Southwest: Merger About Growth, Not Consolidation

Want to receive stories like this every day? Subscribe to our free Deal Alert newsletter!

Some mergers, such as the United-Continental deal, are about two large, cumbersome airlines combining into a smaller, more efficient, and highly profitable powerhouse. Southwest, which moved to acquire AirTran this fall, insists its deal aims to accomplish the opposite.

“[Usually] you take Airline A plus Airline B, and one plus one is less than two,” CEO Gary Kelly said, according to the Dallas Morning News. “That’s not what we’re contemplating here with AirTran.”

Instead, the AirTran acquisition is all about growth—new routes, new planes and types of planes, new international destinations (Southwest’s first), and, yes, new profits.

“AirTran brings significant profit synergies simply by virtue of connecting our two route networks,” Kelly said. “This has the effect of creating hundreds of new itineraries. It may be a thousand new itineraries when we actually get around to doing that.” Just linking the two airlines’ operations alone, with no investment in additional aircraft, will dramatically reshape Southwest’s route map and financial picture. Atlanta, currently a major hub, will instantly become one of Southwest’s busiest destinations. Overnight, Southwest will add a half dozen Caribbean and Mexico cities to its network.

Once the merger completes, however, Kelly says these new markets are primed for growth. “Most of those new markets are not fully developed and are in need of further expansion,” Kelly said. “I would point to Atlanta in particular. This creates for us immediately significant growth opportunities.”

Further growth may come in 2012, when Southwest begins adding larger versions of Boeing’s 737 to its fleet. The 737-800 model carries more carriers more passengers, and will be ETOPS configured, which will allow Southwest to add distant over-water destinations such as Hawaii to its route network

Readers, how do think the Southwest-AirTran deal will affect travel? Will it be good for Southwest customers?