So, it's a win for AirTran customers.
"It's good news for AirTran passengers ... in general because Southwest has better service than AirTran and lower fees," said George Hobica, founder of Airfarewatchdog.com.
Consumer advocate Clark Howard sees the acquisition as a positive development for air travelers nationwide.
"It's so good for the flying public. This is an opportunity for a discounter to have the kind of heft and national reach of the full-fare airlines," Howard told CNN sister network HLN.
Hobica isn't as optimistic about the deal. While it's unlikely the acquisition will lead to higher fares nationwide, he expects other airlines, such as American Airlines and USAirways, to join in the wave of airline mergers that started several years ago. More consolidation is likely to mean modestly higher fares, he said.
"But the thing is, fares can only go up so high before passengers say 'no thank you.' They're doing that now, they'll drive, they'll take the bus, they'll take Amtrak or they'll stay home," he said.
With the recently approved United-Continental merger and the combination of Delta and Northwest, the number of legacy air carriers has dropped to four. Without AirTran, only two major low-cost airlines, Southwest and JetBlue, will be competing for American travelers.
In markets where Southwest and AirTran compete head to head, such as Baltimore, Orlando and Milwaukee, prices are likely to go up if they combine. Consumers may find lower prices in Southwest's new markets.
"New markets always mean cheaper prices, for a while, until everybody fights it out," said FareCompare CEO Rick Seaney. "And a competitor leaving a market typically means higher prices."
Delta Air Lines, a key AirTran competitor, is likely to see the biggest impact in the near term, Hobica said. Both airlines have hubs in Atlanta, Georgia.
"Delta has to decide now whether they're going to eliminate fees on competing routes from and through Atlanta," Hobica said.
Delta led American carriers in fees for the second quarter of 2010, collecting $681.6 million, a 67 percent increase over the same quarter in 2009.
Overall during the second quarter, airlines collected $2.1 billion in ancillary fees, which include charges for checked bags, ticket changes, pet transportation and other fees, according to the Bureau of Transportation Statistics. That figure represents a 15 percent increase from the same quarter last year.
While the proposed deal's effects remain to be seen, some air fare analysts are pleased with the news.
"I think America is going to very happy that now they can fly coast-to-coast between 100 U.S. cities and make the legacy airlines be more competitive with the style of Southwest and their low fees," said BestFares.com CEO Tom Parsons.
__NOTOC__


A Southwest Airlines aircraft. Currently, the airline only serves the US market; however, if they successfully purchase AirTran Airways they will gain international routes to Mexico and the Caribbean.
An AirTran airplane. The company flew 23,998,000 passengers in 2009.
Low-cost US airline  announced Monday that it would buy its low-cost rival  for US$1.4 billion. The merger announcement comes just days after United Airlines sealed a merger deal with Continental Airlines.

"The acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve and takes a significant step towards positioning us for future growth," Gary Kelly, CEO of Southwest, said after the merger was announced.

The Southwest-AirTran deal, which awaits antitrust regulatory approval, will gain Southwest a larger US network. By merging with AirTran, Southwest will also be a strong competitor in Eastern United States cities such as New York City, New York, Charlotte, North Carolina, , Georgia and Washington, D.C., cities that Southwest had previously not touched much. Southwest also will be going international for the first time, inheriting AirTran's Mexican and Caribbean routes. The newly merged company would keep Southwest's name and livery.

Southwest will be offering AirTran stockholders US$7.69 per share. That's 69% more than AirTran's Friday, September 24 closing price. However, AirTran stock shot up 62% to $7.36 on Monday, while Southwest's stock rose more modestly to US$14.01. Delta Air Lines stock declined by 2% on Monday, as Southwest will gain an AirTran hub at Atlanta, which is also Delta's primary hub.

The new airline would carry over 100 million passengers, creating the world's fourth largest airline. Last year, Southwest carried 101,338,000 passengers, while AirTran carried 23,998,000 fliers. Southwest will be 25% larger after the merger is completed.

===Debate over airfare hikes===

Though some people worry that airfares will go up, as people worried about during the United-Continental merger, others, including Southwest, aren't too worried. "America needs this now. You could go from Rochester, N.Y., to somewhere on AirTran, and from Charlotte to somewhere on AirTran. But with this deal you can now go just about anywhere in the country, and to the Caribbean and Mexico, on Southwest.. . With the more than 100 destinations that Southwest will now have, all the legacy airlines will have to set their prices based on whatever Southwest does," says Tom Parsons of BestFares.com. Parsons also said that "I think America is going to very happy that now they can fly coast-to-coast between 100 U.S. cities and make the legacy airlines be more competitive with the style of Southwest and their low fees."  

Consumer advocate Clark Howard also weigned in with a positive remark on the deal. "It's so good for the flying public. This is an opportunity for a discounter to have the kind of heft and national reach of the full-fare airlines," he said.

Southwest even has said that fares could go down, as the "Southwest effect", which is supposed to stimulate competition, "has the potential to stimulate over two million new passengers and over US$200 million in consumer savings, annually" in Atlanta, according to the company. After the merger, Southwest also plans to drop AirTran's checked baggage fees of US$20-25. Southwest currently does not charge for checked baggage. 

Others aren't as thrilled with the merger of the low-cost airlines. "This is truly a shocker, and it can only mean further consolidation. I don't think anyone really saw this coming. More than any recent merger, it spells bad news for low fares, since both airlines were leaders in the low fare space and had frequent, almost weekly, sales. I can only imagine that now pressure is on for American to find a partner, and also US Airways, and that will lead to even less fare competition." says George Hobica,  of airfarewatchdog.com. Hobica also said that "The era of irrational, stupid, destructive fare sales is over. This is the new normal. JetBlue now has permission to raise prices between Baltimore and Boston. Other airlines now have permission to raise prices between Washington, D.C., and Florida."

Though Hobica was generally pessimistic about the deal, he did state that the Southwest takeover would be a win for AirTran customers, "because Southwest has better service than AirTran and lower fees." 

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