Given the recent announcement of acquisition of AirTran by Southwest Airlines, analyze the Southwest's acquisition strategy to determine the long-term impact (synergy) on the value of the company. Explain what the management rationale (motive) behind the acquisition of AirTran, whether you agree with the management or you differ with the management strategy.
What do you recommend for Southwest's strategy (2011 - 2015) assuming the merger goes through?
Southwest Airlines-Acquisition of Air Tran
Southwest Airlines recently acquired Air Tran Airways in a $1.4 billion deal. At time when competitors were merging with each other, dealing with labor issues, tax issues, all of which lead to infuriated customers and bankrupt customers; Southwest Airlines was concentrating on giving a true flying experience to customers by carrying more and customers. As a result the airline has been able to make more money than anyone else and has been paying dividends for 136 consecutive quarters. The end result has been happy employees and satisfied customers and shareholders.
Both Southwest Airlines and Air Tran are considered low cost airlines and their merger is considered a risky deal. However, management at Southwest has a different viewpoint. Air Tran flies to more airports than Southwest. It flies 20 million passengers annually, generates $2.3 billion in revenue, employs 8000 people and has as many daily flights as Southwest has. Southwest realized that its days of organic growth were over. ...
The solution discusses the Southwest Airlines acquisition strategy for AirTran.