Southwest Airlines Buys AirTrans Airways

Southwest Airlines has reached an agreement to purchase Air Tran Airways for $1.4 billion dollars. Air Tran Airways is a low-cost airline that operates over 1,000 daily flights. It operates more Boeing 717-200s than any other carrier. Southwest, the nation's largest airline, is based in Dallas, Texas.

AirTran's principal hub is at Hartsfield-Jackson Atlanta International Airport. It has a second hub at General Mitchell Mitchell International Airport in Milwaukee and smaller hubs at Baltimore/Washington International Thurgood Marshall Airport and Orlando International Airport. AirTran's headquarters are in Orlando, Florida. In addition to providing service to over 50 U.S. destinations including Sea-Tac, AirTran serves destinations in Aruba, Dominican Republic, Jamaica, Mexico, and Puerto Rico.

Southwest is Sea-Tac Airport's third largest carrier, having served more than 2.7 million passengers in 2009. It ranks behind only Alaska Air and Horizon Air. AirTran flew just 237,672 passengers last year at Sea-Tac. However, the AirTran deal allows Southwest to serve additional destinations for Sea-Tac passengers.

Southwest will add 37 additional destinations with the deal. Combined the airlines will serve more than 100 destinations in the U.S., Mexico, and the Caribbean. This could mean fewer delays and cancellations as Southwest adds capacity. However, analysts fear airfares will rise in certain areas such as the Northeast, due to less competition.

The boards of both Southwest and AirTran have approved the deal. Southwest will pay $7.69 per share for AirTran's common stock. This is a 69 percent premium from AirTran stock's closing price on September 24, 2010, which was $4.55 per share. The acquisition allows Southwest to increase its presence in large markets such as New York LaGuardia and Boston Logan and Baltimore/Washington Airports.