Southwest/AirTran merger approved by Dept. of Justice, to close May 2

27 April, 2011 20:50

US Dept. of Justice said Tuesday it has approved Southwest Airlines' acquisition of AirTran Airways, clearing the way for the transaction to close on May 2.

SWA last September announced an agreement to acquire Orlando-based AirTran for $1.4 billion in cash and SWA common stock in a deal that brings together the world's largest LCC with the third largest LCC in North America (ATW Daily News, Sept. 28, 2010). All other necessary approvals except DOJ's had already been received (ATW Daily News, March 24).

DOJ's antitrust division said in a statement that it has "determined that the merger is not likely to substantially lessen competition. The merged firm will be able to offer new service on routes that neither serves today, including new connecting service through [Atlanta] from cities currently served by Southwest to cities currently served by AirTran ... [T]he presence of low-cost carriers like Southwest and AirTran has been shown to lower fares on routes previously served only by incumbent legacy carriers."

DOJ conceded that "there are overlaps on certain nonstop routes," but said antitrust officials decided to "not challenge the acquisition after considering the consumer benefits from the new service. Also, the airports affected by the overlaps are not subject to restrictions on slots or gate availability."

The two carriers combined had revenue of $14.7 billion and carried approximately 113 million passengers in 2010, according to DOJ.

SWA said in a statement, "The combination of AirTran and Southwest Airlines is expected to generate substantial benefits to consumers, including the expansion of low-fare competition in airline markets across the United States." It expects the two carriers to be operating on a single operating certificate by the 2012 first quarter.

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