Sunday, 1 May 2011

AirTran & Southwest Airlines Merger

 

With AirTran merger, Southwest Airlines to gain toehold in Memphis

 

AirTran has been in Memphis International since 1993, when it began as ValuJet, and has helped hold down Memphis-Atlanta fares.

Southwest Airlines executives predicted in the 1980s that one day they'd be in Memphis. That day is Monday.

But it's not because of letters from disgruntled Memphians, civic hand-wringing about semi-monopolistic hub operators or back-door entry by way of West Memphis, which drew looks from Southwest back in 1989.

Effective with Monday's merger,   Southwest Airlines inherits four daily AirTran flights between Memphis International Airport and Atlanta.

Joseph Kaczmarek/Associated Press files

Effective with Monday's merger, Southwest Airlines inherits four daily AirTran flights between Memphis International Airport and Atlanta.

The nation's leading discount airline will arrive in the Bluff City rather unceremoniously after a buyout of fellow budget carrier AirTran.

Does that mean Southwest fan Robert Cockerham can stop making a 284-mile drive to Little Rock airport and back when his contracting business takes him to Dallas or points west?

Not immediately. All that happens Monday is that Southwest inherits four daily AirTran flights between Memphis International Airport and Atlanta.

High jet-fuel prices, lingering economic doldrums and a relatively small number of Memphis-specific arrivals and departures are likely to limit Southwest's ability to grow its presence in Memphis in the near future, airport officials and industry experts said.

It's expected to take a year or two for Southwest to fully integrate AirTran and sort out differences between the operations.

Unlike Southwest, AirTran has baggage fees and a premium seating option, which are expected to go away once integration is completed.

"I'm happy to see Southwest come to Memphis, but I'm sad to see AirTran go," said Cockerham, who switches between the two airlines depending on whether he's headed east or west.

"Southwest and AirTran are both great airlines," he added. "All the AirTran flights here in Memphis now are sold out almost every day. You would think they would realize the need for flights to places other than just Atlanta."

The airlines set Monday as the effective date for their merger after clearing a final regulatory hurdle, an anti-trust review by the Justice Department.

It's possible customers will initially see no difference at the AirTran ticket counter in Terminal A or the carrier's single gate in Concourse A, said Larry Cox, president and CEO of the Memphis-Shelby County Airport Authority.

Cox said he met with airlines serving the airport, including an AirTran representative.

"The AirTran guy didn't really know what's going to happen. They're going to be having some meetings after (Monday). They're keeping it pretty close to the vest."

AirTran has been in the airport since 1993, when it began as ValuJet, and has helped hold down Memphis-Atlanta fares, Cox said.

Airport officials hope Southwest has a similar effect on fares to cities served by both Delta and Southwest and that Southwest finds a way to add nonstop service from Memphis.

"I would look at places where Southwest has significant service and some transfer activity, Baltimore-Washington, Chicago-Midway and Dallas-Love Field, after the Wright amendment expires in 2014; New Orleans, Houston-Hobby, Denver, Phoenix, Las Vegas," Cox said. The Wright amendment restricts flights to and from Love Field.

"I think there's a number of places they could go out in the West where they have significant operations," Cox said.

AirTran's operation at Memphis is small by Southwest standards, said Seth Kaplan, managing director of Airline Weekly. Southwest likes to have eight flights a day per gate for optimum utilization of personnel and aircraft. AirTran does more outsourcing of ground operations to serve airports with fewer flights.

"I think for cities in general that have only AirTran and not Southwest, some of them are going to wonder will they still have that service at all, because Southwest does have a different model," Kaplan said.

"Assuming they stay there, which I would expect them to, I think you would see maybe twice as much service, but it might not all necessarily be to Atlanta. It could be to Chicago or Baltimore or who knows, somewhere out West, like Denver or Phoenix."

To the extent Southwest takes business away from Delta, the city's passenger hub status could be threatened, Kaplan added.

"When you're a smaller hub and you get more low-cost service, what about the hub airline? Might that make their service less viable?" he said.

Some airline industry experts believe high fuel prices for the next couple years will keep a lid on expansions.

Vaughn Cordle, chief analyst for Airline Forecasts LLC, said Memphis travelers should benefit from Southwest's lower fares and lack of hidden charges, coupled with the carrier's expanded footprint.

As to addition of new nonstop destinations, Cordle said, "I think that depends on fuel prices and the economy." Those are the same factors driving Delta's recently announced plans to cut 25 percent of flights at Memphis and 8-10 percent of seat capacity by year's end.

"Without the acquisition by Southwest, AirTran would have gotten smaller over time," Cordle said. "The acquisition gives Southwest more staying power than Delta."

Cox said airport officials look forward to working with Southwest to fill space emptied by industrywide capacity cuts in recent years.

Cockerham hopes the drives to Little Rock will become a thing of the past. "I hope so, but I don't know," he said. "I just think the Airport Authority bends over too far backward to please Delta."

"It's frustrating. You pay your taxes and then you have to drive to Little Rock."

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