Southwest Airlines Merger

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In order to make up for increasing expenses Southwest needs to expand. My recommended strategy for Southwest to pursue, is to merge with Air-Tran and expand into areas where Air-Tran has a heavy presence and Southwest has none. With Southwest having a weak presence in the southeastern U.S., a key area to expand would be Atlanta’s Hartsfield-Jackson International, which is the busiest airport in the U.S. There is obviously a need for the low air-fare company at this site. Southwest’s unique approach of no extra charge for luggage and extra friendly service should help Southwest. The merger is estimated to cost Southwest $1.4 billion dollars; Air-Trans income for 2010 was around $128 million, and along with the 138 new planes and locations Southwest will acquire, the benefits to cost seem great. Competition at Atlanta’s Hartsfield-Jackson International is fierce. Delta Airlines flew nearly 56% of the total passengers from Atlanta in 2009 and will be Southwest’s major competition (Challenges Delta with $1.4B Deal). Southwest will by far be the biggest low-fare option at the Atlanta hub.

Some advantages of expanding here, is that Atlanta’s Hartsfield-Jackson International. has been the busiest airport by passenger traffic and number of landing and take-offs since 1999. Air-Tran also flew nearly 18% of the total passengers at this location in 2009. The Atlanta hub also allows an advantage for a great connection site for other flights, which will help with travel to the many sites in Florida and other southern states. Southwest’s flight traffic was up 13.2% in January and up 13% in February which also shows a growing need for Southwest’s flights and an advantage.

Some disadvantages are that Flying out of such a busy airport may affect Southwest’s flight times and have customers experiencing more unusual delays than normal from the airline which is a disadvantage. Also keeping Air-Tran employees on in Atlanta may be a disadvantage to the unique...
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