Southwest Airlines announced yesterday that it will acquire AirTran in a cash plus stock deal.
Here’s what to expect:
1.) Good news for AirTran passengers and travel to/from/through Atlanta in general. Southwest has better service than AirTran, and lower fees (assuming that Southwest keeps the low/no-fee model, see number 4, below). Southwest is not keeping the AirTran brand.
2.) Southwest and AirTran don’t have much route overlap, so the merger in and of itself won’t lead to higher fares. But both airlines offer aggressive airfare sales almost weekly. We’ll see fewer of these, and fares will inch up. Remember, though, that fares can only go so high before consumers stay home, drive, take the BoltBus, or Amtrak. One route that does overlap is Boston to Baltimore, which both airlines fly nonstop for $78 round-trip; but JetBlue flies the route at the same fare, so as long as there are two airlines flying nonstop on the route, prices will stay reasonable. (In fact, Baltimore probably has the most overlapping routes, so we expect fares to go up there.)
3.) More fare pressure if other airlines continue the merger dance. American and US Air must be in panic mode as Southwest continues to grow. What next? An American/US Air marriage? Frontier/Midwest combine with USAir? JetBlue+American? The Southwest/AirTran merger came out of the blue, so anything and everything could be on the table.
4.) This impacts Delta, at least at first, the most. Will Delta eliminate checked bag and ticket change fees on competing routes to/from/through Atlanta to compete with Southwest’s fee model? Or will Southwest add fees? AirTran was a minor thorn in Delta’s side, but Southwest is going be a major thorn. AirTran was not a particularly healthy airline financially, and Southwest is.
5.) Southwest now becomes an international airline, if it keeps AirTran’s routes to Aruba, the Bahamas, etc. It also becomes a multi-aircraft airline, if it keeps AirTran’s Boeing 717’s along with Southwest’s 737 fleet.6.) Silver lining: as with all mergers of this kind, a plus is that if your flight is delayed or canceled you can now be re-routed over a much bigger route structure.
7.) It’s doubtful that Southwest will keep AirTran’s business class cabins, instead moving the airline to Southwest’s one-cabin model. Same for advance seat selection, which AirTran currently offers.
8.) The merger should win speedy Justice Department and DOT approval, since there is virtually no route overlap between the two airlines.
George Hobica is the founder of Airfarewatchdog™, the most inclusive source of airfare deals that have been researched and verified by experts. Airfarewatchdog compares fares from all airlines and includes the increasing number of airline-site-only and promo code fares.
[Flickr photo via gTarded]