Southwest Airlines paid $1.42 billion to merge with AirTran, which is also a large discount airline within the U.S.. Southwest’s acquisition of AirTran enables the airline to increase to key eastern hubs and sets it up to compete with major international carriers. Travel experts were confused when it happened. Some are saying that the Southwest/AirTran combination will result in higher ticket prices and fees for passengers, now that competition in the discount airfare market has been reduced. Competition within the market can be easier for the large business. Smaller corporations will have to merge to compete with Southwest. Southwest promised to keep its policy of no baggage fees which can be good for any AirTran customers.
Southwest Airlines showing up all around the east now
Southwest Airlines spend $1.42 billion buying out AirTran. Nobody was all that surprised by this. Delta and Northwest merged in 2008. October 1 is when Continental and United Airlines will merge. This means they can be the largest airline in the world. New York’s La Guardia and Washington D.C.’s Reagan National will now have Southwest in their travel hubs with this, says USA Today. Delta will be Southwest’s biggest competitor within the world’s busiest airport in Atlanta where it now has access.
Southwest does better with AirTran investment
Dallas-based Southwest Airlines carries more passengers than any other airline in the United States. AirTran is on the list too. It was the eighth largest carrier before it was bought. As outlined by the Associated Press, AirTran’s closing price was $4.55 but then increased 69 percent to be $7.69 with Southwest’s acquisition on Friday. $670 million can be paid with accessible cash by Southwest. Southwest took on more than just a company. It also took $2 billion in debt from AirTran. In the first half of 2011, the deal will be expected to be close. By 2012, all AirTran planes will bear Southwest colors.
Could it be good or bad that airlines merge?
The end of low air fares may be just around the corner with the Southwest/AirTran merger. As outlined by the Consumerist, it is good to have more competition. Without competition, the prices will go up. 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 the Southwest AirTran merger will also lead to more airline consolidation, further reducing competition and consumer choice. Southwest will have to choose whether to just raise its prices or continue to profit off of low fares, claims Hobica. Also, Southwest might just make it harder for other corporations to get business leading them to lower their prices overall.
USA Today
usatoday.com/money/industries/travel/2010-09-27-southwest-airtran-merger_N.htm
Associated Press
google.com/hostednews/ap/article/ALeqM5hFjJQqYUno_x04Nx3mAvf9Na1EwwD9IGC59G0
The Consumerist
consumerist.com/2010/09/what-does-southwest-buying-air-tran-mean-for-consumers.html
