Merger of Southwest Airlines and Air Tran Airways - Case Study Example

Merger of Southwest Airlines and Air Tran Airways I. Brief of the merge.  The merger between Southwest Airlines was initiated by Southwest Airlines when it first announced the acquisition of AirTran Airways on September 27, 2010. The acquisition was approved by the Department of Justice on May 27, 2010 and was completed on May 2, 2011 after the purchase of AirTrans Holdings Inc.’s common stock and operating assets. The acquisition value of AirTran Airways by Southwest Airlines was estimated at $3.2 bn. By January 26, 2013 codesharing has already begun and this allowed the two airlines to share itineraries. It is expected that by 2015, the more dominant brand in the merger which is Southwest Airlines will be adopted as the common brand thus removing the Air Tran brand from the merger with its operation being absorbed by Southwest. II. Introduce the companies involve Southwest Airlines Southwest Airlines is the world’s largest carrier that caters to the lower end segment of the aviation industry and services to 79 destinations in 39 states in the United States. It is also the biggest operator of Boeing 737 worldwide with over 550 planes in service. It employs more than 46,000 employees and manages more than 3,400 flights a day. Air Tran Airways Airtran Airways was founded by Airtran Corporation which operated as Northwest Airlink carrier in Minneapolis and Detroit which later purchase Conquest Sun. The company grew and acquired 11 Boeing 737’s and served 24 cities in the East and Midwest region catering to the lower segment of the market. It was later spun off by Mesaba and formed its holding company Airways Corporation which was later acquired by ValuJet Inc. and was later renamed to its AirTran Holdings. The name AirTran Airways was retained after the merger with ValuJet Inc. Before the merger with Southwest Airlines, AirTranAirways served more than 70 cities coast to coast. It also cater to the Carribean and Mexico market and flew 700 flights per day with over 8,500 crew catering to almost 25 passengers per year (AirTran Airways). III. Identify the period the company went through the merge and reasons for the merge. give figures if possible.  The merger between Air Tran Airways and Southwestern airline is more of a takeover of Southwestern to Air Tran to expand the coverage of Southwester Airlines. By acquiring Air Tran, Southwest Airline would be able to cover flights that were not previously available to Southwestern Airline such as Atlanta - Hartsfield route that is also the world’s largest airport. Having Air Trans Airways would enable Southwest Airlines to have an access to Air Tran’s Atlanta hub and therefore a beachhead in the market that it covers (CBS News). Services previously unique to Air Tran will now be available to Soutwest Airline among those are flights in Dayton, Akron-Canton, and Washington National. In effect, the acquisition would give Southwest Airlines “a leg up in the market” by having an access to major city airports from alternate airports. As Bob Jordan, Chief Commercial Officer at Southwest Airlines and President of AirTran, said in a statement issued to The Democrat and Chronicle. "With a connected network, we can offer customers more itineraries, more destinations, more low fares, and a taste of what's to come once the integration is complete” (Trejos). IV. Brief description of the changes made  By having an access to airports and services unique only to Air Tran Airways, Southwest Airline is now able to add service to cities and airports it did not previously cover such as Dayton, Akron-Canton, and Washington National. Consequently, the merger also enabled Southwest Airlines, being the dominant entity in the merger, to remove service areas that were previously exclusive to Air Tran. The cities that were removed from their route were Allentown, Pa.; Asheville, N.C.; Atlantic City; Bloomington/Normal, Ill.; Charleston, W. Va.; Dallas/Fort Worth; Harrisburg, Pa.; Huntsville, Ala.; Knoxville, Tenn; Lexington, Ky.; Moline/Quad Cities, Ill.; Miami; Newport News, Va.; Sarasota, Fla.; and White Plains, N.Y. As a result of the merger, the two companies also begun codesharing with AirTran which begun on January 26, 2013. The shared itineraries that was launched as a result of the codesharing continued covering 39 more markets that begun last February 25, 2013 and it is expected that the companies will eventually have shared itineraries in the cities that they cover in both domestic and international flights. V. Results of the merge  The merger was a strategic move in the part of Southwest Airlines who had eliminated a direct competitor in the low cost segment of the market through the merger with Air Tran. The merger also provided an access to Southwest to a blank coverage city of Atlanta and other cities only unique to Air Tran. In addition, the merger provided Southwest Airlines landing rights in New York and Washington DC airports. In sum, the merger provided Southwest Airlines a connected network, more itineraries to offer and more destinations to cover that made Southwest Airlines the country’s largest airlines. This merger is very favorable to Southwest Airlines not only that it was able to remove a direct competitor which is very critical in an industry marked by a very thin margin and high operating cost. Through the merger, it can now capitalize on scale and efficiency by using one aircraft Boeing 737 whose scale and single aircraft maintenance will allow the company to operate efficiently allowing its business proposition of offering low cost airfare to its customers to continue.   VI. How effective was the change The fact that the codesharing between Southwest and Air Tran has already begun on February 14, 2013 and expecting to be completed by 2014 indicates that the change was effective. In addition, it customers are already beginning to book flights to any of the airline’s combined 97 destinations, including international, in one transaction signifying that the merger was effective. Finally, as an ultimate test of the efficacy of the change, it is expected that by 2015, the Air Tran brand will no longer exist and that the two companies will instead retain the Soutwest Airways brand. Works Cited “Airtran airways history”. Airtran Airways. 13 March 2013. http://www.airtranairways.com/about-us/history.aspx Trejos, Nancy. “Many cities lose out in Southwest-AirTran merger”. USA Today. March 1, 2012. http://travel.usatoday.com/flights/story/2012-02-29/Many-cities-lose-out-in-Southwest-AirTran-merger/53307050/1 Read More