Southwest Airlines Agree $1.4 billion to Buys AirTran Airways

Southwest Airlines, the nation’s largest low-fare carrier, said on Monday that it had agreed to buy its smaller rival AirTran Airways in a transaction valued at $1.4 billion, expanding its foothold in New York and Boston and allowing it to move into Atlanta, the nation’s largest airport.

The deal is valued at $3.4 billion when AirTran’s debt and aircraft leases are included. Southwest said the purchase had been approved by the boards of both companies, although it still needs regulatory and shareholder approval.

The move comes as the domestic airline industry is consolidating and reducing the number of seats offered as it attempts to return to profitability. United Airlines is taking over Continental Airlines on Oct. 1, after shareholders of both companies recently approved the tie-up and the government gave the green light. Delta Air Lines led the way in 2008 when it acquired Northwest.

The transaction is a sharp departure for Southwest, one of the nation’s few consistently profitable airlines. The company’s success had been built on a simple business model, operating the same type of Boeing 737 planes at a higher frequency between smaller airports.

But Southwest has been looking for ways to expand as its network grew. For instance, it had sought ways into the nation’s larger markets, like New York, Boston and Washington.

So far, Southwest’s presence in New York has been very limited. It has a few landing and take-off rights, called slots, at La Guardia Airport. As part of the United-Continental merger, Southwest had recently obtained some slots at Newark Liberty International Airport.

Southwest said the acquisition would increase its presence in New York and open the door to Atlanta, which is the nation’s largest airport and the hub of Delta Air Lines.

Analysts at Deutsche Bank said they expect the deal to gain swift regulatory approval given the speed with which the federal government approved the United-Continental tie-up and the fact that the networks of Southwest and AirTran do not overlap much.

Southwest said the transaction would save $400 million a year by 2013. It said the one-time costs related to integrating AirTran would be $300 million to $500 million.

The offer represents a premium of 69 percent over AirTran’s closing stock price on Friday. AirTran shareholders would receive a combination of Southwest shares and cash. That includes at least $3.75 in cash and 0.321 shares of Southwest common stock for each share of AirTran common stock.

JetBlue to Compete With Delta and US Airways Daily Flights Services to Newark-Bouston Destination Flights

Airline will add four daily flights along Northeast route to compete with Delta and US Airways; lower fares foreseen.

JetBlue Airways announced Wednesday that it will start offering daily service from Newark Liberty International Airport to Boston’s Logan International Airport in May, injecting new competition into a Northeast corridor long dominated by Delta Air Lines and the US Airways.

Queens-based JetBlue plans to launch four daily flights between Newark and Boston. The low-cost carrier already makes up to eight flights per day from John F. Kennedy International Airport to Boston.

“JetBlue is committed to giving travelers more for less, and that is particularly true for our new route to Newark, which currently has some of the highest airfares in America,” said Scott Laurence, the airline’s vice president of network planning in a statement Wednesday.

Though JetBlue declined to give pricing estimates for the new Newark to Boston route, the airline did indicate its fare would be cheaper than the going rate. Its main competition along the New York City-to-Boston route is from the Delta Shuttle and US Airways Shuttle.

Commuters from Newark to Boston paid an average one-way gross fare of $311 during the first quarter of this year, according to U.S. Department of Transportation data compiled by JetBlue. “[That] price is higher than the average fare paid by Boston travelers on any of the six coast-to-coast routes operated by JetBlue from Logan,” the company said in a statement.

Average ticket prices on all carriers from JFK to Boston during the same period were $106 one-way, and $177 one-way from La Guardia Airport.

JetBlue rates on its JFK-to-Boston route range from $49 to $301 one-way, according to an airline spokesman. The airline did not provide an average fare, but pointed out that all of its flights include unlimited snacks and is the only carrier with free live television programming on the route.

US Airways declined to comment on JetBlue’s service, instead pointing out that the US Airways Shuttle offers hourly service from La Guardia to Boston from 6:00 a.m. to 9:00 p.m. weekdays. US Airways also serves free beer, wine and soft drinks on its shuttle flights.

