AirTran-Southwest merger: How will it affect customers?

September 27, 2010

Southwest Airlines, the largest carrier at Baltimore-Washington International Thurgood Marshall Airport, announced today that it plans to acquire AirTran Airways. What does this mean for customers and shareholders? Read on:

When is this going to happen?

AirTran stockholders and federal regulators need to approve the deal — and the airlines say it could take months for both to occur. After the merger closes, Southwest said it could then take as long as two years to integrate the airlines and begin operating as one carrier. The airlines expect to be operating as one carrier sometime in 2012.

What if I've booked an upcoming AirTran flight?

"As of today, nothing changes for either company," said Bob Jordan, Southwest's executive vice president of strategy and planning. The airlines will continue to operate separately until the deal is completed, meaning any AirTran flights in the near future will proceed as usual, under AirTran's direction.

What does this mean for ticket prices?

When competition decreases, prices generally rise. And there have been a number of consolidations in the airline industry recently, including Delta-Northwest and United-Continental.

"We're beginning to reach the tipping point for consolidation to have a real impact on airfares for consumers," said Bryan Saltzburg, general manager of TripAdvisor Flights. "Mix this with reduced seat capacity and rising travel demand, and this could be the recipe for higher airfares as we head into the holidays, 2011 and beyond."

However, Southwest said that the two airlines have little overlap when it comes to routes, which means the impact on competition could be minimal.

Does this mean Southwest will fly to more places?

Yes. Southwest says it likes that AirTran flies to many destinations — especially smaller cities — that Southwest currently does not serve. Customers will likely benefit from expanded offerings, though of course Southwest and AirTran will no longer compete in certain markets, which is likely to mean fewer discount fares.

What happens to the AirTran brand?

It will eventually go away. After the merger, the airline will operate as Southwest, and the AirTran brand will not be used. The new airline will use also Southwest's logo and colors.

What about Southwest's Bags Fly Free policy?

Right now, Southwest says it has no plans to change its free-bag policy. It also plans to keep its "open seating" boarding system and single-class cabins. But the airline said it wants to learn from AirTran, a discount airline that flies with business-class seating on every flight and charges for even the first bag checked.

What about my frequent flier miles? Do I need to do anything?

Southwest says it will merge the AirTran A+ Rewards program into its own Rapid Rewards frequent flier program over time. It will notify customers as the process goes forward.

How will this affect BWI?

Southwest is already the busiest airline at BWI, controlling more than half of the market, and AirTran has the second biggest market share. So the merger would cement Southwest's dominance. Together they would handle about 70 percent of passenger traffic.

What will AirTran stockholders get from the deal?

AirTran shareholders will get a combination of cash and Southwest stock in exchange for their shares. The companies estimate the payout will be between $7.25 and $7.75 a share, which represents a significant premium on the airline's current stock price.

How will this affect pet owners who fly AirTran?

Southwest charges a bit more for pets who fly, but not much. According to their websites, AirTran charges $69 each way for small pets who accompany their owners onboard, while Southwest charges $75 each way. Neither airline allows pets as cargo.

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