Two of the largest United States of America discount airlines were merged together when AirTran was bought by Southwest for $1.42 billion. Southwest’s acquisition of AirTran enables the airline to expand to key eastern hubs and sets it up to compete with major international carriers. Travel experts were confused when it happened. The discount market for flight has just gotten smaller with the Southwest/AirTran merger. Numerous are wondering if ticket prices will go up as a result of this. Other airlines will only be able to compete by merging themselves. AirTran customers should be quite happy to know that Southwest plans on keeping its policy of having no baggage fees.
East now experiencing much more of Southwest Airlines
Southwest Airlines spend $1.42 billion purchasing out AirTran. Nobody was all that amazed by this. There was a different merge in 2008. Delta and Northwest were merged. October 1 is when Continental and United Air carriers will combine. This means they can be the largest airline in the world. USA Today reports that the deal gives Southwest a major presence in primary travel hubs for instance New York’s La Guardia and Washington, D.C.’s Reagan National. Access was given to Southwest in Atlanta which is a world’s busiest passenger airport. This is where Southwest and Delta will start to battle.
Southwest does better with AirTran investment
Within the United States of America, there is not any airline that beats out Dallas-based Southwest Airlines for carrying more passengers. Within the United States, AirTran has been rated as the eighth largest carrier of passengers. The Associated Press reports that depending on Southwest’s closing share price on Friday, Southwest’s acquisition is worth $7.69 per AirTran share–a 69 percent premium over AirTran’s closing price of $4.55. $670 million can be paid with available money by Southwest. $2 billion in AirTran debt is going straight to Southwest. Assuming regulatory and shareholder approval, the deal is expected to close within the first half of 2011. All AirTran planes can have been changed to Southwest by 2012.
Will customers do better or worse with combining air carriers
The end of low air fares may be just around the corner with the Southwest/AirTran merger. The Consumerist reports that passengers benefit when there are more carriers competing for their business. There is not as much pressure to keep flights at low prices if there is not competition within the discount realm. 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 can have to choose whether to just raise its prices or continue to profit off of low fares, states 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
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