Several analysts have recommended the merger of Southwest airlines and Airtran Airlines. Most of these analysts have a vision of the benefits of this merger. The company has a strong financial background, and enough labor, which will be put into practice to manage the challenges. The management by the current chief executive officer is outstanding and of good quality. In his speech to the public, the chief executive officer gives people assurance that the company will deliver the best services to its customers (Thompson, 2011). All the same, it will not be an easy task for the company but through the collaboration of the management and the employees at the ground level, the company will enjoy the best outcome from the merger. There are mixed reactions from different people concerning the merger as some are suspecting a hike in prices of the customer services. However, the company should be determined in handling the hardships. Some people think that the challenges would be so many for Southwest Airlines to handle, but the company should never look behind.
Brief History of Southwest Airline
The longest CEO and the co-founder of Southwest airlines are Herb Kelleher who majored in philosophy and law. Kelleher started working as the CEO of Southwest Airlines in 1981 whereby he started his duties by visiting the company with a maintenance specialist who was supposed to scrutinize the general working of the planes and find out how they can be improved for more efficiency. This first visit was also supposed to initiate a one on one talk with the flight attendants (Grubb, 2001). The management of Kelleher was not bound to work in an office but he preferred to work in the field and see how the flights were performing. Kelleher interacted much with his troops to gain field experience and this was a wonderful experience and a positive move for Southwest Airlines.
Kelleher was a unique CEO. He preferred most of the time to listen, observe as well as encourage his employees. He was freely interacting with the employees and sometimes helping the flight attendants to load the bags. The major strategy of Southwest Airlines from the beginning is low cost, low price, and no-frills. The company’s tagline is “The freedom to fly” (Thompson, 2011). The strategy of the company is based on ensuring the company is the best place to work in, making the place safe and the services reliable, extensive places, and with the best travel experiences to offer to customers.
On September 27, 2010, Southwest airlines confessed some interest in acquiring Air Tran Airways. This process was estimated to cost approximately $1.4 billion, which was worth the advantages and opportunities that Southwest Airlines would access. Through the merger of the two airlines, Southwest airlines would be able to utilize the business opportunities available in many of the AirTran hubs like Atlanta. There was an assurance of the Southwest airlines to have expanded services especially in some prestigious leisure places such as Aruba. The background plans of the two companies were to have this process of merger completed and effective within the next two years.
The two airline companies decided to work separately until the entire process is accomplished. The merger of the two airlines has come up with many questions to the customers. Customers and other analysts tend to think that this merger would result in a decrease in the prices of the air tickets due to the competition of these two with the most famous airlines such as Delta and American (Thompson, 2011). There are suggestions that the price may drop in the short run and come back to normal in the end, but to some extent, it may remain like that for a long time in the market. Some analysts think that the prices of air tickets will generally go up because the market competition depends on various factors. There are also some efforts by other airlines to ensure that they will not be abandoned when the mergers become effective.
One of the major advantages that will be enjoyed by Southwest Airlines is the most frequent and regular customers of Airtran, especially the ones that go for regular business trips. These customers have specific reserved seats in Airtran airlines in business class sections, and these now would become the customers of Southwest airlines (Grubb, 2001).
Before the merger, Southwest airline is still a major and reliable airline for many customers more than any other airline in the United States. This airline has access to more than 100 cities in its travels, and the aspect of merging with Airtran, the responsibilities will be more complex. There is a major challenge on whether the merger will be able to maintain the high status of Southwest airlines through the added responsibilities or it would just be seen as a big airline.
There are plans of the southwest airlines to close the financial integration of it with the Airtran airline, but the spokesperson of AirTran airways assures the public that the services of their airline will continue as before. He says that the customers of the Airtran airways will continue booking for their trips just like before, through their common way of booking like the internet because there is nothing that has changed for their customers (Thompson, 2011). The spokesperson says that even the employees of the AirTran will be working just like before and the policies of the company will continue to work in place as usual. The likelihood of Southwest Airlines to challenge big and famous airlines like delta is very high. The merger is hoped to open as many opportunities as possible for Southwest airlines making its business operations wide and with the extended network coverage.
