Discount Air carriers within the United States are being merged together. This is because AirTran was bought out by Southwest Airlines for $1.42 billion. Southwest is now more within the game with all the access it has to the east side of the country. It also can play internationally with the competition. The deal caught travel experts off guard. Some are saying 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. Other airlines will only be able to compete by combining themselves. The policy for no baggage fees is something Southwest is known for. Luckily for any riders of AirTran, the policy could be kept no matter what happens.
Southwest Airlines unleashed in the east
Southwest Airlines’ purchase of AirTran for $1.42 billion continues a trend of airline consolidation. In 2008 Delta merged with Northwest. October 1 is when Continental and United Airlines will combine. This means they can be the largest airline within 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. 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 stock greatly rises with AirTran
Dallas-based Southwest Airlines carries more passengers than any airline in the United States of America. AirTran is the eighth-largest U.S. carrier. Friday’s closing prices for AirTran were shown to by $4.55. After Southwest bought them out, stock options went up, reports the Associated Press, to $7.69 per AirTran share which is a 69 percent increase. Southwest has plans to pay with money. It has in available cash $670 million. Southwest took on more than just a business. It also took $2 billion in debt from AirTran. Assuming regulatory and shareholder approval, the deal is expected to close in the first half of 2011. By 2012, all AirTran planes will bear Southwest colors.
Airline combinations: good or bad for consumers?
The end of low air fares may be just around the corner with the Southwest/AirTran combination. As outlined by the Consumerist, it is good to have more competition. Without competition, the prices will go up. Fewer competitors within 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 could have to determine whether to just raise its prices or continue to profit off of low fares, claims Hobica. Other larger companies may be forced into lowering their prices. This would only be if Southwest becomes a competitor to them.
Further reading
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
