Two of the largest United States of America discount airlines were merged together when AirTran was bought by Southwest 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. This was something travel experts weren’t expecting. The discount market for flight has just gotten smaller with the Southwest/AirTran merger. Many wonder if ticket prices are going to go up as a result of this. Competition within the market will be easier for the large business. Smaller companies will have to merge to compete with Southwest. The policy for no baggage fees is something Southwest is renowned for. Luckily for any riders of AirTran, the policy could be kept no matter what happens. Article source – Is the AirTran/Southwest merger good or bad for consumers? by Personal Money Store.
The east coast getting some Southwest Airlines
Airlines have been consolidating more often which is why it isn’t that surprising that Southwest Airlines bought AirTran for $1.42 billion. There was a different merge in 2008. Delta and Northwest were merged. Continental and United Airlines can be the largest airline within the world after combining on October 1. 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. Delta could be Southwest’s biggest competitor in the world’s busiest airport in Atlanta where it now has access.
Southwest does better with AirTran stock options
Southwest Airlines is situated in Dallas. Astonishingly, more passengers ride with Southwest in the United States than any airline. AirTran is on the list too. It was the eighth largest carrier before it was bought. 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 accessible money by Southwest. $2 billion in AirTran debt is going straight to Southwest. 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.
Consequences of combining airlines
To customers, the Southwest/AirTran combination could mean the end of low air fares. The competition between companies is what keeps prices low, says the Consumerist. The competition being gone will leave Southwest and other businesses with less pressure. Without the pressure, prices are sure to go up. George Hobica of Airfarewatchdog told The Consumerist the Southwest AirTran merger will also lead to more airline consolidation, further reducing competition and consumer choice. Hobica suggests that there are really only two things Southwest can do. It will either be able to improve its business of making money off of low fares or raise its prices for everyone. Other larger companies may be forced into lowering their prices. This would only be if Southwest becomes a competitor to them.
Additional 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
No related posts.
