NEW YORK (AP) - Southwest Airlines said Monday it will buy
AirTran for about $1.42 billion. The move will put Southwest in
head-to-head competition with Delta Air Lines in Delta's home base
The buyout, funded mostly with debt, will also give Southwest a
bigger slice of the market in cities like Boston and New York,
where it has been expanding.
Southwest, based in Dallas, carries more passengers than any
other airline in the U.S. Besides its base in Atlanta, AirTran has
hubs in Milwaukee and Orlando.
The announcement continues the airline industry's move to
consolidate. Continental Airlines and United Airlines parent UAL
Corp. will formally combine at the end of this week and become the
world's largest, toppling Delta. Delta claimed that spot when it
acquired Northwest Airlines two years ago.
Southwest tried unsuccessfully last year to buy Frontier
Airlines out of bankruptcy. Republic Airways Holdings won the
auction for Frontier last August, buying the Denver-based carrier
for almost $108.8 million.
Southwest's acquisition of AirTran is expected to close in the
first half of next year. It requires both regulatory and
shareholder approval. The airlines expect to fully blend their
operations in 2012.
Based on Southwest Airlines' closing share price on Friday, the
deal is worth $7.69 per AirTran share. That's a 69 percent premium
over its closing price of $4.55. In premarket trading, AirTran
shares jumped 61 percent to $7.31, while Southwest shares rose 12
cents to $12.40.
Southwest will pay about $670 million with available cash.
Southwest will assume $2 billion in AirTran debt.
Southwest and AirTran said the new airline will operate from
more than 100 different airports and serve more than 100 million
In April, AirTran Holdings Inc. CEO Robert Fornaro signaled his
interest in making a deal, saying the airline would consider a
combination with another carrier if approached and if such a deal
made sense for the company and shareholders.
But when asked by The Associated Press who might be a potential
suitor for AirTran, Fornaro said, "I'm not sure that we're
necessarily a natural fit to be gobbled up by somebody else."
(Copyright 2010 by The Associated Press. All Rights Reserved.)