Southwest Airlines said it is buying AirTran Airways in a $1.4 billion deal that is a combination of cash and Southwest common stock. The agreement has been unanimously approved by the boards of directors of each company, and closing is subject to the approval of AirTran stockholders, receipt of certain regulatory clearances, and fulfillment of customary closing conditions. The two airlines will operate separately until the deal is closed; then Air Tran will be absorbed into the Southwest brand and livery.
Southwest said the acquisition will significantly expand its low-fare service to many more customers in many more domestic markets, creating hundreds of additional low-fare itineraries for the traveling public. Moreover, the expansion of low fares should generate hundreds of millions in annual savings to consumers. Based on an economic analysis by Campbell-Hill Aviation Group, LLP, Southwest’s more expansive low-fare service at Atlanta, alone, has the potential to stimulate more than two million new passengers and more than $200 million in consumer savings, annually. These savings would be created from the new low-fare competition that Southwest would be able to provide as a result of the acquisition, expanding the well-known “Southwest Effect'” of reducing fares and stimulating new passenger traffic wherever it flies.
“Both companies have dedicated people with kindred “warrior spirits, who care about each other, and who care about serving customers,” said Gary Kelly, chairman, president and CEO of Southwest. “We will continue to build upon our outstanding Customer experiences, strong and unique Cultures, and award-winning, safe operations.”
“This agreement is great news for our crew members, our shareholders, our customers and the communities we serve,” said Bob Fornaro, Air Tran’s president and CEO. “Joining Southwest Airlines will give us opportunities to grow, both professionally as individuals and as a group, in ways that simply would not be possible without this agreement.”
AirTran revenues and operating income, excluding special items, for the 12 months ended June 30, 2010, were $2.5 billion and $128 million, respectively. Southwest revenues and operating income, excluding special items, for the 12 months ended June 30, 2010, were $11.2 billion and $843 million, respectively. Net annual synergies are expected to exceed $400 million by 2013.
Based on current operations, the combined airline will have nearly 43,000 employees and serve more than 100 million customers annually from more than 100 different airports in the U.S. and near-international destinations. In addition, the combined carriers’ all-Boeing fleet consisting of 685 active aircraft, including 401 Boeing 737-700s, 173 Boeing 737-300s, 25 Boeing 737-500s, and 86 Boeing 717s, with an average age of approximately 10 years, one of the youngest fleets in the industry.
Southwest also previously announced that it is evaluating the opportunity to introduce the Boeing 737-800 into its domestic network to complement its current fleet, providing opportunities for longer-haul flying and service to high-demand, slot-controlled, or gate-restricted markets. Southwest said its acquisition of AirTran supports its evaluation of the Boeing 737-800.
Until the merger is closed, Southwest and AirTran will continue to operate as independent companies. After the closing, Fornaro will continue to be involved in the integration of the two companies. Southwest plans to integrate AirTran into the Southwest brand by transitioning the AirTran fleet to the Southwest livery, developing a consistent customer experience, and consolidating corporate functions into its Dallas headquarters. Subject to the receipt of necessary approvals,
Southwest’s integration plans include transitioning the operations of the two carriers to a single operating certificate. Plans for existing AirTran facilities will be developed by integration teams and decisions will be announced at appropriate times in the future. The carriers’ frequent-flyer programs will be combined over time, as well. For more information, visit www.airtran.com, www.southwest.com/investor_relations or www.lowfaresfarther.com.