The Southwest spokesperson also gave some tips on the changes that the company is planning to apply with the newfound airline. Whitney Eichinger who is the company spokesperson said that the company would not charge the first two checked bags as a way of attracting customers as they launch the new company (Grubb, 2001). This would be the greatest and the most interesting change that the airline customers would experience. As the southwest airline has a legacy of charging relatively lower prices to their customers, the company believes that this legacy will not change even after the merger.
The company gives some assurance of the prices remaining low because the company does not want to lose some of its trusted customers. On the other hand, some analysts are arguing that the prices will go up due to the decreased number of airlines in the market. For instance, the fact that Delta and Northwest airlines merged in early 2008, and continental and united in late 2009, is a clear indication that the airline companies are decreasing and hence the prices of their services will increase.
In addition to more opportunities for Southwest airline, there would be also more pressure on the activities and responsibilities of the company. The fact is that Southwest will be a big airline in the market, but with a large group of customers to satisfy. The major challenge would be serving customers at the specified time and managing effective connections (Renga & Menteges, 2010). All sorts of customers who are traveling either for business, leisure, or for any official trip would require being convinced why they should maintain their loyalty to that specific airline. Customers may realize the congestion in a certain airline, and they have the freedom to shift from one airline to another. Something special must be done to the customer services so as they can remain loyal to the airline despite all the challenges.
Although Southwest airline is relatively bigger than Airtran, the management of Southwest airlines has greater hopes of benefiting from the merger. The major theme of Southwest Airlines is to expand the services of its operations, especially the network coverage of the company. Another suspected advantage to be enjoyed by Southwest airlines is about lowering the prices of its services and having access to the busiest markets in the United States. All these benefits are what Southwest airlines are looking forward to gaining once the merger will gain full acceptability.
Current operations of both Airlines
Once the intended regulators will approve the merger of the two companies, Southwest airline would start its operations in some areas where it will be working hand in hand with Delta as far as competition is concerned. Even before the merger, Southwest Airlines is still operating at a larger scale competing with some of the famous airlines in the United States (Thompson, 2011). The major market of Delta Airlines is the Reagan Washington National Airport, the southwest airline would have access to this major market of Delta such that increasing its competition through the increased market areas.
Currently, the Airtran airline has access to some areas outside the United States continent for instance; it covers as wide as Mexico and the Caribbean. These are among the places that Southwest Airlines did not have access to, and through the merger, the company would have the access to these places. The CEO of southwest airlines has given a positive speech concerning the benefits that the company is looking forward to having after the complete merger.
According to some news from the two companies’ analysts, the Southwest airline is five times bigger than Airtran airline whereby in the year 2009, Southwest airline had revenue of approximately $11 billion, and the revenue of Airtran during that period was $2.5 billion (Renga & Menteges, 2010). Although Southwest Airlines does not cover some areas outside the United States continent like the Airtran, its daily departures are many compared to that of Airtran airline. The daily departures of the Southwest airline are measured to be three thousand and two hundred while that of AirTran Airline are relatively lower amounting to six hundred and eighty six daily (Grubb, 2001).
The merger has a plan of increasing the resources; both financial and human labor to be in a position to combine the two responsibilities and cover as many areas as possible.
Moreover, because it will cover a larger market, increasing both human and financial resources becomes not only very important but also mandatory. However, the measure will be accompanied by several challenges as the customers would be looking forward to being served effectively and efficiently just like before. For the travels, customers will be expecting equal punctuality that would not disappoint them or tamper with their programs. Southwest Airlines’ chief executive officer is giving the public a general overview of how the company is prepared to handle the new challenges after the merger to ensure that their customers’ loyalty is not violated and at the same time to attract more customers to their services.
Southwest chief executive officer Gary Kelly insists that the idea of the two companies merging is a unique opportunity that would concentrate on offering services to the domestic customers and not necessarily to the international ones (Renga & Menteges, 2010). Although there is a great opening of some international markets the major target is not serving the outside market, developing the state through serving the domestic customers. The chief executive officer of Southwest Airlines declares that this unique opportunity would allow the company to have some plans of future growth positioning since the merger is considered to be long-lasting.
Grubb, T. (2001). Capitalize on Merger chaos: six ways to profit from your competitors consolidation and your own. Michigan: Simon and Schuster.
Renga, A., & Menteges, M. (2010). Pacific Southwest Airlines. New York: Arcadia Publishing.
Thompson, A. (2011). Southwest Airlines in 2008. Cultures, values and Operating practices. New York: McGraw Hill.