Funny thing about the recent push by Southwest Airlines to get their flight attendants and pilots to agree to contracts that will allow 737-800 flying. As I told an audience in Chicago last week — I seriously doubted the airline was only interested in getting their employees’ okay so that they could order new airplanes.
Today the reason became clear as the airline announced it is purchasing AIrTran.
This morning Southwest announced its intention to purchase AirTran for a combination of cash and Southwest stock. Each share of AAI will be exchanged for $3.75 cash and 0.321 shares of LUV with an adjustment mechanism to provide $7.25 to $7.75 in value for each share of AAI.
Are we surprised? No.
Atlanta has long been the big gaping hole in Southwest’s business model. In addition, Southwest now realizes that with a mature (i.e., flat) market in the domestic U.S., the only way to grow is through the acquisition of a new livery as the opportunity for organic growth is practically non-existent.