The proverbial ink isn’t even dry on the U.S. Department of Justice’s approval earlier this month of the United Airlines-Continental Airlines merger. But that hasn’t stopped the pace of even further consolidation within the domestic industry, as this week Dallas-based Southwest Airlines announced its intention to acquire the parent company of Orlando-based AirTran Airways.
For consumers, the approval of this merger would bring mixed blessings. Southwest’s expansion into Atlanta and other airports means the spread of low-fare service to even more markets. Currently AirTran serves destinations in Mexico and the Caribbean, so the potential also exists for Southwest to launch service outside the U.S. for the first time.
In addition, AirTran passengers used to paying baggage fees would get a break, since Southwest remains the largest carrier that does not charge for many service such as checking baggage. Post-merger, Southwest says it would scrap AirTran’s $75 fee for itinerary changes after purchase and its baggage fees—$20 for first checked bags, $25 for second.
However, the removal from the market of a low-fare competitor such as AirTran would not bode well. And the approval of this deal undoubtedly would lead to further consolidation—perhaps American Airlines and US Airways?—as the overall pace of consolidation continues to threaten passengers with less service and higher fares.
Since 2001, we’ve also seen American Airlines acquire TWA’s assets, America West Airlines merge with US Airways, and Delta Air Lines acquire Northwest Airlines. For these reasons, earlier this year I testified on behalf of Consumers Union in both houses of Congress against the United-Continental merger.
Interestingly, the DOJ only signed off on the United-Continental deal because the two carriers agreed to sell take-off and landing rights at Continental’s Newark hub to Southwest. As for this partnership, most analysts are speculating the DOJ will approve Southwest-AirTran because the two carriers’ route maps do not overlap significantly.
In the wake of the Newark expansion, this deal would greatly enhance Southwest’s domestic presence, particularly in Atlanta, the largest U.S. market not served by the nation’s largest low-cost airline. The only airport currently served by AirTran that would not be served post-merger is Dallas-Fort Worth; an existing agreement prohibits Southwest—which is based at Love Field in Dallas—from operating at DFW.
While AirTran offers two classes of service and allows passengers to select seat assignments, those options would not be available after the merger. Southwest has always operated with just one aircraft type—the Boeing 737—so it remains to be seen how or even if AirTran’s Boeing 717s would be integrated into the fleet.
As for their frequent flyer programs, Southwest says the intent “over time” is to meld the two programs; both carriers issue awards based on flight segments rather than the more common method of issuing awards based on mileage flown.—William J. McGee
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