Smart SpendingSmart Spending

Will Southwest deal mean higher fares?

Southwest says it plans to continue its low-fare, no- or low-fee model once the acquisition of AirTran is complete.

By Karen Datko Sep 28, 2010 9:45AM

The first thing I thought upon hearing of Southwest's plan to buy AirTran was: Does this mean Southwest Airlines is coming to an airport near me? Am I going to be free to move about the country? Please, let it be so. (No such luck.)

But passengers who will gain access to Southwest, if regulators and AirTran shareholders approve this deal, are thrilled.

 

"They don't charge for luggage. I'm excited. If Southwest is coming here, that will be fantastic," Sharon Elliott told The Atlanta Journal-Constitution at the Atlanta airport, which would be one of 37 destinations added to Southwest's itinerary. Post continues after video.

Airfarewatchdog blog reader "JGC" wrote:

I cannot imagine that Southwest will depart from what made them the most profitable airline in the industry by raising fares and fees. I live in ATL and am so glad they will FINALLY be coming into Hartsfield!

It's clear that Southwest Airlines is still held in high regard while many airlines have fattened themselves at the fee and fare trough. Everyone, it seems, knows that Southwest doesn't charge a checked-bag fee -- for the first or second bag. Only one other U.S. airline, JetBlue, doesn't charge for the first bag.

 

But will Southwest change when it has completely absorbed its smaller no-frills rival -- sometime in 2012 if all goes according to plan? Southwest's purchase of AirTran Airways for $1.4 billion means Southwest can expand into Atlanta, the world's busiest airport, and other cities in the Southeast and elsewhere. Bloomberg Businessweek explains:

Atlanta, AirTran's biggest hub, is the largest U.S. market Southwest doesn't already serve. The purchase fulfills its goal of adding flights to Mexico and the Caribbean, expands its presence at New York's LaGuardia and lets it start flights at Washington's Reagan National airport.

Some of what we've read so far looks good for consumers. The Airline Biz Blog at The Dallas Morning News reports: "Southwest does not plan to charge for bags, have first-class seating and have assigned seating. AirTran offers all of the above." Southwest also plans to continue its no-fee policy for ticket changes, Southwest's special new Spreading Low Fares Farther website says.

 

That's great news. USA Today reports that airline fees overall continue to rise, "some by more than 50% since a year ago." (That article details some of the highest fees, and links to this handy chart so you can compare what each airline charges.)

 

Also, Southwest chief executive Gary Kelly said his airline, if the deal goes through, will continue to offer low fares. Terry Maxon of Airline Biz wrote, "By combining the reach of Southwest and AirTran, Kelly expects the deal to save consumers hundreds of millions of dollars in airfares."

 

Others aren't so sure fares will stay low. "The union of the two low-cost airlines, industry analysts say, will probably lead to increased airline profits but potentially higher fares for passengers," the Los Angeles Times reports.

 

What do some of the best-known experts think? At The Wall Street Journal's The Middle Seat Terminal blog, Scott McCartney made this prediction:

As always in airline mergers, there are tradeoffs for consumers. On overlapping routes, travelers may get more complete schedules with flights spread out more when two airlines aren't battling head-to-head. But the 9 a.m. or 5 p.m. flights may get more expensive if there's only one plane departing instead of two. For some, airfare will no doubt rise. Others may find a bigger Southwest can reach even further and bring low-fare competition to new markets that don't now have it.

George Hobica of Airfarewatchdog said, among other things:

Southwest and AirTran don't have much route overlap, so the merger in and of itself won't lead to higher fares. But both airlines offer aggressive airfare sales almost weekly. We'll see fewer of these, and fares will inch up. Remember, though, that fares can only go so high before consumers stay home, drive, take the BoltBus or Amtrak.

Do you welcome this deal? Or do you predict that Southwest is going to become a clone of the consolidation-happy legacy airlines?

 

More from MSN Money:

1Comment
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More