Impact on Twin Cities of Southwest-AirTran merger unclear

Two airlines that have helped keep airfares down in the Twin Cities are combining. Dallas-based Southwest Airlines plans to buy AirTran for $1.4 billion. But the impact of the merger may be relatively minor for Minnesota travelers.

Southwest and AirTran don't have a very big shares of the Twin Cities air travel market. But they have consistently offered enticing fares to Chicago, Atlanta and other destinations they serve. That's often spurred Delta and other carriers to match the Southwest and AirTran fares.

Most notably, Southwest has slashed fares between the Twin Cities and Chicago to as low as $49 each way.

Some industry observers worry Southwest's acquisition of AirTran could reduce airfare competition. But Southwest insists it won't.

"This will mean more destinations, more flights, more low fares," said Southwest spokesman Chris Mainz. "It's too early to tell market-specific impact. But, of course, we're very excited and we think this is going to allow for more options for our customers."

The deal requires regulatory and shareholder approval. Meanwhile, the two carriers will continue to operate separately.

From the Twin Cities, Southwest flies nonstop to Chicago, St. Louis, Denver and Phoenix. AirTran flies nonstop from here to Atlanta and Milwaukee. Combined, Southwest and AirTran carried about 150,000 Twin Cities passengers in August. Meanwhile, Delta and its regional partners flew about 2.1 million.

"There's no real downside to this."

While Southwest says it's too early to forecast how service may be affected in the Twin Cities, Metropolitan Airports Commission spokesman Patrick Hogan is hoping for more flights.

"This could be an opportunity for Southwest, certainly, to grow its presence at MSP," he said. "There are only four airlines at Terminal 2 -- Humphrey. Now that they are acquiring AirTran, there really will only be the three. And Southwest will have a pretty significant presence at the second terminal here."

The other Terminal 2 tenants are Sun Country Airlines and Icelandair.

Hogan wonders whether the merger will reduce AirTran's current nonstop service to its hub in Milwaukee in deference to Southwest's major operations in nearby Chicago.

"That's the question: Is Southwest going to continue to have a significant concentration in both Chicago and Milwaukee?" said Hogan. "Hopefully, they will. And hopefully, we'll see as many flights going out of here flown by Southwest, as we do with Airtran now."

One analyst, at least, figures the union of Southwest and AirTran won't mean fewer flights for Twin Cities travelers.

"Southwest is going to expand there anyway," said Michael Boyd, president of the Denver-based BoydGroup.

Southwest entered the Twin Cities market with flights only to Chicago, and has since added three more nonstop destinations.

Boyd thinks the deal is good for travelers, even though Southwest is more of bare-bones carrier than AirTran is.

"The Southwest product doesn't have a business cabin," he said. "It doesn't give you advance seat selection. So, that might be something consumers look at. But there's no real downside to this."

Unlike AirTran and most other airlines, Southwest doesn't charges passengers for their first two checked bags. And Southwest says it plans to continue that policy after the merger.

Buying AirTran puts Southwest in head-to-head competition with Delta Air Lines in Delta's home base of Atlanta. The deal also gives Southwest a bigger slice of the market in important East Coast markets for Delta, like Boston and New York.

It's hard to see how the Southwest-AirTran deal wouldn't get government approval. The Feds let Delta and Northwest combine, as well as United and Continental.

Analysts expect the planned Southwest-AirTran deal will inspire a merger or two among other carriers, including American, US Airways, and JetBlue. There's even some talk of Delta buying Alaska Airlines to boost its presence on the West Coast.

(MPR wire services contributed to this report.)

Gallery

Fullscreen SlidePrevious Slide

1 of 1

Next Slide