The cash-and-stock deal is to be closed sometime in the first half of 2011. It requires both regulatory and shareholder approval.
The airlines are to fully blend their operations in 2012. Ultimately, the AirTran nameplate will disappear and Southwest will eliminate the bag fees and flight-change fees that AirTran now charges, Southwest said in its announcement.
Southwest, which does not assign seats and offers just one class of service, said it will spread that system to AirTran and will eliminate AirTran’s current business-class and coach service operation.
“We have open seating, no plans to change that. We don’t charge for bags, no plans to change that,” Gary C. Kelly, Southwest’s chairman, president and chief executive officer, told reporters during a news conference Monday.
Southwest and AirTran will operate separately, as they do now, until the deal is closed. They said the combined airline will operate from more than 100 airports and serve more than 100 million customers.
The deal will give Southwest increased access to the Atlanta market and New York’s LaGuardia Airport and, for the first time, access to Washington’s Reagan National Airport.
“It will provide new low-fare competition to nearly all legacy airport markets in the country that we do not serve today,” Kelly said, without giving details.
Kelly said he initiated the discussions in the spring of 2010 by contacting Bob Fornaro, AirTran’s chairman, president and CEO.
It would be the airline industry’s latest merger. Delta Air Lines absorbed Northwest Airlines two years ago, United and Continental’s merger takes effect at the end of this week and Republic Airways bought Frontier Airlines last year.
It is too soon to tell how the AirTran-Southwest deal could affect Dayton’s air service, said Linda Hughes, a spokeswoman for the Dayton airport. None of the recently completed or announced airline mergers has had a negative effect on Dayton’s air service, Hughes said.
The merger of AirTran into Southwest could add more than 20 percent, or about $2 billion a year, to Southwest’s annual revenues, Kelly said.
No changes in employment are planned for either airline, the companies said. Southwest said it hasn’t had an employee furlough in 39 years and “as we grow, we will need more people, not fewer.”
The companies said they expect they will need to hire about 2,000 employees a year to maintain the desired work force, given normal turnover.
“We’ve never had a furlough, we’ve never had a pay cut,” Kelly said.
The company will work with its unions to resolve seniority issues as the work forces are blended, Kelly said.
Southwest, which carries more passengers than any other airline in the United States, intends to keep its headquarters in Dallas. That would ultimately mean an end to the Orlando headquarters of AirTran, which has hubs in Atlanta, Orlando and Milwaukee.
The deal will provide new opportunities for AirTran and its employees in giving access to Southwest’s financial strength, Fornaro said.
Based on Southwest’s closing share price on Friday, the deal is worth $7.69 per AirTran share. That is a 69 percent premium over its closing price of $4.55.
Southwest will pay about $670 million with available cash. Southwest will assume $2 billion in AirTran debt.
The Associated Press contributed to this story.
Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.
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