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A Southwest-AirTran combination "has appeal as it represents an alternative for [Southwest] to gain share in key markets," the analyst wrote. Given his revised consolidation outlook, McKenzie raised Credit Suisse's rating on AirTran from neutral to outperform. Whispers of a potential Southwest-AirTran deal have circulated for months, but then again whispers of almost every possible combination have circulated amid growing investor enthusiasm for airline M&A. But it remains far from certain that either company would be interested in such a combination. AirTran, though smaller than Southwest, ranks among the industry's lowest-cost operators, giving it some wherewithal to survive high fuel prices or a travel slowdown. Southwest, meanwhile, is expected to be an opportunistic dealmaker and might not be interested in paying anything more than a distressed price for AirTran if other, cheaper, options are available. Without doubt both AirTran and Southwest are likely to be actively involved should a round of airline consolidation start as expected. Southwest has been mentioned as a potential acquirer of the Hawaiian operations and other assets of partner ATA Airlines Inc., and it could make a run at Aloha Airgroup Inc. or another company, while AirTran has already made an unsuccessful bid for Midwest Air Group Inc. and could consider other targets or a sale. But for now the companies appear just as likely to be bidding against each other for divested assets from other deals as they are walking down the aisle together. - Lou Whiteman See Dealwatch: Airlines CategoriesComments
From: Zack Rules,
Southwest would NEVER merge with Airtran. Daniel McKenzie is completely wrong! Airtran flies lots of people through its Atlanta hub and most of its other routes are leisure and/or seasonal. Southwest doesn't really do much seasonal flying though they just got the ability to do so with their new reservation system. They go for lots of nonstop flights with Airtran doesn't do. Also, there are some of Airtran's markets that while they make money for Airtran, lack the size that Southwest has been looking for. With loads of 717's, a first class and meals, Airtran's got a different following. These two carriers simply would never merge effectively. The only way Southwest could possibly benefit from a merger maelstrom is by getting gates, planes and other assets.
Posted on:
March 11, 2008 7:12 PM
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Record oil prices are creating additional stress in the airline industry and may lead to different consolidation scenarios, according to Credit Suisse Group analyst Daniel McKenzie. Higher fuel prices will mean fewer lower fares, which McKenzie in a Tuesday note said will make it harder for discounters like Southwest Airlines Co. and AirTran Airways Inc. to win market share. Those airlines instead could look to combine for the sake of scale.
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Who will Southwest Merge With? You only merge with someone because you need to merge. Southwest doesn't need to merge. Their a very good, clean operation that's making money. Why merge and have to assume anyone elses problems and debt? There's no need and nothing to gain.
Look for Southwest to expand their routes Internationally. Probably into Canada, the Caribbean and Mexico but that's it. Definitely not into the Hawaiian market.