27
Sep
2010
Posted by: Mark Ashley
As you’ve probably heard by now, Southwest Airlines has made a $1.4 billion cash-and-stock offer to buy AirTran. (The rumors that Southwest would buy SunCountry didn’t pan out.) I’ll leave the financial analysis to others. The market went nutso today though, with Southwest going up 8.7% and AirTran going up a whopping 61.3%.
So what does this mean to you, whether you fly Southwest, AirTran, or neither?
- More open seating, more coach, fewer first class seats, and tougher upgrades elsewhere?
Southwest seating rules will prevail, which means a victory for the open-seating model. AirTran will lose assigned seats and its first class. Those first-class seats were rather inexpensive, compared to other airlines’ products, which will disappoint some premium travelers out there. And the network effects of that loss of first-class seats? Demand for first-class fares on other carriers might go up as a result, making your upgrades harder to clear. Hey, it’s a theory. - Bag fees take a well-deserved beating.
Southwest has vowed to remove checked baggage fees on AirTran, post-merger. Spreading the gospel of no- or low-fee travel is a good thing. (And given Southwest’s recent advertising of its baggage policy, I think they’re committed to it.) This won’t kill the concept of bag fees, but it might make them less socially acceptable. - This is about Atlanta and Washington.
When organic growth slows, or the barriers to entry in a new market are great, buying a local rival becomes more attractive, and that’s what happened here. AirTran has been successfully carving out a piece of the Atlanta market from Delta for the past few years. For Southwest fliers, you’ll (finally) be able to fly to Atlanta without having to change to a different airline. This deal also brings Southwest to Washington-Reagan National. If you fly into either of those cities, you’ll see a bit of fanfare over this deal, and likely some fare sales to kick things off. You may see counteroffers, like double-mileage promotions from Delta in ATL, US Airways at DCA, etc. But over the longer term… - Fares? A wash, for now.
Yes, there’s a “Southwest effect” on fares, but it’s particularly pronounced when Southwest enters a new market, bringing low-fare competition to the legacy airlines. In this instance, AirTran has already warmed up the market. So for now, we shouldn’t expect any macro-level discounting. If anything, we might see fares go up in the long term if Southwest retires some of the AirTran capacity. But that’s not going to happen overnight. - This takes Southwest international, but it’s not a big deal.
Yes, it’s international, but it’s not like this takes Southwest to Tokyo and Sydney. If Southwest keeps the AirTran routes, you’ll be able to fly Southwest to Cancun, Montego Bay, and Punta Cana. For those who have avoided Southwest because their travel plans (and frequent flier redemption goals) take them to other hemispheres, you’ll still be out of luck, for now.
Any other thoughts on Southwest and AirTran? Any predictions on how this will affect your travels, on a post-merger Southwest or anywhere else? Hit the comments!
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September 28th, 2010 at 12:39 am
So…Do you think Southwest will expand or discontinue in-flight internet? Satellite radio? Or will they go with just the rapping flight attendants who occasionally give you a hug? Should be an interesting one to watch.
September 28th, 2010 at 6:52 am
Jake, I think that inflight internet is here to stay. The question that remains is whether there will be one provider or two, as the airlines merge. AirTran has made a real commitment to it, using the air-to-ground solution from Aircell/Gogo, while Southwest is slowly adding the satellite-based Row44 product. For a while, you’d likely see both in the fleet, just not both on the same plane…
September 28th, 2010 at 8:24 am
But will they bring any flights to GSO?! I’m tired of driving to CLT and RDU!
September 28th, 2010 at 8:59 am
Very nice breakdown from a customer perspective, Mark. Well done, indeed. Long time lurker, first time commenter.
September 28th, 2010 at 1:21 pm
Wow, southwest just aligned themselves perfectly for a takeover of Delta in a couple years…
September 29th, 2010 at 1:35 pm
So, I get to trade crappy customer service for bus-like open seating on flights to DC. I can’t wait…
September 29th, 2010 at 5:46 pm
I’m bummed about this.
We have tix with Air Tran for a charter with Applevacations for January 2011.
We paid for the upgrade to the bigger seats and extra service with Air Tran.
Now we’ll be stuck with the cattle call crap of SW?
grrrrr….
What a way to ruin the start of what would have been a relaxing vacation.
At least I haven’t paid the final balance yet, and will NOT be paying for the upgrade I booked if I’m not going to get assigned seat in front of plane in bigger seats with free drinks and snacks as Air Tran provides.
September 29th, 2010 at 7:33 pm
MLE,
If you’re traveling January 2011, then you’re unlikely to be affected yet. The merger will need to undergo FTC review, which isn’t instantaneous.
September 30th, 2010 at 12:09 pm
Thanks Mark. I was unaware that Southwest even had in-flight internet yet. (Doh!) Goes to show how often I fly them (=never).
October 5th, 2010 at 2:53 pm
ugh…I don’t fly SW and I’m not starting now. I’m an AA fan all the way. It doesn’t matter how many one way flights you get on SW…those free tickets will never take you to London in First Class — or on the wing…they’ll never go there. And SW just doesn’t fly to half the places I want to go — even with the AirTran merger. And I’d rather chew my arm off than have to endure the SW flight crews and their fake happiness. It’s just gross.
In addition, SW may not charge for bags but they charge fees more than United, Continental and US Airways — they’re just hidden better.
October 5th, 2010 at 2:54 pm
I wish American would buy Southwest and put an end to it already!!
October 7th, 2010 at 10:31 pm
hey chris you sound stupid…typical pain in the butt passenger, im glad i wouldnt have to deal with you on one of my flights. stay with american, their employees with bad attitudes need you.
October 8th, 2010 at 7:14 am
Let’s cut the insults and play nice, people.
October 19th, 2010 at 10:22 pm
[...] not mine … ? The article’s first answer: AirTran. AirTran? This, assuming that the merger with Southwest will go through. But AirTran does not sell flat-beds. Their “business class” seats are [...]