Southwest-AirTran Deal Sign of Confidence: CEO
The acquisition of AirTran by Southwest Airlines, two discount carriers, means the airline expects robust demand for flights, its CEO told CNBC Monday.
“Certainly, we are counting on our demand continuing to be strong,” said Southwest’s Gary Kelly. “The synergies that flow on a revenue basis from combining the two networks are huge. We believe that we can create $400 million a year in revenue value over and above the costs.”
Southwest has agreed to purchase the Atlanta-based AirTran for $1.4 billion.
Kelly said if the acquisition goes through, it represents a 25 percent increase in the size of the popular low-fare airline. It will allow Southwest to have a presence at key airports that it doesn’t now serve, including Newark (New Jersey) Liberty, La Guardia in New York City and Washington’s Reagan National.
“It’s all about growth and future growth,” added Kelly. “The combinationof the two airlines together creates tremendous growth opportunities we just wouldn’t enjoy on our own. We have complementary route networks.”
Kelly added that Southwest has seen a shift of customers from other airlines, some of which tack on the "dreaded" fees for bags, which Southwest does not do. Extra revenue, he said, has also come from charging full fares and the popularity of its Business Select program.
- Slideshow: North America's Best Major Airports
- Checking the M&A Pulse