We are officially declaring 2010 the year of the airline merger: In January, Delta finished folding Northwest flights into its system; in May, United and Continental announced their merger, which passed antitrust muster in August; and today, Southwest unveiled plans to scoop up Orlando-based AirTran for a cool $1.4 billion in a cash-and-stock deal.
The agreement is big news for low-cost carrier Southwest, as it will not only give the airline landing strips in the Caribbean and Mexico (the carriers first international destinations), but also bolster service in several key domestic markets specifically Atlanta, D.C. (Reagan National), New York (LaGuardia), and Boston. The deal also conveniently arrives about a month after Southwest intercepted 18 slots at Newark Liberty International Airport from Continental, which was forced to lease the take-off and landing strips as part of the Department of Justices antitrust clearance.
The two carriers will operate separately until the acquisition clears approval hurdles from both companies shareholders and U.S. regulators. Once the deal gets the anticipated green light, however, expect Southwest to fully swallow AirTran. Plans to combine the two frequent-flyer programs, give AirTrans 138 planes makeovers, consolidate headquarters in Dallas, and transition to a Single Operating Certificate are already in the works.
As with any merger, the concern for flyers is that as competition drops, fares will increase, even among the lowest tier of budget carriers. Although this issue could crop up, were most curious to see how Southwest transitions some of its budget trademarks, like offering open, all-coach seating and allowing passengers two free checked bags. Fingers crossed that Southwests generous luggage policy usurps AirTrans fee scale, which currently charges $20 for the first piece and $25 for the second.