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Southwest Airlines and AirTran Airways Merger

Southwest Airlines to Aquire AirTran

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This impending merger seemed to come out of nowhere and literally on the heels of the United/Continental Airlines merger being a done deal. As the industry continues to consolidate, what makes this merger particularly unique is it is one that involves two low cost airlines - giant Southwest Airlines, and much smaller Air Tran Airways.

1. Which Airlines Are Involved?

Southwest Airlines is in the process of acquiring AirTran Airways. The giant low cost carrier launched a website describing the merger, possible implications for passengers of both airlines, and FAQs and route maps.

2. How is the Acquisiton of AirTran Happening?

At the end of September, 2010, an agreement for Southwest Airlines to acquire AirTran Airways was approved by the boards of directors of each company.

After wading through the Terms of the agreement, it seems that "each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines' common stock...AirTran stockholders would receive approximately 57 million shares of Southwest Airlines common stock, which represents approximately seven percent of the pro forma Southwest Airlines common shares outstanding, as well as approximately $670 million in cash."

There are regulatory conditions that will also need to be approved for the merger to complete.

3. What Are Some of the Changes Happening to Merge the Airlines?

  • Until completion of the deal, Southwest Airlines and AirTran will continue to operate as separate airlines.
  • The AirTran fleet will transition to Southwest Airlines' livery.
  • Dallas will be the headquarters (current headquarters of Southwest) for the merged airline.
  • The frequent-flyer programs will be combined.

4. What About Baggage Fees?

And now, down to the real nitty-gritty - will there be fees to check luggage?

From Southwest Airlines - "As you know, Southwest does not charge a bag fee for the 1st or 2nd checked bag. AirTran charges $20 for the 1st checked bag, $25 for the 2nd, and $50 for additional bags. Upon full integration, it is our intent to have a consistent product offering. It is our intent that the bag fees would not be part of that product."

5. What Will Happen With Change Fees?

From Southwest Airlines - "As you know, Southwest does not charge change fees. AirTran charges a $75 for any changes made after purchase. Upon full integration, it is our intent to have a consistent product offering. It is our intent that the change fees would not be part of that product."

6. Will There Be Any Changes to Seating Policies?

From Southwest Airlines - "As you know, Southwest does not assign seats. AirTran does offer seat assignments including Business class and Coach. Upon full integration, it is our intent to have a consistent product offering. It is our intent that seat assignments would not be part of that product."

7. What Will the New Airline Look Like...in Numbers?

Based on current numbers between the two airlines, this is what the combined airline may initially look like:

  • Almost 43,000 employees
  • More than 100 million customers annually
  • Over 100 different airports in the US and international destinations served
  • 685 active aircraft including :
  • 401 Boeing 737-700s
  • 173 Boeing 737-300s
  • 25 Boeing 737-500s
  • 86 Boeing 717s
  • Fleet age of approximately 10 years

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