Delta Air Lines also declined to comment on the JetBlue move, saying only that “La Guardia is the preferred airport for business travelers…and they have long counted on the Delta Shuttle for reliable, convenient hourly service.”

JetBlue’s announcement came just days after discount-rival Southwest Airlines won 36 flight slots at Newark airport as a concession of the merger between Continental Airlines and US Airways. Assuming it receives the necessary governmental approvals, Southwest can start operations at Newark as early as March.

JetBlue is the largest carrier at its home base of JFK, moving more than 11.5 million passengers through the airport over the 12 months ended in June. It currently has a small presence at Newark Liberty, from which it serves five cities in Florida, carrying fewer than 980,000 passengers over the same period. JetBlue was the sixth-ranked carrier at the New Jersey airport.

Southwest Airlines to Increase Flight Service to New York City Area

The result of the merger of two largest airlines, Continental Airlines and United Airlines will add service competition flights to New York City.

Southwest Airlines is one airline that provides airline flight service to New York City. To anticipate competitive air service, Southwest Airlines will add the service number of flights to New York City.

Southwest Airlines may soon double the number of its flights to the New York City area as a result of a deal that would allow Continental and United to move forward with the carriers’ $3.15 billion merger agreement.

Dallas-based Southwest said it would lease 36 time slots at Newark Liberty International Airport from Continental Airlines, giving the domestic budget carrier first-time access to the constrained and busy facility.

“This will help [Southwest] establish a pretty good presence in the Northeast, and it’s enough to have the Southwest effect: substantially lower airfare,” said Terry Trippler, travel advisor with the consultancy Rules to Know, in a Monday interview.

Southwest already flies eight round-trip flights from New York’s LaGuardia Airport. It also operates 21 daily flights out of Islip Macarthur Airport, on nearby Long Island.

The new flights out of Newark would begin in March.

Southwest has a record of offering less expensive ticket prices because of a low-cost business model, which includes a strategy of using a single model of aircraft to keep training and maintenance costs down. Whenever the airline enters a new market, Trippler said, ticket prices generally decline.

Agreeing to the slot transfer cleared the way for the Justice Department to close its investigation into the competitive effects of the merger proposed between Continental and UAL Corp., the parent of United Airlines. See related story on Justice Department approval.

It “will likely significantly benefit consumers on overlap routes as well as on many other routes,” the Justice Department said in a statement. Continental has hub operations at Newark Airport.

Shares of UAL rose 1.3% to close at $20.71 and Continental added 0.4% to $21.89 in Monday trading. Shares of Southwest slipped 1.3% to $10.99.

Michael Derchin, analyst with CRT Capital Group, said that regardless of any decline in ticket prices from having to compete with Southwest, United-Continental will more than make up for this through some $800 million to $900 million in merger-related cost reductions.

“It’s such a good merger that it’s pretty small in the scheme of things,” Derchin said in an interview. “It’s a modest negative” for United and Continental, he said.

By contrast, Delta Air Lines and US Airways worked to exclude Southwest when they proposed swapping time slots at LaGuardia and at Ronald Reagan Washington National Airport. Shutting out the discount carrier in part led to the airlines withdrawing the plan in July, according to Derchin.

New York represents just a small part of Southwest’s total business, but it has a lot of potential for growth, according to Southwest spokesperson Katie Coldwell.

“We would love to have more slots at LaGuardia and Newark,” Coldwell said.

The airline currently operates Boeing Co. 737-300, -500 and -700 jetliners, but it’s considering the addition of the larger 737-800, with would increase its number of seats per flight.

Such an aircraft would be better suited for the New York area, which sees a high demand for traffic and yet is constrained by size of its three major airports.

Combined, Newark, LaGuardia, and John F. Kennedy International airports are No. 3 in terms of passenger traffic, just after Atlanta’s Hartsfield-Jackson and Chicago’s O’Hare, according to data from Airports Council International.

Source : MarketWatch

U.S. Regulators Approved Propose Merger Continental Airlines and United Airlines

Continental Airlines Inc. and United Airlines cleared the biggest hurdle in their proposed merger on Aug. 27 after federal regulators said they had approved the deal.

