

Southwest's acquisition of AirTran: Why they're doing it and why you should care - jaf12duke
http://blog.flightcaster.com/southwests-acquisition-of-airtran-why-theyre

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mjfern
It looks like Southwest Airlines may have fallen into a growth trap: "Among
all other influences, the desire to grow has perhaps the most perverse effect
on strategy" - M.E. Porter

Southwest competes on cost, and this cost position hinges in large part on the
rapid turnaround of aircraft. Rapid turnaround lowers Southwest's equipment
and labor costs; its aircraft, pilots, and flight attendants are "doing work"
for longer periods of time each day (rather than sitting idle on the ground).

A variety of activities contribute to Southwest's ability to rapidly
turnaround aircraft, but some of the key activities include:

\- Southwest's culture, where everyone pitches in to turnaround aircraft

\- Using a single type of aircraft (737s), enabling simplified service and
maintenance

\- The point to point route structure, avoiding the issue of synching the
schedules of hub and spoke aircraft

\- Operating at less congested airports to avoid traffic delays

From my vantage point, it seems the AirTran acquisition threatens each of
these activities:

\- Integrating AirTran's distinct culture with Southwest's

\- Expanding beyond 737s to operate 717s

\- Divergence from the point to point structure to a hub and spoke

\- Entry into congested airports, such as Hartsfield-Jackson (ATL), which was
ranked #20 in 2010 for on-time departure performance by the Bureau of
Transportation Statistics

In short, this acquisition is problematic from a strategic standpoint and
appears to threaten the basis of Southwest's cost advantage.

~~~
joeyo
Another cost saving measure that Southwest appears to use is to access the
"worst" terminals via the "worst" gates. What I mean by that is their flights
consistently service older terminals, gates that are further away from the
security checkpoint or are otherwise less desirable. I presume that this means
they save considerably on their airport access fees. I personally don't mind
walking a bit further to the gate, so this kind of cost savings doesn't bother
me a bit. I do wonder what the distribution of AirTran's gates looks like,
though.

~~~
lusis
At least at ATL, Airtran has pretty much all of C terminal. Mind you there are
30ish i think gates split 15 on each side so it's not THAT far to walk from
train to one end of the terminal.

The choice of terminal is irrelevant because it just means a shorter or longer
train ride from ticketing/baggage claim. Unless you're connecting with other
airlines, you usually don't have much to worry about.

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tptacek
Two really important bits of backstory to this, if you don't follow the US
airlines: Southwest is famous for flying a single plane type (the 737) and for
a Greyhound Bus-type route map that differs starkly from the hub/spoke model
served by ATL --- the largest "hub" in the US market.

~~~
bobf
I'm not sure if its worth reading too much into the acquisition, from a "this
is going to change Southwest's business model" standpoint. Personally, I
suspect that just getting access to ATL is worth the price for Southwest.

~~~
tptacek
A SWA that flies more than just the 737 is a pretty momentous business model
change.

~~~
mrduncan
I agree. However, they do fly a few different variations of the 737. They are
in the process of replacing their 300s with the newer 700 series and they also
have a few 500 series which are slightly smaller (122 passengers vs 137 in the
300/700). They have also recently been evaluating adding the 800 series (a
stretched version of the 700 series) to their fleet.

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jobeyonekenobi
Looking at the fleets, the article does not mention the fact that AirTran has
65 Orders for 737-700's (the type that Southwest uses),
<http://en.wikipedia.org/wiki/AirTran_Airways#Current_Fleet> and is looking at
options to replace its current 717 fleet.... As well as landing slots,
increased build slots at Boeing are always very welcome.

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reddot
I designed Airtran's telephone flight information system. I hope they keep
it.... :)

~~~
mahmud
Wow. I just used it while flying out of Milwaukee a few days ago.

Airtran is truly a trashy airline. I flew business and had to wipe bread-
crumbs off of my seat.

~~~
tptacek
I actually kind of like Airtran. Cheap biz class, satellite radio. Bread
crumbs don't set me off.

~~~
mahmud
Oh, and it has wifi too. Forgot about that.

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ryanricard
> And since Southwest can't grow by adding capacity to current routes (we know
> the negative cycle that creates), they must find new markets.

I don't think I "know the negative cycle that creates." Could I trouble
someone to explain it to me?

~~~
pchristensen
I'm guessing higher capacity => over supply => loss of pricing power => lower
revenue and higher costs

~~~
dartland
Exactly.

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bigmac
I feel about Southwest the same way many around here feel about Dropbox; such
a great service that gives me exactly what I want.

