The Power of a Merger: Southwest
A typical price conscious consumer is the target of the merger between Southwest and AirTran. AirTran executives assert that with the merger, the potential exists to spread discount airfares farther is even greater. Discount carriers are known for stimulating competition and helping to lower airfares. Consolidation of major carriers such as United and Continental airlines brings the number of major carriers in the U.S. to only four.
In general the average consumer is finding fewer seats and higher prices and feels the airlines have worked hard to make flying not fun. Despite not pleasing to the customer, the industry is making money again with critical profit centers known as add-on fees. With $25 for a checked bag, $35 for phone reservations, and up to $300 to change a reservation, major airlines have made $2.4 billion in profits with $1.3 billion coming from add-on fees with $745 million from checked bags alone.
Southwest charges no fees for changing flights or for the first two checked bags and the merger with AirTran may help to lower ticked prices in the industry. Individuals say that wherever Southwest goes, they will pressure their competitors to refrain from excessive fees in the long haul.
Also check out http://www.southwest.com
- What would make the arrangement between Southwest and AirTran a merger and not an acquisition?
- What were the reasons that Southwest and AirTran had for merging? What approach(es) did they use?
- What would cause the Southwest/AirTran merger not be successful?
- What strategies would you recommend to Southwest should it need to restructure?
Please read the two case files. The answer(Argument) should be similar with the two files.