In a deal that turns up the heat on its bigger rivals, Southwest Airlines Co. (NYSE: LUV) yesterday (Monday) announced plans to buy discount carrier AirTran Holdings Inc. (NYSE: AAI) for $1.4 billion.
By nabbing AirTran, Southwest is making a move that supports its long-term growth strategy and targets large network carriers with a large East Coast presence such as Delta Airlines Inc. (NYSE: DAL) and US Airways Group Inc. (NYSE: LCC).
"This absolutely changes things," said Gary Kelly, Southwest's chairman and chief executive officer on a call with analysts.
The deal will allow Southwest to expand into airports serving major hubs like Atlanta, Washington D.C., Boston, Baltimore and New York City, he added.
The move puts Southwest in head-to-head competition with Delta in Delta's home base of Atlanta. The buyout, funded mostly with debt, will also give Southwest a bigger slice of the market in cities like Boston and New York, where it has been expanding.
Eventually, the low-cost carrier will expand into international markets, with flights to Mexico, the Caribbean, Canada and possibly South America, Kelly told CNNMoney.com.
"It will be several years before you see Southwest airplanes in international markets, but it's going to happen," he said.
The Airline Industry: How to Make Good Money From a Bad Business
After years of off-and-on conversation, UAL Corp.'s United Airlines (NASDAQ: UAUA) is getting into bed with Continental Airlines Inc. (NYSE: CAL) in a merger deal valued at $3.7 billion. The merged entity, keeping the "United" name, will be the largest airline in the world. It will have close to $30 billion in combined revenue, 700 aircraft, and service to 370 destinations in 59 countries, according to BusinessWeek. Early estimates predict savings to reach $1 billion to $1.2 billion annually.
Freakish Winter Freezes Some Profit Plays, Heats Up Some Others
This article was supposed to be about investments that would allow you to profit from the typical cold-and-snowy weather that's part of the winter routine at this time of year.
But as everyone from Southern California to the Middle Atlantic East Coast states, and the Great Lakes to the Deep South, is painfully aware, this year's winter has been neither "routine" nor "typical" - not by a long shot.
Indeed, the so-called "snowpocalypse" of 2010 has been so fierce that pundits have already coined new terms to describe it. This run of winter bluster has actually nullified some of the usual "winter plays" - those that can be found almost every year - while at the same time creating other opportunities you might not ordinarily think of.