Southwest Airlines’ now completed purchase of AirTran Airways represents, in many ways, a dramatic shift for the two airlines. Southwest has been the darling of the industry, and the buyout will change the the company operates. Its point-to-point model has been praised as an alternative to traditional hub-and-spoke operations, and its use of a single type of aircraft has been adopted by other airlines hoping to keep costs down. In purchasing AirTran, the prominence of those two fundamentals may wane.
But there are two aspects of the buyout that tilt the scales in Southwest’s favor. The real prize of the deal is AirTran’s 31 gates at Atlanta’s Hartsfield-Jackson Airport, the busiest airport in the world. “Southwest has been trying to get into Atlanta and AirTran is their ticket,” said Marty Lariviere, a professor of managerial economics and decision sciences.
Hartsfield-Jackson is AirTran’s main hub, which raises a question: Why is Southwest embracing an airline that uses the “old” hub-and-spoke model. The answer may be that Southwest has been heading in that direction anyway. A majority of Southwest passengers at Chicago’s Midway Airport change planes, Lariviere pointed out. “It looks a lot like a regular hub.”
On the surface, adding AirTran’s 717s looks like the least appealing part of the deal. By exclusively flying 737s, Southwest has been able to streamline maintenance and scheduling, both of which help keep costs down. But even this part of the purchase has its advantages. As Southwest adds more destinations, there will inevitably be some routes that fail consistently fill a 737 to capacity. Southwest’s planes typically seat 137 passengers, while AirTran’s 717s will seat 117 when they are reconfigured to Southwest’s one-class seating. Airlines make no money on empty seats, and on routes with razor-thin margins, every little bit counts.