You might presume from the title of this post that I’m opposed to Southwest’s acquisition of AirTran. But that isn’t actually the case. I’m just confused. Why would Southwest do this? I don’t follow the logic.
I can easily identify reasons why this deal isn’t a good one for Southwest.
- Southwest has a very distinctive and unique culture. Merging with AirTran will put this at significant risk.
- Southwest has long benefitted from having just one type of plane, the 737. With the AirTran acquisition, Southwest will start flying the 717. This is a big shift.
- AirTran’s main base is Atlanta, a huge Delta hub. Southwest has long avoided the hub model, especially at major airports like Atlanta. Again, this is a major strategy change.
Overall it feels like Southwest is becoming more like the other big domestic airlines. And why would Southwest want to do this? Financially, most domestic airlines have been a disaster over the past 10 years. Southwest, with its very unique model and culture, was the one shining star.
I have a much harder time identifying reasons why the deal makes sense. Perhaps this is a defensive move; Southwest might be nervous about AirTran, so the acquisition is primarily to eliminate a threat. This could be the case, but I find it unconvincing.
So if I owned any Southwest stock (I don’t) I would sell it.
Or am I missing something?