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 Comments made by a Southwest Airlines Co. executive late Wednesday about the discount king's expansion strategy have rekindled industry gossip that the airline might seek a deal with rival, smaller discounter AirTran Holdings Inc.
Southwest CEO Gary Kelly told The Associated Press there are "decent odds" that the carrier will add flights to a new major U.S. airport next year, following its recent expansion into Minneapolis and New York. Southwest historically has focused on smaller secondary airports where congestion -- and competition -- is limited, but in recent years it has been increasingly looking to larger markets as it courts more business travelers.
There are a number of airports Kelly could be considering, including Boston, Washington or Charlotte, N.C. But Atlanta, home to Orlando, Fla.-based AirTran's principle hub, has long been considered one of the biggest holes in Southwest's network and seems a possible destination. The problem for Southwest is that Atlanta, though the largest airport in the U.S., is cramped by AirTran and Delta Air Lines Inc.'s substantial operations. Gates, though sparse, are probably available to a new entrant with Southwest's clout, but a large operation there would seem likely to cause delays that could clutter Southwest's network. AirTran, with a somewhat complementary fleet (the airline flies Boeing Co. 737s like Southwest, as well as the smaller 717), an established operation, facilities and customer base in Atlanta, and a market cap of under $500 million, could make the transition easier and eliminate any worry about increased delays. Still, there is reason for skepticism. While Southwest has done deals in the past and has said it could be interested in future purchases, AirTran would still be a relatively large target and potentially difficult to easily digest. AirTran also has a different business model than Southwest, making money on a limited business-class seating that appeals to customers who might simply turn to Delta. AirTran also has been able to use its smaller planes to offer profitable service to some smaller markets that Southwest's model of larger planes and increased frequencies might not support. Anything is possible, and AirTran certainly appears a good candidate for a sale if the right offer comes along. But given the risks, Southwest seems more likely to go it alone if it wants to enter Atlanta. At least for now. - Lou Whiteman See AP story with Kelly's comments See Dealwatch: Airlines CategoriesComments
From: Lou Whiteman,
BizReporter, I think ATL, Charlotte and Cincinnati are the most likely new cities, though I do agree a deal is less likely than simply announcing new service.
Posted on:
December 18, 2008 4:05 PM
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Southwest isn't heading to Boston because they already are serving the market via Providence, Manchester, NH and even Hartford.
Washington is also already served via Baltimore. But following its Boston strategy as a guide, one could surmise that a move into Northern Virginia would be its next move because it would blanket Washington's northern and southern suburbs similar to the Providence/Manchester situation. Dulles would be the best bet there. Also, such a move wouldn't stray far from its usual expansion model, where as an AirTran purchase would.