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Southwest to Acquire AirTran

September 27, 2010 By: Staff

Southwest AirlinesSouthwest Airlines will acquire AirTran Holdings, Inc., the parent company of AirTran Airways (AirTran), for a combination of cash and Southwest Airlines' common stock. The transaction has been valued at $1.4 billion. The agreement has been unanimously approved by the boards of directors of each company, and closing is subject to the approval of AirTran stockholders and regulatory clearance.

"Today is an exciting day for our employees, our customers, the communities we serve, and our shareholders," said Gary C. Kelly, chairman, president, and CEO of Southwest Airlines. "The acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve and takes a significant step towards positioning us for future growth.

"This acquisition creates more jobs and career opportunities for our combined employee groups, as a whole. It allows us to better respond to the economic and competitive challenges of our industry, and fits perfectly within our strategy for our fifth decade of service," Kelly continued. "It offers customers more low-fare destinations as we extend our network and diversify into new markets, including significant opportunities to and from Atlanta, the busiest airport in the United States and the largest domestic market we do not serve, as well as Washington, D.C. via Ronald Reagan National Airport. The acquisition also allows us to expand our presence in key markets, like New York LaGuardia, Boston Logan, and Baltimore/Washington. It presents us the opportunity to extend our service to many smaller domestic cities that we don't serve today, and provides access to key near-international leisure markets in the Caribbean and Mexico. Finally, this accelerates our goal to boost profits and achieve our financial targets,” Kelly said.

The acquisition will significantly expand Southwest Airlines' low-fare service to many more customers in many more domestic markets, creating hundreds of additional low-fare itineraries for the traveling public. Moreover, the expansion of low fares should generate hundreds of millions in annual savings to consumers, Southwest said,

Based on an economic analysis by Campbell-Hill Aviation Group, LLP, Southwest Airlines' more expansive low-fare service at Atlanta, alone, has the potential to stimulate over two million new passengers and over $200 million in consumer savings, annually. These savings would be created from the new low-fare competition that Southwest Airlines would be able to provide as a result of the acquisition, expanding the well-known "Southwest Effect" of reducing fares and stimulating new passenger traffic wherever it flies.

"Joining Southwest Airlines will give us opportunities to grow, both professionally as individuals and as a group, in ways that simply would not be possible without this agreement," Bob Fornaro, AirTran Airways' chairman, president and CEO said. "This agreement with Southwest is a testament to the success and hard work of the more than 8,000 AirTran crew members who have built this airline."

AirTran revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $2.5 billion and $128 million, respectively. Southwest Airlines revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $11.2 billion and $843 million, respectively. Net annual synergies are expected to exceed $400 million by 2013. One-time costs related to the acquisition and integration of AirTran are expected to be in the range of $300 million to $500 million.

Until closing, Southwest Airlines and AirTran will continue to operate as independent companies. After closing, Fornaro will continue to be involved in the integration of the two companies. Southwest Airlines plans to integrate AirTran into the Southwest Airlines brand by transitioning the AirTran fleet to the Southwest Airlines livery, developing a consistent customer experience, and consolidating corporate functions into its Dallas headquarters.


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