The merger, if approved by regulators, would create an airline with 685 aircraft that will serve about 100 million passengers annually in nearly 100 airports. The company will remain headquartered in Dallas and keep the Southwest name.
The acquisition marks the first time Southwest would offer service to Mexico and the Caribbean. The merger would also give Southwest a bigger slice of the market in the Northeast, including Boston, New York and Baltimore- Washington, D.C.
Southwest, the largest airline based on domestic passenger load, has grown quickly since it was founded in 1971, capitalizing on no-frills service, low fares, no first-class seating and no baggage fees.
The union of the two low-cost airlines, industry analysts say, will probably to lead to increased airline profits but potentially higher fares for passengers.
"While Southwest's acquisition of AirTran is likely to be approved by regulators, the devil will be in the details on how it impacts travelers and airfares," said Bryan Saltzburg, general manager of the travel website TripAdvisor Flights. Robust competition among low-cost carriers and legacy airlines has been essential to keeping airfares in check in recent years.
On Wall Street, shares at noon increased for both carriers and most other airline stocks. Southwest stock jumped $1.58 or nearly 13% to $13.86. AirTran stock soared $2.79 or 61% to $7.34. Overall, airline shares were trading higher.
The airline merger is the latest one in the last two years. Earlier this year, United Airlines announced plans to merge with Continental Airlines. Delta Air Lines bought Northwest Airlines in 2008.
Southwest Chief Executive Gary Kelly, however, characterized the move as an opportunity to expand Southwest to key markets and increase profits while offering the airline's low fares. While AirTran charges a baggage fee, Kelly promised the newly merged airline would not.
"We've been a little busy at Southwest Airlines," he said. "This acquisition fits in beautifully with the strategy we've laid out for what will be the next decade."
Under the $1.42-billion agreement, including debt, Southwest will exchange each share of AirTran common stock for $3.75 in cash and 0.321 shares of Southwest Airlines' common stock, subject to certain adjustments. The agreement has been unanimously approved by the board of directors of both airlines but still requires approval from AirTran stockholders and federal regulators.
The two airlines would be fully integrated within two years, Kelly said. "Both companies have dedicated people with kindred warrior spirits."
The merger, if approved by regulators, would create an airline with 685 aircraft that will serve about 100 million passengers annually in nearly 100 airports. The company will remain headquartered in Dallas and keep the Southwest name.
The acquisition marks the first time Southwest would offer service to Mexico and the Caribbean. The merger would also give Southwest a bigger slice of the market in the Northeast, including Boston, New York and Baltimore- Washington, D.C.
Southwest, the largest airline based on domestic passenger load, has grown quickly since it was founded in 1971, capitalizing on no-frills service, low fares, no first-class seating and no baggage fees.
The union of the two low-cost airlines, industry analysts say, will probably to lead to increased airline profits but potentially higher fares for passengers.
"While Southwest's acquisition of AirTran is likely to be approved by regulators, the devil will be in the details on how it impacts travelers and airfares," said Bryan Saltzburg, general manager of the travel website TripAdvisor Flights. Robust competition among low-cost carriers and legacy airlines has been essential to keeping airfares in check in recent years.
On Wall Street, shares at noon increased for both carriers and most other airline stocks. Southwest stock jumped $1.58 or nearly 13% to $13.86. AirTran stock soared $2.79 or 61% to $7.34. Overall, airline shares were trading higher.
The airline merger is the latest one in the last two years. Earlier this year, United Airlines announced plans to merge with Continental Airlines. Delta Air Lines bought Northwest Airlines in 2008.
Southwest Chief Executive Gary Kelly, however, characterized the move as an opportunity to expand Southwest to key markets and increase profits while offering the airline's low fares. While AirTran charges a baggage fee, Kelly promised the newly merged airline would not.
"We've been a little busy at Southwest Airlines," he said. "This acquisition fits in beautifully with the strategy we've laid out for what will be the next decade."
Under the $1.42-billion agreement, including debt, Southwest will exchange each share of AirTran common stock for $3.75 in cash and 0.321 shares of Southwest Airlines' common stock, subject to certain adjustments. The agreement has been unanimously approved by the board of directors of both airlines but still requires approval from AirTran stockholders and federal regulators.
The two airlines would be fully integrated within two years, Kelly said. "Both companies have dedicated people with kindred warrior spirits."
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