It will be interesting to see how Airtran employees are integrated into
Southwest's fold. For some reason I love being cattle-prodded onto a Southwest
flight, with the stewardesses giving us fun reminders to be timely. I think
the phrase last time was "find a cush for your tush"

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krschultz
Slightly offtopic, but does anyone dislike Southwest? I have spent my entire
life flying Continental out of EWR because they were basically the only option
and I had a pile of FF miles, but now I'm near 2 Southwest hubs and I'm
thinking of making the switch since I'm almost out of Continental miles. It
seems very different but I've read a lot of positive things about Southwest.

~~~
lotharbot
I don't know anyone who actively dislikes Southwest, but I do know people who
dislike certain policies:

\- Open seating instead of assigned seating. First on the plane = first pick
of seats, and you board the plane in order of when you checked in (online or
at the counter.) I personally like this, but some people don't.

\- Limited amenities. Bring your own entertainment.

\- Singing flight attendants. On some flights, the crew giving the safety
briefing will "spruce it up" by singing or doing it as dramatic poetry or
something. I think it's fun, but some people find it grating.

~~~
tptacek
To be fair, you also have to factor in the SWA clientele, which is noticeably
less business-centric than even Airtran.

~~~
dctoedt
In Texas, SWA is a favorite of many, many business travelers, not least
because of the casual on-board atmosphere and the funny (as in humorous) and
good-natured flight attendants. Friday-afternoon flights can be almost like a
party.

~~~
FraaJad
Perhaps that's because SWA is a Texan company and they "get" the airline?

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robertp
I hope Southwest definitely upsets the dominance that the shitty airlines have
on the east coast.

~~~
marklabedz
I've found that they have done just that at PHL. It wasn't easy to knock US
off balance a few years ago and that's exactly what happened - on time,
generally more friendly and they didn't manage to lose your luggage. During
IRROPS (poor weather, mechanical problem, etc), its a lot easier to sub a 737
for a 737 than have to find a way to cram an A320's worth of people on an E170
or two.

Granted, the dynamics of PHL are a little different from the NYC airports, but
Southwest seems to be effectively penetrating BOS.

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lusis
As someone who flys with his entire family business class to Flint on Airtran
multiple times a year, this is going to suck.

All of the in-laws are in Saginaw and Flint was simply the best place to fly
for those visits.

Now? I guess Detroit via Delta because screw flying to GR and driving across.

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mrbird
One of the things many people love about Southwest is their generally relaxed,
friendly, and informal atmosphere. Is AirTran similar? Do they tell jokes
during the safety demonstration too? If not, do you think they'll start?

~~~
dotBen
_Do they tell jokes during the safety demonstration too? If not, do you think
they'll start?_

I usually fly Delta, and ALL of their servie is a joke, not just the safety
demonstrations. :P

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edw519
Southwest has been ultra-competitive for many reasons, the biggest probably
being its fuel hedging program. But it's only a matter of time before this
competitive advantage asymptotically approaches zero, so it needs new
strategies to maintain its advantage.

As a frequent flier and raving fan of Southwest, I've wondered what would
change when they once again paid the same price for fuel as the legacy
carriers. Today I stopped worrying. This acquisition ought to buy Southwest at
least 10 more years as #1.

I'm also a frequent flier of Air Tran. AFAIC, except for Jet Blue, no other
carrier is in the same class as Southwest and Air Tran. I have little doubt
they will figure out how to make this work.

Now if only the feds don't fuck this up...

~~~
bbatsell
For the past 2-3 years or so, its fuel hedging has actually had a net negative
effect on profit, as their hedged prices were higher than market price for Jet
A.

~~~
secret
While not good, that is part of hedging. It's basically an insurance premium
for a policy they never had to collect on.

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trickjarrett
I find this merger interesting, having flown very little on Southwest but
quite a lot on AirTran due to Atlanta being a major destination for me. I'm
curious to see what changes they bring, however this comes as I find myself
more and more frequently paying extra for JetBlue and other carriers that
provide a bit more than baseline services.

~~~
kingkilr
I've got the opposite perspective, I fly Southwest almost exclusively (for
domestic anyways), mostly though their big hub at Midway, I'm hoping for me
this just means more or the same, but to more destinations.

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clistctrl
I've never liked southwest, I flew with them once, and it was generally a bad
experience. On the other hand I have always LOVED Air Tran. $50 upgrade to
business class, with wifi, and free xm radio. This combination made for one
great flight. Loosing that, looses me.

~~~
bradleyland
Their rewards systems is one of the most generous around as well. Four points
for a business class upgrade, and lots of easy ways to ear points. If you
don't have the points, business class upgrades are far more reasonable than
other airlines. Between that and the WiFi on all flights, I'm going to be
really sad to see them go.

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zackattack
if you are younger than 23, you can book a one-way ticket on airtran for like
$69 on the day of the flight. you have to fly standby, and you can't take any
luggage, but it's an awesome program that i had taken advantage of.

