Southwest Airlines buying AirTran

[Tamizi Hj Tamby 1]

Just found this out at DA.C:

 

Southwest buying AirTran for $ 1.4 Billion-ajc.com

 

Upon the acquisition,the combined fleet will be consisting of:

 

Southwest's Fleet

Boeing 737-300 - 175 - 0

Boeing 737-500 - 25 - 0

Boeing 737-700 - 350 - 113

 

AirTran's Fleet

Boeing 717-200 - 86 - 0

Boeing 737-700 - 52 - 65

 

Combined Together Fleet

Boeing 717-200 - 86 - 0

Boeing 737-300 - 175 - 0

Boeing 737-500 - 25 - 0

Boeing 737-700 - 402 - 178

-----

Total Aircraft - 688

Total Orders - 178

Total Aircraft Including Orders - 866

Info above obtained from DA.C

[Pieter C. 5]

VERY surprising news !!!

 

didn't even know they were talking to eachother

 

717's first ones to go, as it doesn't fit Southwest's fleet...

 

It will open up routes into the Caribbean for Southwest too; good for them, they've approval from the Unions regarding their intended 737-800's use...

 

Think DELTA has a very bad day today, having a big competitor at their home-turf now...

[BC Tam 2]

If one just goes by fleet size as yardstick alone, our local carriers (and regional neighbours too) are really really tiny

[flee 5]

Southwest is more interested in the AirTran hubs I think.

 

Southwest is to further consolidation in the US industry through the acquisition of fellow low-fare carrier AirTran Airways.

 

In a definitive agreement endorsed by both the boards of both airlines, Southwest is purchasing all outstanding common stock of AirTran's parent for a combination of cash and stock.

 

Under the agreement each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest's common stock. Including AirTran's debt and capitalized aircraft operating leases, the transaction is valued at $3.4 billion.

 

Through the agreement Southwest gains key access to Washington National Airport and expands its presence in other key markets including New York LaGuardia and Boston. It also furthers Southwest's goals of serving near international destinations through AirTran's leisure markets in the Caribbean.

 

Until closing Southwest and AirTran will continue to operate as separate brands. Southwest plans to integrate AirTran's Boeing 737s and 717s into its own 737 livery and consolidating corporate functions at its Dallas headquarters.

 

The two carriers also plan to transition to a single operating certificate and will operate a combined fleet of 685 aircraft. As of 30 June the combined unrestricted cash of the two airlines was $3.7 billion.

 

Source: http://www.flightglobal.com/articles/2010/09/27/347841/southwest-to-acquire-airtran-airways.html

[Mohd Suhaimi Fariz 2]

If one just goes by fleet size as yardstick alone, our local carriers (and regional neighbours too) are really really tiny

 

Ah, but what they lack in size, they make up in service quality.

[Josh T 0]

It's just mind-boggling that Southwest have almost 700 aicraft, all of which are the same type! They are the world's biggest operator of the B737.

[flee 5]

Well it looks like they have ordered B737-700's to replace their older planes. In the long term, they may just end up with just one aircraft type when all their new planes are delivered.

 

Southwest executives have confirmed that it plans to operate AirTran's 86 Boeing 717s once its acquisition of AirTran closes and the Atlanta-hubbed carrier is folded into the Southwest brand.

 

Southwest today unveiled plans to acquire AirTran through a combination of cash and common stock.

 

Both carriers operate the 737-700, and Southwest is evaluating adding the larger -800 to its fleet. Southwest also operates 737-300s/500s.

 

During a call with media to discuss the acquisition Southwest CEO Gary Kelly said the carrier has decided it wants to keep and operate the 717, and will operate the smaller aircraft in a single 117-seat configuration. Currently AirTran operates its 117-seat 717s in a dual class offering.

 

Kelly acknowledges the addition of the 717 requires a different type crew rating and establishing how the aircraft is scheduled into operations. But he believes the 86 aircraft offer enough scale and says Southwest has the ability to incorporate the aircraft into its fleet cost effectively.

