Is the AirTran/Southwest merger good or bad for consumers?

Monday, September 27th, 2010 By

southwest airlines, new color scheme for airtran planes

By 2012, all AirTran planes will bear the Southwest Airlines color scheme after a $1.42 billion deal that merges the two largest discount carriers in the U.S. Image: CC compujeramey/Flickr

AirTran has been purchased by Southwest Airlines for $1.42 billion in a deal that merges two of the largest discount airlines in the U.S. southwest’s acquisition of AirTran enables the airline to expand to key eastern hubs and sets it up to compete with major international carriers. The deal caught travel experts off guard. Some are saying that the Southwest/AirTran merger will result in higher ticket prices and fees for passengers, now that competition in the discount airfare market has been reduced. It will also force other airlines to merge in order to compete. However, a definite positive for former AirTran passengers will be Southwest’s policy of no baggage fees,which the airline said it will maintain across the board.

Southwest Airlines unleashed in the east

Southwest Airlines’ purchase of AirTran for 1/42 billion continues a trend of airline consolidation. Delta and Northwest merged in 2008. Continental and United Airlines will merge Oct. 1, creating the largest airline in the world. USA Today reports that the deal gives Southwest a major presence in primary travel hubs such as 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 gets Southwest bump

Dallas-based Southwest Airlines carries more passengers than any other airline in the U.S. AirTran is the eigth-largest U.S. carrier. The Associated Press reports that based 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. Southwest will pay about $670 million with available cash. Southwest will assume $2 billion in AirTran debt. Assuming regulatory and shareholder approval, the deal is expected to close in the first half of 2011. By 2012, all AirTran planes will bear Southwest colors.

Airline mergers: good or bad for consumers?

To consumers, the Southwest/AirTran merger could mean the end of low air fares. The Consumerist reports that passengers benefit when there are more carriers competing for their business. Fewer competitors in the discount realm could mean that Southwest and other airlines have less pressure to keep fares low. George Hobica of Airfarewatchdog told The Consumerist that the Southwest AirTran merger will also lead to more airline consolidation, further reducing competition and consumer choice. Hobica said the outcome will depend on whether Southwest will use the expansion to either improve its ability to profit from low fares, or simply raise prices. Another possible outcome is that a bigger Southwest could force the bigger airlines to compete on its level and lower airfares overall.

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This post has 7 comments

  1. fyest. says:

    Just so you know…SWA mentioned that they will NOT charge for bags! Repeat. NOT charge for bags.

  2. kyle says:

    just had to say this. expect Southwest to move Atlanta operations to Fullton

  3. Alex says:

    I’ve traveled on AirTran and Southwest airlines and found that the customer service on Southwest far exceeds AirTran. I hope that the company culture during the acquisition is not negatively influenced by AirTran. A component of their profits is driven from their strong culture and customer service. I am also not looking forward to Southwest coming to Boston if the fares are going to increase due to less competition. Southwest also plans to keep AirTran’s outrageous bag fee that charges $20 for the first checked bag and $25 for the second. By Southwest charging extra for bags they are going against their original marketing campaign. I don’t feel as though the Southwest acquisition of AirTran will be beneficial to their customers.

  4. free movies to watch says:

    I think this will be a bad thing, plane ticket are so expensive already, to raise it anymore, give us citizen a break!

  5. King Wang says:

    Airline mergers: good or bad for consumers?
    this is one good question.i have the same question .but i know the answer now.

  6. king says:

    Southwest Airlines unleashed in the east,this is good for us. I like to do the business and fly all over the world. many customers ask me to meet them.but it is too far for me.how to do it .

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