Rumor has it Virgin America is looking to sell – Photo: Bernie Leighton | AirlineReporter
Airlines buying airlines. Mergers. These are the topics that rumors were made for. As I start hearing more rumors about the sale of Virgin America, I wanted to take a closer look at who might buy them — and who wouldn’t. Personally, would I buy them? No. I don’t have the money. If I did, it would be nice, though. A privately-held airline. Immune from Wall-Street capacity discipline bludgeons… heaven!
So now that we know I cannot buy Virgin American… who might?
Northwest Airlines Boeing 757
There has been a lot in the news about airline mergers and buy outs. Delta & Northwest, United & Continental and most recently AirTran & Southwest. Some in the media throw around “merger” and “takeover” interchangeably, but they are very different. When two airlines come together, there are two types of sale agreements: the merger and the takeover.
I got an email from a reader (thanks Jay) asking about the difference between an airline merger and take over. I am not a financial professional, but I want to try my best to point out the major differences. If you have any more to add, please feel free to leave a comment!
This is when two companies come together blending their assets, staff, facilities, and so on. After a merger, the original companies cease to exist, and a new company arises instead. Sometimes the new entity will take the name and brand from one of the airlines, but sometimes an entirely new brand can be created.
Delta and Northwest merged, leaving the Delta brand. United and Continental merged, which will leave the United brand. In mergers like these, management needs to work hard to come to certain agreements, figure what/who will be cut and how the new airline will operate. Of course, this can be a very complex process for both airlines to undertake.
TAKE OVER / BUY OUT / ACQUISITIONS
In a takeover, a company is purchased by another company. The purchasing company owns all of the target company’s assets including company aircraft, trademarks, routes and so forth. The original company may be entirely swallowed up, or may operate semi-independently under the umbrella of the acquiring company.
In the case of Southwest buying out AirTran, the AirTran brand will disappear and be absorbed by Southwest. It is not a merger and Southwest will own the assets of AirTran and have complete control. This process is easier than a merger, since management at Southwest has the final say, but they need to successfully share their culture with the employees at AirTran and make sure they feel welcome.
Alright, I hope that helps some! Image: fiveholer
I am sure by now you have heard the news that Southwest Airlines is buying AirTran. For me, it was bad timing, since this week has been insane and I haven’t been able to read and absorb this huge news until today. Better late than never right? The benefit, is I get to share some great thoughts from other people as well.
Not that long ago I was questioning if Southwest was eying to buy Sun Country. Ha…I will a little off. Southwest was planning something a little bigger. Yes, the new and bigger Southwest still can’t compare in size with the new Delta and soon to be new United, but Southwest is king of US low cost carriers and this transaction makes them the undisputed champ.
This buy out is huge since AirTran is not a small airline. AirTran has over 8,000 employees and 138 aircraft. To compare Southwest has almost 35,000 employees and 547 aircraft. Southwest is obviously larger, but this will be a huge under taking, since both airlines are quite different.
Here are some of the “big” questions that I keep seeing about the buy out:
* What about the new aircraft type? Southwest previously has only flown Boeing 737’s. AirTran flies both Boeing 737’s and Boeing 717’s. Southwest has stated they will continue to fly the Boeing 717 on shorter routes. Seeing the Southwest livery on a Boeing 717 is quite exciting for most airline nerds and I very much look forward to it.
* Will Southwest start international flying? There has been talk about Southwest flying internationally before this buy out, but they can quickly transition since AirTran already has a few international flights. Southwest confirmed they will be updating their reservation system and move forward with additional international flights.
* Will business class stick around? AirTran has business class, Southwest does not. Southwest will be removing the Business Class seats from the AirTran aircraft and go all economy.
* Is open seating going to stick around? Yes. Like it or not, the open seating will continue to be a unique Southwest trait.
* Southwest won’t start fees will they? No. Southwest is well known for no baggage fees, no ticket changing fees, etc. That will continue to stay the same (at least for now).
* Getting access to Atlanta for Southwest is big right? Very much so. Access to Hartsfield-Jackson Atlanta International Airport (ATL), which is the busiest airport in the world, is a biggie. AirTran build a strong presence at ATL and now Southwest will have instant access to compete directly with Delta.
This just goes to show who the heck knows what Southwest will do in the future. They are now flying to larger airports, going internationally and have multiple aircraft types. It used to be pretty easy to predict what Southwest would do, but now they have gone rogue. I don’t think that is a bad thing and it for sure makes things a bit more interesting.
There has already been so much said about this buy out and I want to share some of the best opinions out there:
* Brett Snyder via his blog CrankyFlier and on BNET has done a great job looking at this merger from a number of different angels:
– First look at the merger
– Frontier and other airlines will benefit from this merger
– 6 Reasons why this merger is a good idea
– 4 Reasons why this merger is a bad idea
* Dan Webb on Things in the Sky has a few quick thoughts on the buy out
* Steven Frischling thoughts on his blog Flying with Fish
* PDF file comparing the two airlines