Thursday, April 28, 2011

Southwest’s Acquisition of AirTran Approved by US Justice Department

U.S. Justice Department gave its sanction for the Southwest Airlines’ purchase of AirTran Airways, saying the merger of two major discount airlines isn't likely to hurt competition.

The Department said the airlines do overlap on some nonstop routes, but it has decided not to challenge the deal as the competitors can get airport gates and landing slots on those routes.

Southwest Airlines is the largest airline in the United States and is known to offer cheap tickets on flights. With the required approval in the bag, Southwest stated that will close the $1.4 billion deal with AirTran on Monday, 2nd May 2011. The airlines proposed the merger in September 2010 and have been waiting upon the U.S. Justice Department approval since.

U.S. DOJ released a statement that announced the closing of its investigation regarding the merger of the two budget airlines. The Department said in the statement, “The presence of low-cost carriers such as Southwest and AirTran in the domestic market has been shown to lower fares on routes previously served only by incumbent legacy carriers.”

The Department of Justice further added, “After a thorough investigation, the division determined that the merger is not likely to substantially lessen competition. The merged firm will be able to offer new service on routes that neither serves today, including new connecting service through Atlanta’s Hartfield Jackson International Airport from cities currently served by Southwest to cities currently served by AirTran.”

“Although there are overlaps on certain non-stop routes, the division did not challenge the acquisition after considering the consumer benefits from the new service. Also, the airports affected by the overlaps are not subject to restrictions on slots or gate availability. Where such restrictions exist, entry by other airlines may be particularly difficult,” the DOJ continued.

Consumers to benefit: Southwest
Southwest emphasised that the merger with AirTran will prove extremely beneficial for budget travellers who look for tickets on cheap flights. The carrier believes that the passengers can travel economically by grabbing cheap tickets on flights offered by the airlines.

Southwest Airlines was quoted by different news portals as stating, "The combination of AirTran and Southwest Airlines is expected to generate substantial benefits to consumers, including the expansion of low-fare competition in airline markets across the United States."

“These fare savings will result from expanding the well-known 'Southwest Effect' of reducing fares and stimulating passenger traffic wherever Southwest flies,” the airline further stated.

Southwest Eyes East Coast Markets
With AirTran all set to merge with Southwest Airlines, Southwest plans to expand in the US East Coast markets such as Atlanta and Washington. However, Southwest will operate AirTran as a separate airline temporarily. The airline will now be operating flights to more than 100 destinations, including four new airports added by the carriers in 2010.

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