Monday, September 27, 2010

Southwest to buy Air-Tran - UPDATED

The AP reports that Southwest Airlines has bought Air-Tran for $1.4 billion dollars.

DALLAS — Southwest Airlines is buying AirTran for about $1.4 billion as it seeks entry into a number of smaller markets.
The announcement comes about a week after Continental Airlines and UAL Corp. combined amid an industrywide consolidation.
The companies said Monday that the new Southwest-Airtran operation would operate from more than 100 different airports and serve more than 100 million customers.
The deal is worth approximately $3.4 billion including AirTran's debt. It will pay about $670 million with available cash.
Southwest Airlines Co. gets more exposure to existing markets like New York and Boston and it can get into smaller markets it doesn't already serve.
Shares of AirTran Holdings Inc. rose nearly 4 percent to $4.55 in premarket trading.
Overweight people wearing rude tshirts or skimpy clothes will soon have fewer flying options, now that Southwest Airlines is buying Air-Tran. The deal was announced this morning and comes a week after Continental and United Airlines merged. Southwest will get more access to places like New York, Boston, Baltimore, Washington, and expand into places like Atlanta for the first time.  The bright side of this to me is that Southwest will now fly to Memphis, at least until they decide not to.

Spirit is expected to respond by merging with an ICBM manufacturer to develop flights that will just jam all the passengers in a tube and rocket them across the country.

UPDATE:  Southwest does not have a habit of flying to under served cities from small markets just once a day or even 4 or 5 times a week.  It just costs them too much to operate these routes.  I'd expect these cities to be axed quickly once the merger happens.  I'm thinking places like Allentown, Harrisburg, Flint, and Key West are going to be cut, simply because Air Tran has lower overhead for ground workers.  One flight a day is not economical to maintain a crew on the ground and all the support equipment.   I'm thinking more that this is a grab at certain markets that Southwest covets like LGA, DCA, international routes to Mexico and the Caribbean.  More than likely there will be carnage on the small cities, and ones that Southwest never wanted to serve (like Memphis).

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