The analysts are poring over the announcement Monday that Southwest Airlines is buying its smaller budget competitor AirTran and the consensus is that it’s part of the voracious growth model that sustains Southwest Airlines. However, stability in Southwest’s bottom line might be reflected by a reduction of rock-bottom fare wars that have also been a hallmark of the industry. The deal is worth more than $3 billion. Southwest gets some route expansion and perhaps some breathing space but also fills some important holes.
Although the $25 fares are likely to go away, so is AirTran’s baggage fee. Southwest doesn’t charge for bags and believes it attracts customers. Southwest will gain a few more routes, mainly including service to Atlanta, but the fundamental strategy appears to be to take a bigger chunk of business from the legacy carriers. The deal allows for rapid expansion in New York and Boston. “We’re trying to get more customers in Chicago and more business customers in particular,” Southwest CEO Gary Kelly told MSNBC, “and if we don’t serve their destination needs, we won’t get them.”
