The U.S. Justice Department has approved Southwest Airlines’ acquisition of AirTran Holdings, saying it won’t substantially reduce competition. Southwest will close the deal on Monday, 02-May-2011.
The US Justice Department has cleared the way for Southwest Airlines’ acquisition of AirTran Airways stating that the development would not trim down the competition significantly.
Southwest Airlines, a Dallas-based carrier that is known to offer tickets on cheap flights, plans to close the $1.4 billion deal with AirTran on Monday. Southwest has been waiting on the DOJ approval since the merger was proposed by the two airlines in 2010.
The US Justice Department said that “there are overlaps on certain nonstop routes”, but officials decided not to challenge the acquisition in the benefit of those travellers who prefer tickets oncheap flights.
“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 said in a statement that announced the closing of its investigation.
The airline will fly all-Boeing aircrafts as Southwest flies all 737s and AirTran operates 737s and 717s. The two airlines had combined revenue of $14.7 billion in the year 2010 and carried more than 110 million passengers during the year.
Merger isn’t likely to hurt competition, says DOJ
“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,” the Department of Justice was quoted as saying in different online sources.
“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 Department continued.
Consumers to benefit, emphasises Southwest Airlines
Southwest emphasised on the benefit of the merger to the public as they can travel economically by having their hands at much cheaper air tickets on flights.
The carrier was quoted by various 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 observed.
Merger Instrumental for Southwest’s Expansion
The acquisition will augment Southwest’s size by one-fourth, although the carrier plans to operate AirTran as a separate airline for the time being. Southwest Airlines stated that the merger with AirTran means that it will now serve more than 100 destinations, including four new airports added by the carriers this year.
The merger will enable Southwest Airlines to expand its operations in huge US East Coast markets such as Atlanta and Washington. Southwest will gain AirTran’s hub in Atlanta, which Southwest is not serving currently, and additionally pick up AirTran’s flight operations to Mexico and the Caribbean.
At present, AirTran is the second largest carrier in Atlanta after Delta Air Lines.