Thursday, Dec. 09, 2010

Southwest Buys Airtran

There was more than one sky hook-up in 2010. In a surprise deal, Southwest, the nation's largest low-cost carrier, acquired its smaller rival AirTran for $1.4 billion. The deal expands Southwest's geographic reach. Most of AirTran's routes are in the Northeast, where Southwest is unsurprisingly weak. But it was also a reaction to other recent airline combinations, including the United and Continental combination, and Delta's purchase of Northwest in 2009. Southwest felt it needed to add scale to stay competitive. The need to reduce seat capacity is behind the big deals. For years the industry has had too many planes chasing too few passengers, killing profits. That's changing. For consumers, though, the result will be higher average ticket prices.