Week 8 Discussion Essay

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Southwest Airlines bought AirTran Airlines for $1.4 billion in 2011 in a “Horizontal Merger”; AirTran stockholders received 0.321 shares of Southwest common stock as well as $3.75 for each share of AirTran stock that they owned.
Southwest Airlines was created in 1971 and is one of the largest low-fare airlines with operating revenues of $9.4 billion in 2013. AirTran Airways was created in 1992 and more of a regional carrier but with a few close international flights. Operating revenues of $1.9 billion in 2010.
Pros:
Southwest expands 25%, reduces costs, fosters efficiency, share prices jump, customers now have no baggage fees or assigned seating and more destination options.

Cons:
Possible negative stock effects based on the merger process, image damage based on the merger process, operating as separate entities.
(Barker 2013)

Southwest’s merger with AirTran is being executed with a well thought out transition plan. Customer-friendly with very minor impact on travelers, unlike what happens in most mergers. The Southwest/AirTran merger is completely unique in how it is proceeding.
What’s unique is that AirTran is disappearing. This isn’t a “merger of equals” as seen with other big airline mergers. This is Southwest taking AirTran and turning its assets into Southwest. Because of that, the transition can occur much more easily.
In 2012, Southwest started slowly canceling AirTran flights and re-creating them as Southwest flights. For example AirTran operated three flights between LA and Atlanta while Southwest had none. Then there were three daily flights on Southwest as well as one single redeye on AirTran. So Southwest replaced the AirTran flights and now has the ability to grow a little as well.
Southwest dramatically reduced the number of AirTran flights the summer of 2012. This allowed the airline to start pulling out airplanes from the AirTran fleet to send them for rework/paint where they’ll come out as Southwest airplanes inside and out. At the same time, crews will begin coming over from AirTran to Southwest. They’ll get training and will be assimilated into the Southwest operation style.
Why could Southwest do this so effortlessly? The other mergers are completely different. Whether it was America West/US Airways, Delta/Northwest, or Continental/United, these were all true mergers in the sense that they took bits and pieces from each other to create the new combined airline. Think about the harmonization of the frequent flier program as just one piece of the pie. There isn’t one airline that stays the same in these mergers, but there is in the Southwest/AirTran merger. AirTran is effectively disappearing and will leave barely a trace, and that allows Southwest to gradually phase it out without making any big changes to the surviving operation along the way.
According to a Southwest spokesperson, “…we haven’t announced or decided on anything concrete that we plan to pull over from AirTran and incorporate into Southwest.” There will be some things behind the scenes that need to come over. For example, Southwest isn’t capable of flying internationally but AirTran can. That is not a customer-facing issue, but it is something Southwest will need to incorporate.
In the meantime, Southwest and AirTran continue to operate separately with Southwest getting bigger and AirTran getting smaller. There are efforts to connect the two systems with code sharing, but Southwest’s technology team is the hold-up. It can’t codeshare yet, despite years of trying. The plan is to have that up and running sometime in the near future, and that will make it easier to transition AirTran out slowly without completely killing the feed in the Atlanta hub.
Southwest is doing what it can to relocate AirTran flights to be near Southwest in airports around the US so they can operate together, even as they continue to operate as two separate airlines (Cranky Flier 2012).

Southwest Airlines today began selling seats on its first-ever international
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