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Southwest Airlines to Acquire AirTran

September 27th, 2010 Comments off

Spreading Low Fares Farther | Southwest Airlines to Acquire AirTran Holdings, Inc..

See the link above for the official website related to the buyout of AirTran by Southwest.  There are numerous news reports as well that you can read elsewhere.

Photo credit: Brenden Schaaf taken September 29, 2010 at MSP using a BlackBerry Bold

Probably the biggest way this story relates to our class is in the value chain discussion with Southwest obviously feeling that they needed expand to remain competitive.  Specifically, news reports I have read and heard have indicated that Southwest had a desire to expand and/or enter the Atlanta, New York City, Orlando, and Milwaukee markets.  A year ago, Southwest was seen a suitor for Midwest Airlines but they lost out in that attempt to expand to Frontier Airlines.

Mega-mergers are the pattern in the airline industry these days following tie-ups by Delta/Northwest and United/Continental.  It will be very interesting to watch how Southwest proceeds as they try to avoid the negative aspects of mergers that have plagued many companies including other airlines (such as America West and US Airways).  Southwest probably has the most unique culture of all airlines with a playful, fun way of dealing with customers.  Anyone that has ever flown Southwest can tell you that you will not mistake it for a legacy carrier.  Culture clash is a common reason for merger failures…Southwest will have to be careful to avoid the traps associated with this as they proceed.

Another challenge will be how Southwest integrates aircraft and frequent flier programs at AirTran into the Southwest fleet and system.  Southwest is known for flying only Boeing 737 aircraft to make maintenance and other issues easier, while AirTran flies Boeing 717 aircraft in addition to 737s.  Perhaps this is a strategy for Southwest to branch out to different, but related, types of aircraft.

Another issue that will be interesting is how Southwest configures the AirTran aircraft post-acquisition.  AirTran has a small First Class cabin on most (all?) planes and they likely attract a certain segment of the business traveler population that is accustomed to the additional services provided.  Will Southwest risk alienating business travelers by going to the “cattle call” seating that they have today once they acquire AirTran and enter markets like Atlanta where there is a loyal business traveler following?  Will business travelers defect to Delta, which is also based in Atlanta?  Perhaps they already have?

Stay tuned to this situation in the months to come.  There will be lots of examples in the news related to what we discuss in class.

Other links to news about this story:

On-Time Performance Measures Subject to Manipulation

July 21st, 2009 Comments off

Here is a piece from USA Today recently that discusses the padding by airlines of their flight times over a 20 year span.  One way to hide the fact that planes are often late is to manipulate the schedule so that the expectations are lowered.

For airline executives facing chronic delays on certain routes, the answer has been to pad those flights’ “block times” by lengthening the total number of minutes the aircraft is expected to operate, all the way from the gate at Airport A to the gate at Airport B.

As one airline operations manager said to me a few years ago: “The airlines are no more on-time than they used to be, but they’re better at covering it up.”

Think flight times are being padded? They are.  Bill McGee.  USA Today.  June 29, 2009.

A similar Wall Street Journal article from a couple years ago places the blame on increased congestion, which I’m sure is somewhat to blame, but increasing the time allotted for each flight gives the airline flexibility and allows it to be “on-time” when it otherwise wouldn’t be.  When the airlines themselves get to set the expectation, it becomes easier to meet (surprising, then, how many late flights there still are).

A check of two dozen flights from June airline schedules found that “block times” — the time airlines allot in their schedules for the trip — are about 10% higher than they were in June 1997. That kind of slowdown makes trips less productive for travelers with more time spent sitting and waiting. It can also frustrate travelers who arrive “early” on days when there aren’t slowdowns, only to wait for a gate to open at the scheduled arrival time.

The Middle Seat: Why Flights Are Getting Longer; Planes Are Faster and Navigation Better, but Airlines Are Padding Schedules Even More as Congestion Worsens. Scott McCartney. Wall Street Journal. (Eastern edition). New York, N.Y.: May 29, 2007. pg. D.1