On Southwest’s Planned Acquisition of Airtran

I won’t have a lot to say on the announcement of Southwest’s planned acquisition of Airtran. I’ll leave that to the Cranky Fliers and Dan Webbs of the world, it’s a little outside of my area of interest — I try not to fly Southwest or Airtran and have little interest in their mileage programs.

Still, it’s hard not to see this as a bg deal. This is obviously bigger than Southwest’s previous acquisitions.. Morris Air, run by Dave Neeleman who would go on to found JetBlue once his non-compete was up, and Muse Air which was founded by Southwest’s original President Lamar Muse and his son (and dubbed ‘revenge air’ after Muse’s ouster of Southwest and attempts to compete across Southwest’s key routes).

One expects Airtran to begin aligning policies with Southwest once the deal is approved. So Airtran’s baggage fees will go away. It’ll also raise Airtran’s costs to Southwest levels, which is good for their competitors. Though this eliminates a strong competitor in the ‘low cost carrier’ segment it will be hard for a Justice Department that’s allowing United and Continental to merge to block Southwest and Airtran.

In the end though I see this as a signal that Southwest isn’t Southwest anymore, that they don’t see the opportunities out there for strong organic growth within their business model. They tried to acquire Frontier and that failed, but it clearly wasn’t a one-off. This deal says it’s a conscious strategy to grow by acquisition and with a carrier whose low cost model is different (more hub-based than point-to-point) and with a different culture.

Frequent flyer perspective: A larger Southwest makes it an even bigger deal that Southwest is planning to relaunch their Rapid Rewards frequent flyer program in 2011, since the carrier itself will be bigger.

Otherwise, one less low cost carrier that I am choosing not to fly if I can avoid it but putting pricing pressure on the carriers that I do fly.

A big story for the airline industry, ho hum news for me.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. This has been a long time coming, and was an inevitable outcome of the disposition of Frontier. FL is a great fit for WN, both focusing on 73G, and the excellent financials of FL. I also think it may necessitate the DL/AS merger (if it wasn’t already necessary)…

  2. “I also think it may necessitate the DL/AS merger (if it wasn’t already necessary)…”

    It’s not necessary. As they say: why buy a cow when milk is free? DL gets most everything they want from an AS codeshare relationship: access to routes and markets, even elite upgrades, with absolutely ZERO of the headaches of a merger (combining workforces and so on).

    The problem with a DL/AS merger is a bunch of AS’s revenue goes out the window once that happens: all the AA codesharing (AA isn’t going to want to hand DL any of their money). It also increases DL’s costs to bring AS into their payscales and so on, and historically, DL completely frittered away a lot of the routes AS runs today (LAX-SEA, SEA-ANC, and so on- everything not based out of SLC) they inherited as part of the WA merger. DL also failed miserably at their last tries to run West Coast hubs (PDX and then LAX).

    I bet WN would be thrilled to see DL and AS merge, though: they’d walk in and start pushing hard at PDX and SEA, maybe even try going into ANC. And I’m sure that within 5 years DL will do what legacy carriers always do on the West Coast- surrender market share to WN when they can’t run a north-south network from hubs and corporate HQs 2000 miles away. We’ve seen it in CA time and time again. Don’t see how it’s going to be any different this time.

  3. I think you hit the nail on the head when you said Southwest isn’t Southwest anymore.

    Ironically, I left Southwest years ago and began using Airtran instead. I loved the business class seating. The business class seats will simply vanish with the new Southwest (they already said so). This merger was bad news for me.

    So I’m stuck. Airtran sold me out. There really is no decent low-cost airline that even has a business class. Who will I make the jump to? Any suggestions?

Leave a Reply

Your email address will not be published.