Monday, February 28, 2011

Rising fuel prices make Southwest Airlines acquisition of AirTran imperative

Southwest Airlines Chairman, President and CEO Gary Kelly said Friday that rising fuel prices make the LCC's planned acquisition of AirTran Airways "absolutely imperative." Speaking at a hearing held in Milwaukee by the US Senate's subcommittee on antitrust, competition policy and consumer protection, Kelly said, "The economies of scale and the revenue synergies presented by this merger are a hedge against higher fuel prices."

Sen. Herb Kohl (D-Wisc.), chairman of the subcommittee, has said the panel "will carefully examine this proposed merger to determine whether air travelers will continue to see the low fares that they have come to rely on, especially in cities like Milwaukee where AirTran and Southwest are key competitors."

But Kelly asserted that neither carrier will be able to grow without the merger, a situation that would ultimately lead to less service for consumers. "High fuel prices have stymied growth in the airline industry and will continue to do so for the foreseeable future," he explained. "The AirTran acquisition is a strategic hedge to enable a resumption of growth by Southwest. Absent the merger, both carriers will be constrained and even hard-pressed to maintain current capacity levels."

While Congress often holds hearings on pending mergers, it has no formal role in approving the transactions. The SWA/AirTran merger, which the carriers expect to close in the second quarter, still requires US Dept. of Justice clearance.

(Aaron Karp - ATWOnline News)

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