 

"Our pilots have looked at it [the 717] and like it," Kelly states. The aircraft will also allow Southwest to operate in markets too small to support its 737 fleet.

 

Southwest's chief says the carrier is not prepared to make a decision on adding the larger -800 to its fleet. "We hope to make a decision soon," he says. Previously Southwest indicated it would decide on adding -800s in December and has negotiated a tentative deal with its flight attendants to operate the aircraft.

 

Commenting on the impetus to acquire AirTran Kelly states that after a tumultuous last couple of years in 2010 Southwest is finally comfortably profitable enough to strategically think about its future by examining its technology, fleet and possible acquisitions. Today he revealed Southwest also plans to replace its reservation system.

 

Source: http://www.flightglobal.com/articles/2010/09/27/347858/southwest-plans-to-keep-airtrans-boeing-717-fleet.html

Edited September 28, 2010 by flee

[Pieter C. 5]

Southwest, AirTran - Factbox

 

September 28, 2010

 

Southwest Airlines said it would acquire low cost rival AirTran. Below are facts about the deal and the two carriers:

 

TRANSACTION

 

-- The deal is worth USD$1.04 billion in cash and common shares, but jumps to nearly USD$1.4 billion when AirTran convertible notes are included.

 

-- There is no estimate for when the transaction will close or how long antitrust officials at the US Justice Department will take to review the proposal.

 

-- Each AirTran share will be exchanged for USD$3.75 in cash and 0.321 shares of Southwest common stock, subject to certain adjustments intended to provide at least USD$7.25 and up to USD$7.75 in value per share of AirTran common stock.

 

SYNERGIES

 

-- AirTran revenues and operating income, excluding special items, for the 12 months ending June 30, 2010, were USD$2.5 billion and USD$128 million, respectively. Southwest revenues and operating income, excluding special items, for the 12 months ending June 30, 2010, were USD$11.2 billion and USD$843 million, respectively.

 

-- Net annual synergies are expected to exceed USD$400 million by 2013. One-time costs related to the acquisition and integration of AirTran are expected to be in the range of USD$300 million to USD$500 million.

 

-- As of June 30, 2010, the combined unrestricted cash and short-term investments of the two companies was USD$3.7 billion. Southwest intends to fund about USD$670 million in cash consideration for the transaction out of cash on hand. Since June 30, Southwest's cash and short-term investments balance has increased from USD$3.1 billion to USD$3.3 billion.

 

OPERATIONS

 

-- Based on current operations, the combined organisation would have nearly 43,000 employees and serve more than 120 million passengers annually.

 

-- The combined carriers' all-Boeing fleet would total 685 active aircraft, including 401 Boeing 737-700s, 173 Boeing 737-300s, 25 Boeing 737-500s, and 86 Boeing 717s, with an average age of approximately 10 years.

 

-- Until closing, Southwest Airlines and AirTran will continue to operate as independent companies. After closing, AirTran CEO Bob Fornaro will continue to be involved in the integration of the two companies.

 

-- Southwest Airlines plans to integrate AirTran into the Southwest Airlines brand by transitioning the AirTran fleet to the Southwest Airlines livery and consolidating corporate functions into its Dallas headquarters. Frequent flier programmes will be combined over time.

 

AIRLINE FACTS

 

-- Southwest flies 3,200 flights a day to 69 US cities. Headquartered at Dallas Love Field. Incorporated in 1971 with three aircraft serving three Texas cities. It currently operates 544 Boeing 737 jets, which fly an average of six flights a day. It has been profitable for 37 straight years.

 

-- AirTran serves 71 cities, mostly on the US East Coast, the Midwest and the Caribbean. Headquartered in Orlando, with a hub in Atlanta. Fleet includes 86 Boeing 717s and 52 Boeing 737s. Profitable nine out of last 10 years. Formerly ValuJet.

 

(Reuters)

 

-------------------------------------------------------------------------------------------

 

Southwest To Attack East Coast Markets

 

September 28, 2010

 

Southwest Airlines, the largest US low-cost airline, agreed a deal to buy smaller rival AirTran Holdings for USD$1.4 billion, aiming to challenge bigger carriers in the East Coast market.

