags fly free” policy, which seems to be helping Southwest increase its market share and which Southwest says it has no plans to alter.
• No fees for phone reservations, ticket change, and same-day flight changes.
• Published senior fares, which although not the lowest available, are useful for late bookings.
• Improved legroom for coach passengers in former AirTran 717s, if Southwest decides to keep them.

3. But former AirTran customers would lose out as Southwest eliminates some former AirTran programs and policies:

• Relatively inexpensive business-class seating. The acquisition would leave hated Spirit and tiny (and bankrupt) Sun Country as the only two airlines in North America offering relatively inexpensive genuine premium seating at semi-reasonable prices.
• “AirTran U” special standby fares for youth ages 18 to 22.
• Advance seat assignments—for a fee, of course, but a better option than Southwest’s fee for an early boarding group.
• Some of the routes currently flown for AirTran by SkyWest, unless they can support flights with mainline airplanes.

All in all, most former AirTran customers would gain more than they’d lose. But the losses would be significant for some.

4. The acquisition will maybe lead to higher fares, or maybe lower fares, or maybe about the same fares. This is one topic on which the industry’s leading mavens disagree, and I can’t say I have the “answer,” either. Overall, I tend to believe that reduced competition usually leads to higher fares, but I also know that Southwest likes to keep fares low regardless of competition. We’ll just have to see.

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5. The acquisition is not a done deal yet. Unlike the case of Continental with United, this one was not pre-sold to the important labor unions at either line nor, as far as I can tell, was it run past either the Justice or Transportation Department.

• Integrating union matters—especially pilot seniority lists—has derailed or crippled more than one airline combination, and there may also be some problems with mechanics and flight attendants. This is not to say labor problems will undo the deal, but they might, or at least delay it for several years.
• The acquisition also raises antitrust issues. If carried out, the resultant Southwest would enjoy a huge share of the low-cost airline market in the East and South—maybe enough to require some divestitures or other concessions. Congress, too, may weigh in on the issues.

Still, as a business plan, an acquisition makes good sense. That may be enough, in the end, to push it through to completion.

6. And no matter what, not much will happen for at least a year, as the people involved settle the vexing questions that need to be settled.

Your Turn

How do you feel about the Southwest’s acquisition of AirTran? Share your thoughts by adding a comment below!