Southwest's Latest Moves and What They May Mean for Their Passengers

Southwest announced in September that they are in the process of acquiring AirTran. Even though both airlines operate in the low cost realm of the airline industry and both fly in the US, they are very different companies and their operations are not complementary.

Southwest has open seating with no seat assignments, has no separate classes of seating, doesn't charge for the first two checked bags, flies only Boeing 737s, offers ticketing only through their company, tends to fly mainly from origin to destination with minimal plane changes and doesn't fly outside the lower 48 or as a lot us know it as the continental US.

On the other hand, AirTran charges for their checked luggage, has a business class as well as economy, flies 717s along with 737s, flies throughout the continental US and into Mexico and the Caribbean, their tickets are available on their website as well as through the global network and flies the typical route from origin to hub before rerouting passengers to their destination with a possible multi-plane change.

Southwest is well known for doing things their way and not wanting to go out of the continental US. When they acquired ATA in 2005, giving them the opportunity to move to Chicago's Midway Airport, they got rid of the ATA
Hawaiian routes and have not gone into Mexico or Canada.

According to their CEO, Gary Kelly, this current merger is about moving into Atlanta. Southwest also plans to use this opportunity to grow its share in markets it's already in along with opening doors into new areas such as Baltimore/Washington, New York, Boston, Washington DC, Mexico and the Caribbean.

It will be interesting to see what happens since Atlanta is a major hub destination for very confusing multi-plane transfers.

There are two divergent opinions on what the outcome will be.

On the one hand, both Delta's CEO Richard Anderson and JP Morgan's Jamie Baker think that AirTran's lower ticket prices will be raised to Southwest levels making it more competitive for Delta since Southwest doesn't offer what AirTran offers which is similar to what Delta offers but at a lower price.

Delta is presumably counting on Southwest converting AirTran's routes to Southwest's one-type plane fleet and one class cabins and thereby giving Delta the opportunity to snap up AirTran's business class travelers in the Atlanta area.

On the other hand, According to Robert Herbst an airline analyst in St Louis, Southwest's acquisition of AirTran will be eliminating "Southwest's biggest low-cost rival". He sees AirTran as being what Southwest was around fifteen years ago. He views this move as a financially positive move for Southwest and as being a good thing for the entire airline industry as a whole.

In time, we will see which way this will go. But bear in mind, Southwest, since their inception in 1971, has consistently made money every year, has not had major labor disputes with their employees and has always done things their own way. They have always bucked the trend of other carriers and have been very successful at what they do while being careful in their choices and flying a lot of repeat customers year after year.

So, as I said, this will be interesting. But for myself and a lot of other repeat customers, this will be another opportunity for those of us who don't fly in the Business Class to find even more routes to fly Southwest instead of all of the other airlines who have gone crazy with their multiplying added fees.

Sources:

http://www.portfolio.com/business-travel/2010/09/29/risk-averse-southwest-makes-risky-move-with-airtran-merger#ixzz13Vtr7Wzi

http://www.businesstravelnews.com/Business-Travel/Airline-News/Articles/Delta-Execs-See-Opportunity-In-Southwest,-AirTran-Merger/

http://www.bizjournals.com/stlouis/stories/2010/09/27/daily1.html