Sunday, February 27, 2011

AirTran, others testify before Senate panel about Southwest-AirTran merger

Southwest Airlines, AirTran, others testify before Senate panel about Southwest-AirTran merger
* AirTran is a more aggressive discounter than Southwest on average. "The pricing data ... reveals that AirTran's discounts are some of the deepest in the industry; in fact, higher than Southwest's, which has been considered the industry "maverick" for many years," Moss said.

* Southwest has grown less aggressively than AirTran in recent years.

"The reason for AirTran's maverick-like behavior on the entry front may be obvious, namely that Southwest - with a larger market presence - may be reaching saturation levels in terms of the airports it can serve using its hybrid system," Moss said in her prepared remarks.

"This likely reflects the fact that Southwest, which is far larger and more mature than AirTran, has experienced nearly as much organic growth as possible. Merger may be the only way to extend this growth platform while AirTran may still be in expansion mode."

* While AirTran has shown that a low-cost carrier can enter a market, LCCs in the future may not find it so easy to enter a market versus Southwest-AirTran.

"Those players are likely to be the remaining LCCs," she said. "But the best markets for LCC entry will already have been entered by Southwest and AirTran which, when merged, will be a more formidable competitor for an entrant."

Fares may go up in Milwaukee, once Southwest -- the less aggressive discounter -- takes over AirTran.

"The merged airline will be in price competition against legacy carriers, but no longer against each other," Moss said. "While they may continue to be the low fare operator, their fares could edge closer to legacy fares and their influence on legacies' pricing could diminish."

The hearing by the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights included appearances by Gary Kelly and Robert Fornaro, Southwest's and AirTran's chairmen, presidents and CEOs, respectively, who saw only good things for Milwaukee and competition if Southwest and AirTran were allowed to merge.

Also speaking were the Milwaukee airport director and president of the Metropolitan Milwaukee Association of Commerce.

Southwest and AirTran are awaiting the U.S. Department of Justice's response to their proposed deal. They reiterated this week that they expect to close the merger in the second quarter of 2011.






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