United Airlines and Continental were informed by the Antitrust Division of the U.S. Department of Justice that it had completed its review of the proposed merger. That clears the way for the deal to close Oct. 1, pending shareholder votes in September.

“The completion of DOJ’s review is an important step on our journey of creating the world’s leading airline, benefiting our customers, co-workers, communities and stockholders,” said Jeff Smisek, Continental’s chairman, president and chief executive in a statement. “The DOJ’s decision permits us to clear one of the last regulatory hurdles to closing our merger.”

Houston-based Continental and Chicago-based United announced an all-stock merger on May 3. Both companies have set special shareholder meetings to vote on the deal Sept. 17.

United and Continental received clearance from the European Commission on the airlines’ proposed merger in July, which noted its investigation found the transaction would not raise competitive concerns in Europe or on trans-Atlantic routes.

Continental shareholders will receive 1.05 UAL shares for every Continental share they own. At the closing of the deal, Continental shareholders will hold 45 percent of the new entity, while UAL shareholders will own 55 percent. The combined company will have headquarters in Chicago.

Also on Aug. 27, Continental and United said they would lease 18 pairs of round-trip flights to Southwest Airlines at Newark Liberty International airport in an effort to address DOJ concerns.

Southwest Airlines to Begin Flights To Newark Liberty

Southwest Airlines Co. said Friday it will boost its New York-area flying next year as part of a deal that also seeks to ease concerns from regulators about the proposed merger of UAL Corp.’s United Airlines and Continental Airlines Inc.

Dallas-based Southwest plans to lease take-off and landing slots at Newark Liberty International Airport from Continental, adding to its existing services in the region from New York LaGuardia and Islip on Long Island.

Southwest would lease slots to operate 18 daily round-trip flights at peak and off-peak times, which analysts said would likely be enough for high-frequency service to three yet-to-be-disclosed destinations. It would start some flights in March 2011, with a full schedule by next June.

Continental and United said in a joint statement that the plan was a fair solution to concerns raised by the Department of Justice about their proposed merger. The airlines have responded to a second request for information from regulators, and had previously said they were confident of closing a deal by year end. The Southwest plan is contingent on sealing a deal by Nov. 30.

Newark is the New York area’s largest hub and a stronghold of Continental, but rivals including Delta Air Lines Inc., AMR Corp.’s American Airlines and JetBlue Airways Corp. are seeking to buttress their presence in the country’s largest travel market.

Southwest has a limited presence at slot-restricted LaGuardia and successfully campaigned to block a planned transfer of slots at the airport involving Delta and US Airways Group Inc. Delta aimed to strengthen its position at LaGuardia while US Airways would have secured more access to Reagan National in Washington, D.C.

For Southwest, an enhanced New York presence fits its strategy of winning more premium business travelers. The country’s largest carrier of domestic passengers is revamping its frequent-flier program to secure more high-paying corporate accounts, as well as providing in-flight wireless service and credit card tie-ins, a key revenue source for the industry.

The airline, like other low-cost carriers, had reeled in growth plans over the past 18 months but continues to add back limited capacity to balance supply with recovering demand. Southwest had previously announced plans to add two new cities next year to expand its network to 71 destinations. It will also decide in December whether to order larger versions of the Boeing 737 that would suit more congested airports like Newark.

Source : WJS

Continental Airlines Proposes Three Major Airports In New York Exemption New Tarmac Rule

According to Continental Airlines, carriers serving New York’s three major airports should be temporarily exempt from new federal rules that fine airlines for tarmac delays.

In a Department of Transportation filing, Continental Airlines said delays from John F. Kennedy International Airport’s runway closure and construction impact all major airports in New York City.

Due to New York’s complex and interconnected airspace, Continental said “delays and delay mitigation strategies at one New York area airport adversely affect and inconvenience air carriers and passengers at another New York area airport.” Bad weather and conflicting runway approaches could cause “exponential increases” in the number of delays occurring at the other New York airports, said Continental.
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