Southwest Airlines announces acquisition of AirTran, its biggest deal ever
Low-fare pioneer Southwest Airlines disclosed this morning that it has reached an agreement to acquire AirTran, a mostly regional airline based in Orlando, Florida. If the $1.4 billion deal is approved, it will be the largest acquisition in Southwest's history, and will allow Southwest to better compete with the older "legacy" carriers, particularly Delta, American, and United, in the eastern regions of the country.
AirTran serves a total of thirty eight cities that Southwest does not serve, and Southwest serves thirty seven cities that AirTran does not, so the merger will significantly expand Southwest's presence if it goes through.
Most notably, Southwest will be able to serve Atlanta, the largest American city that it currently does not fly to. AirTran has a major hub at Atlanta, offering nonstop flights to many other cities in the northeast, southeast, and mid-Atlantic states out of Hartsfield-Jackson International Airport.
Southwest has set up a website touting the virtues of the deal. The website doesn't mention that AirTran, which was originally born in 1993 as ValuJet, has a very rocky and troubled history. ValuJet's first few years of existence were filled with accidents, oversights, and safety violations due to corner-cutting.
The airline's problems eventually culminated in disaster.
Three years after it was founded, ValuJet suffered a near fatal blow when one of its flights crashed into the Florida Everglades as a result of a fire in the cargo hold which was entirely preventable.
One hundred and ten people were killed.
ValuJet's reputation was so damaged by the disaster that it merged with a smaller competitor: AirTran. ValuJet adopted the AirTran name, even though it was the nominal survivor of the deal, because it wanted to remake itself. There have been two notable incidents since the Flight 592 disaster. Both occurred in 1998; neither incident resulted in a fatality.
Today's AirTran is obviously run by more competent people, but context is important, which is why I mention the history. Had the FAA gone ahead and permanently grounded ValuJet in 1996 — like it considered doing — it might have gone out of business and never merged with AirTran.
Southwest will have some strategic decisions to make as a result of the merger. It will have to decide whether to serve all of the markets that AirTran currently servies. It will have to decide if it wants to continue offering international service to Mexico and the Caribbean, as AirTran does today. Southwest will also have to figure out how to integrate AirTran's fleet. Like Southwest, AirTran flies an all-Boeing fleet, but several dozen of its aircraft are 717s, not 737s. Production on the 717 (originally the MD-95, itself a derivative of the DC-9) ended in 2006, so it is likely the 717s will be gradually phased out over time.
The two airlines expect to be fully integrated within two years.
AirTran serves a total of thirty eight cities that Southwest does not serve, and Southwest serves thirty seven cities that AirTran does not, so the merger will significantly expand Southwest's presence if it goes through.
Most notably, Southwest will be able to serve Atlanta, the largest American city that it currently does not fly to. AirTran has a major hub at Atlanta, offering nonstop flights to many other cities in the northeast, southeast, and mid-Atlantic states out of Hartsfield-Jackson International Airport.
Southwest has set up a website touting the virtues of the deal. The website doesn't mention that AirTran, which was originally born in 1993 as ValuJet, has a very rocky and troubled history. ValuJet's first few years of existence were filled with accidents, oversights, and safety violations due to corner-cutting.
The airline's problems eventually culminated in disaster.
Three years after it was founded, ValuJet suffered a near fatal blow when one of its flights crashed into the Florida Everglades as a result of a fire in the cargo hold which was entirely preventable.
One hundred and ten people were killed.
ValuJet's reputation was so damaged by the disaster that it merged with a smaller competitor: AirTran. ValuJet adopted the AirTran name, even though it was the nominal survivor of the deal, because it wanted to remake itself. There have been two notable incidents since the Flight 592 disaster. Both occurred in 1998; neither incident resulted in a fatality.
Today's AirTran is obviously run by more competent people, but context is important, which is why I mention the history. Had the FAA gone ahead and permanently grounded ValuJet in 1996 — like it considered doing — it might have gone out of business and never merged with AirTran.
Southwest will have some strategic decisions to make as a result of the merger. It will have to decide whether to serve all of the markets that AirTran currently servies. It will have to decide if it wants to continue offering international service to Mexico and the Caribbean, as AirTran does today. Southwest will also have to figure out how to integrate AirTran's fleet. Like Southwest, AirTran flies an all-Boeing fleet, but several dozen of its aircraft are 717s, not 737s. Production on the 717 (originally the MD-95, itself a derivative of the DC-9) ended in 2006, so it is likely the 717s will be gradually phased out over time.
The two airlines expect to be fully integrated within two years.
# Posted by Andrew : 11:10 AM
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