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Kai Ryssdal: The ticker symbol for Southwest Airlines are the letters L-U-V. It’s a tribute to its original home base of Love Field in Dallas. But the carrier has been getting a huge amount of consumer love, too. It has more domestic passengers than any other American airline. It’s been profitable for years now in the face of brutal aviation competition. So why’s it going to spend $1.4 billion to buy its low cost rival AirTran?
Marketplace’s Eve Troeh reports.
Eve Troeh: In its announcement about AirTran, Southwest says, “Both companies have dedicated people with kindred warrior spirits.” They are both no-frills, low-cost carriers. But Southwest isn’t buying AirTran because they’re so kindred. This pow-wow is about Southwest adding big names to its “where we fly” list, like Atlanta, Ga., and Reagan Airport in Washington, D.C.
Henry Harteveldt: Southwest becomes more appealing to people who live in those cities, as well as business travelers destined for those markets, which is the key to any airline’s profitability.
That’s Henry Harteveldt with Forrester Research. He says Southwest avoided these airports, because they were known for delays. But now overall air traffic is down, and Southwest feels it can keep up its level of service.
But Harteveldt says the AirTran purchase will still complicate Southwest’s motto of “keep it simple.”
Harteveldt: They have to evolve from “keep it simple” to “keep it simpler.”
A few of the wrinkles? AirTran charges baggage fees. Southwest doesn’t. How will it make up the revenue? AirTran has business class and assigned seating. Southwest notoriously doesn’t. It has to phase them out. Plus AirTran flies to Aruba and the Bahamas. Southwest only flies within the continental U.S.
George Hobica leads Airfarewatchdog.com. He says Southwest likely welcomes the challenge.
George Hobica: I think they would love to fly to Mexico, I think they’d love to fly to Hawaii one day. And I think this is kind of like a baby step for them to break out and become a major player.
And, he says, who knows which other companies Southwest might buy to accomplish those goals.
I’m Eve Troeh for Marketplace.
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