Southwest acquires AirTran for $1.4. billion
Southwest to acquire AirTran: Too early to tell what it means for travelers
The move by Southwest is the first example of consolidation between two large US low-cost airlines and marks a departure from the Dallas-based airline's usual strategy of organic growth.
Southwest, the originator of the low-cost airline model that has spawned imitators around the world, put its aggressive organic growth strategy on hold during the worst of the economic downturn and oil spike in 2008 caused it to pull back.
The deal will give Southwest a foothold in Atlanta AirTran's hub and also the busiest airport in the US and put pressure on Delta Air Lines, which is also based at the city's Hartsfield airport. Delta shares closed down 2.65 per cent to $11.39.
The deal also boosts Southwest's presence in Washington DC, New York, and Boston and will for the first time see it move into international markets. AirTran has services to the Caribbean and Mexico.
"The acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve," said Gary Kelly, Southwest's chief executive.
"We think of ourselves as a growth company and we're trying to make it happen." He also signalled that Southwest was looking at further international expansion.
Southwest's cash and stock deal offer amounts to roughly $7.69 a share, a 69 per cent premium to Friday's closing price, valuing AirTran's equity at $1.4bn. Including AirTran's debt and aircraft leases, the value of the transaction is $3.4 billion.