Merger could lift airfares in Boston
Southwest-AirTran deal means less competition
Southwest Airlines said yesterday that it plans to buy rival AirTran for $1.42 billion, combining two of the nation’s biggest discount carriers in a move that could eventually mean higher ticket prices for some Boston travelers.
The proposed acquisition would reduce competition along overlapping routes; less competition typically leads to higher fares, according to analysts. From Logan International Airport, Southwest and Atlanta-based AirTran compete along the Baltimore route.
“What Southwest is doing is taking out the low-cost carrier,’’ said airline analyst Michael Friedman. “You are eliminating the guy who prices at the bottom.’’
The transaction still needs approval from the US Department of Justice and from stockholders.
Southwest officials said they plan to integrate AirTran into Southwest by 2012.
Dallas-based Southwest would remain the nation’s fourth-largest domestic carrier, in terms of passenger traffic, after merging with number eight AirTran, but the deal could give the king of low cost airfares a bigger slice of the Boston market.
Currently, AirTran and Southwest Airlines are Boston’s sixth- and seventh-biggest carriers, based on passenger traffic. The combined airline would not rank among the five largest carriers flying out of Logan, however: Together, the airlines would handle about 9.5 percent of the passenger traffic. Logan’s top airline, JetBlue Airways, has an 18 percent market share.
The merger would give Southwest — whose flights from Boston go primarily to the middle and western parts of the country — more East Coast destinations from the Hub.
Southwest, which began doing business at Logan in August 2009, has 25 daily flights to six destinations: Baltimore, Chicago Midway, Denver, Philadelphia, Phoenix, and St. Louis.
AirTran, which launched its Logan service in 1997, has 19 daily flights to five destinations: Akron-Canton, Ohio; Atlanta; Baltimore; Milwaukee; and Newport News-Williamsburg, in Virginia.
The combined airline would operate at Logan’s Terminal E. Until the merger is completed, Southwest and AirTran will continue to operate independently with no schedule changes.
Edward Freni, aviation director for the Massachusetts Port Authority, which runs Logan, said the deal will benefit travelers. “You have two airlines combined offering more options to the consumer in a more consolidated fashion,’’ he said.
Along routes in which the two airlines compete with JetBlue, fares may go down — at least temporarily — as the result of a fare fight, some analysts said. JetBlue and Southwest compete from Boston to Baltimore, Chicago, and Denver and with AirTran along the Baltimore, Orlando, and Fort Meyers, Fla., routes.
“You will see JetBlue and Southwest going head-to-head,’’ said Henry H. Harteveldt, a travel industry analyst at Forrester Research Inc. “You will see a continued fare fight for the customer.’’
Airports within an hour’s drive of Boston could be affected by the merger. AirTran does not have any flights leaving from Manchester Boston Regional Airport in New Hampshire and T.F. Green Airport in Rhode Island, but those airports offer Southwest flights.
“Initially, this creates some additional opportunities for folks who fly the Southwest network to destinations across the country,’’ said Tom Malafronte, a spokesman for Manchester, which has 23 daily Southwest flights, or 60 percent of the airport’s passenger traffic. “We are cautiously optimistic that it will be good for Manchester.’’
T.F. Green did not immediately return calls seeking comment yesterday.
The Southwest-AirTran deal continues the airline industry’s move to consolidate. Continental Airlines and United Airline’s parent, UAL Corp., will formally combine this week and become the world’s largest carrier, passing Delta. Delta became the nation’s biggest airline when it acquired Northwest Airlines two years ago.
Alison Croyle, a JetBlue spokeswoman, said the carrier is in favor of consolidation and the resulting reduction in capacity.
“It results in an improvement in the financial health of the industry,’’ she said in an e-mail yesterday.
In a statement, AirTran’s president and chairman, Bob Fornaro said: “Southwest Airlines will give us opportunities to grow, both professionally as individuals and as a group, in ways that simply would not be possible without this agreement.’’
AirTran, which will be rebranded Southwest once the deal is approved, will expand Southwest’s network by 25 percent and increase revenue by 20 percent, said a Southwest spokesman, Paul Flaningan.
“It’s a win-win for all of us,’’ he said.
The move could also be a win for passengers who are tired of paying baggage fees. AirTran charges $20 for a passenger’s first checked bag, and $25 for the second. But Southwest, which has built a marketing campaign around the fact it does not charge luggage fees, said it won’t keep AirTran’s bag fees.
Some Southwest and AirTran passengers at Logan yesterday afternoon were happy about that and more.
Kathran Jackson, a catering assistant from Missouri who has flown on both airlines, said the merger may make it easier to visit her daughter in Florida.
“I’m a happy camper now,’’ she said.
The Associated Press and Globe correspondent Alexa McMahon contributed to this report. Johnny Diaz can be reached at firstname.lastname@example.org.
Correction: Because of an artist's error, a chart accompanying this report on Southwest Airlines plans to buy AirTran was incorrectly labeled. The chart showed airline market share for international and domestic passengers in August.