Southwest's bid to buy AirTran could bump US Airways as dominant carrier

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Southwest Airlines could knock US Airways off its long-held perch as the region's dominant carrier with its proposed $3.4 billion acquisition of AirTran Airways.

In Pittsburgh, the acquisition, announced Monday, also could reduce the number of nonstop flights available to Orlando, a popular vacation destination now served by both airlines. But it's unlikely to cause great upheaval for local travelers.

Perhaps the biggest change would be symbolic, with Dallas-based Southwest likely becoming the airport's dominant carrier, a position held by US Airways since at least the early 1980s.

"It would be the first time in many, many, many years that US Airways wasn't the dominant passenger count carrier," said Bradley D. Penrod, executive director of the Allegheny County Airport Authority, which operates the airport.

The change highlights the rise of Southwest, which entered the Pittsburgh market in 2005, and the decline of US Airways, which once carried nearly 90 percent of the airport's traffic but is now down to 25.8 percent.

Combined, Southwest and AirTran have carried nearly 1.6 million passengers -- or 29.3 percent of all -- this year through August, compared to 1.4 million for US Airways. Alone, Southwest was the second biggest airline with 18.2 percent of the traffic and Orlando-based AirTran fourth, with 11.1 percent.

Based on the August statistics, US Airways still would have more daily departures with 42, compared to a combined 33 for Southwest and AirTran.

Southwest and AirTran now are the only two airlines that offer nonstop service to Orlando from Pittsburgh, a combined five to eight flights a day. That competition would be eliminated as a result of the acquisition, but Mr. Penrod doesn't see that having much impact on fares.

"I'm really not afraid of losing competition to Orlando. Typically, that's a value-based market anyway. So price sensitivity is something that the carriers do play close attention to," he said.

While some experts predicted that Southwest would trim back nonstop service to Orlando with the acquisition, Mr. Penrod said it was "too early to tell." He also noted that other carriers still would serve the destination, albeit without nonstop flights.

Other than that one market, there's virtually no overlap in service from Pittsburgh for the two carriers. AirTran serves Atlanta, a big business destination; Milwaukee; and Fort Lauderdale and Fort Myers, Fla. Southwest flies to Baltimore, Chicago, Las Vegas, Phoenix, Philadelphia and Tampa.

Michael Boyd, a Colorado-based aviation expert who has done work in Pittsburgh in the past, sees Southwest leaving most of the service intact, although he added there's always potential for cutbacks.

At the same time, Mr. Boyd, who did some work for an entity involved in the acquisition, noted he doesn't see Southwest expanding here, saying that Pittsburgh "is on the cusp of profitability" for the airline.

"Any net new flying, that is not in the cards," he said. "Southwest is looking at Pittsburgh with a jaundiced eye. If it's profitable, it's marginally so."

Paul Flaningan, a Southwest spokesman, said it was far too early to speculate on what routes the combined airline would serve from Pittsburgh or any other market for that matter.

He said the airline intends to make decisions based on "what's best for our customers and employees."

Mr. Penrod said the Delta-Northwest and United-Continental mergers have not posed any problems for Pittsburgh, although there was virtually no overlap in service in either situation.

Overall, the acquisition of AirTran gives Southwest a long-sought presence at Atlanta's Hartsfield-Jackson International Airport, where it will go head-to-head against Delta, and greater access to Boston Logan and New York LaGuardia airports. It also meets a Southwest goal of adding an international presence, with markets in the Caribbean and Mexico.

Darryl Jenkins, an airline consultant based in northern Virginia, described the acquisition, which still must be approved by the U.S. Justice Department, as a "huge deal" for Southwest.

"I think Southwest had no growth opportunities and now they have a lot. They have every place on the East Coast they couldn't get into, from Atlanta to Boston," he said.

In addition, the deal offers Southwest more connecting opportunities to smaller cities. It also gives them greater access, particularly in the Northeast, to business travelers, typically the bread and butter for airlines.

The acquisition values AirTran common stock at $7.69 a share, or a premium of 69 percent over the closing price last Friday. Under the deal, each share of AirTran common stock would be exchanged for $3.75 in cash and 0.321 shares of Southwest common stock.

Given what the acquisition does for Southwest, "this is the best money they're going to spend in a long time," Mr. Jenkins said.

Neither he nor Mr. Boyd saw the merger of the two low-fare carriers resulting in higher prices for travelers. In fact, Mr. Flaningan said Southwest has been known for years as "the low-fare leader and we want to keep that."

While acquiring AirTran will eliminate low-fare competition to Southwest, Mr. Boyd doesn't see that as being a big issue. Given that there wasn't much overlap in the two systems, they were competing more against other airlines than each other, he said.

"They're still facing the same competition as they did before except all the airplanes will be one color instead of two," he said.


Mark Belko: mbelko@post-gazette.com or 412-263-1262.


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