 

The merger, which was announced on Monday, would be the first between leading US low-cost airlines and prompted speculation of more deals to come as the industry cuts costs and carriers look to expand their networks.

 

The cash-and-stock deal needs government approval. The acquisition values AirTran at a 69 percent premium to its Friday closing price and would lift Southwest into fourth place in US air traffic rankings, from sixth place.

 

Southwest, with a market capitalisation of about USD$10 billion, said the deal would produce annual benefits exceeding USD$400 million by 2013. Its shares closed up 8.71 percent at USD$13.35, while AirTran shares rose 63 percent and closed at USD$7.34.

 

"The market approves of the deal and thinks Southwest is getting a great price despite paying such a substantial premium," said Morningstar equity analyst Basili Alukos.

 

"Southwest had been waiting to expand this past downturn, and I think this acquisition proves that substantial organic growth is a thing of the past."

 

Airline valuations have plummeted since 2008, when the oil price spike and global recession sharply hurt profits. Carriers responded at the time by cutting capacity, and Southwest put its growth plans on hold -- until this deal for AirTran.

 

News of the merger may pressure larger rivals to find merger partners of their own to beef up their networks and achieve cost and revenue benefits.

 

"It increasingly marginalises those network carriers who haven't consolidated," said airline consultant Robert Mann. "So I think the biggest impact is on American (Airlines)."

 

Shares of JetBlue Airways rose 7.11 percent as analysts said its strong presence in New York would make it a key player in any M&A activity. Shares of Republic Airways, another low-cost airline, rose 5.25 percent.

 

HIGH PREMIUM

 

The deal is the second notable airline merger this year after that of United Airlines parent UAL and Continental Airlines. Delta bought Northwest in 2008. US Airways was bought by America West Airlines in 2005.

 

Orlando, Florida-based AirTran is run by chief executive Bob Fornaro. AirTran was bought in 1997 by ValuJet, which abandoned the ValuJet name after a 1996 crash that took more than 100 lives.

 

Southwest chief executive Gary Kelly said the deal gives his company access to AirTran's extensive East Coast network, especially Atlanta, where AirTran competes head to head with Delta Air Lines. Delta shares fell 2.5 percent.

 

AirTran also has Caribbean routes that Southwest said would give it an international presence.

 

"What is an interesting opportunity to us is threefold: (AirTran hub) Atlanta, small cities and international," Kelly said. "The profit opportunity with this transaction is simply far greater than it is without."

 

While the deal premium that Southwest offered is among the highest of airline deals in the past three years, analysts noted that valuations had fallen sharply during the recession.

 

"It still represents a discount to what most airlines were trading at," said Jim Corridore, airline analyst at Standard & Poor's.

 

As of last Friday, Southwest's shares have under-performed the broader Arca Airline Index this year, rising about 7 percent against the index's 24 percent increase. AirTran has done even worse, falling 13 percent in the year to date.

 

LITTLE OVERLAP

 

The combined company would be based in Dallas, which is Southwest's home, and have nearly 43,000 employees and fly more than 120 million passengers annually. The all-Boeing fleet would consist of 685 active aircraft that would include 401 Boeing 737 700s.

 

Southwest, which operates from 69 cities -- including Las Vegas, Chicago and Dallas -- said the two airlines have very little overlap on their routes.

 

Kelly said the deal would allow Southwest to expand in markets such as New York LaGuardia, Boston Logan and Baltimore/Washington. It also allows access to leisure markets in the Caribbean and Mexico.

 

Southwest's acquisition of AirTran could lead to lower fares in East Coast markets currently dominated by larger rivals such as United and Continental. But experts do not see a shift in the balance of power on those routes.

 

(Reuters)

[Tamizi Hj Tamby 1]

AirTran was also previously known as Valujet,but after the deadly crash of Flight 592 at Everglades Swamp,Florida that killed all 110 passengers aboard their DC-9. Then after the incident,they executed a 'reverse merger' with a smaller regional airline AirWays Corp.,and led to the birth of AirTran Holdings and AirTran.