http://online.wsj.com/article/BT-CO-20110225-710894.html
Southwest CEO: AirTran Deal 'Imperative' To Counter Fuel Spike
PEWAUKEE, Wis. (Dow Jones)--The head of Southwest Airlines Co. (LUV) said Friday it is "absolutely imperative" the company completes its planned merger with AirTran Holdings Inc. (AAI) as a hedge against soaring jet fuel costs.
Gary Kelly, chairman, president and chief executive of Dallas-based Southwest, said both carriers could be forced to shrink without a deal the companies aim to close in the second quarter of this year.
Kelly's comments came during testimony before the Senate Antitrust, Competition Policy and Consumer Rights subcommittee.
The Justice Department in November made a second request for information on the planned deal that would expand Southwest's domestic capacity by more than a fifth and provide entry to key markets such as Atlanta for the first time.
The proposed deal has attracted little opposition from rivals and lawmakers compared with recent consolidation in the U.S. industry.
The field hearing was called by Sen. Herb Kohl (D., Wis.), who in his opening remarks planned to question the potential impact of the deal on competition from Milwaukee's Mitchell Airport.
Southwest and AirTran would have a combined 39% share at the airport.
"The experience of other airline mergers in recent years gives us reason for caution," said Kohl.
Of the Southwest/AirTran deal he said: "I get the feeling that there are goods and bads to it."
Kelly said the enlarged airline would provide "Milwaukee-area customers with access to an even stronger and nationwide low-fare, low-cost carrier network."
He declined to provide Sen. Kohl with a guarantee that Southwest would maintain the airlines' combined capacity at Milwaukee after the deal closes, citing the uncertainty created by fuel prices. "We want to grow...but we have to do that in a fiscally responsible way," he said. Diana Moss, vice president of the American Antitrust Institute, called AirTran a "maverick" and said there was a risk of fares rising and capacity cuts. "It is clear that AirTran is an aggressive discounter relative to Southwest," she said. "Fares could edge higher and rivalry diminish."
Kelly said Southwest was unlikely to maintain AirTran's crew base--of 70 to 90 pilots--in Milwaukee after a merger, though he expected the number of airport staff to expand as it worked to boost frequencies. He also said Southwest has yet to determine the fate of AirTran's code share deal with Skywest Airlines Inc. (SKYW). Southwest's pilots' contract precludes domestic code sharing.
Southwest CEO: AirTran Deal 'Imperative' To Counter Fuel Spike
PEWAUKEE, Wis. (Dow Jones)--The head of Southwest Airlines Co. (LUV) said Friday it is "absolutely imperative" the company completes its planned merger with AirTran Holdings Inc. (AAI) as a hedge against soaring jet fuel costs.
Gary Kelly, chairman, president and chief executive of Dallas-based Southwest, said both carriers could be forced to shrink without a deal the companies aim to close in the second quarter of this year.
Kelly's comments came during testimony before the Senate Antitrust, Competition Policy and Consumer Rights subcommittee.
The Justice Department in November made a second request for information on the planned deal that would expand Southwest's domestic capacity by more than a fifth and provide entry to key markets such as Atlanta for the first time.
The proposed deal has attracted little opposition from rivals and lawmakers compared with recent consolidation in the U.S. industry.
The field hearing was called by Sen. Herb Kohl (D., Wis.), who in his opening remarks planned to question the potential impact of the deal on competition from Milwaukee's Mitchell Airport.
Southwest and AirTran would have a combined 39% share at the airport.
"The experience of other airline mergers in recent years gives us reason for caution," said Kohl.
Of the Southwest/AirTran deal he said: "I get the feeling that there are goods and bads to it."
Kelly said the enlarged airline would provide "Milwaukee-area customers with access to an even stronger and nationwide low-fare, low-cost carrier network."
He declined to provide Sen. Kohl with a guarantee that Southwest would maintain the airlines' combined capacity at Milwaukee after the deal closes, citing the uncertainty created by fuel prices. "We want to grow...but we have to do that in a fiscally responsible way," he said. Diana Moss, vice president of the American Antitrust Institute, called AirTran a "maverick" and said there was a risk of fares rising and capacity cuts. "It is clear that AirTran is an aggressive discounter relative to Southwest," she said. "Fares could edge higher and rivalry diminish."
Kelly said Southwest was unlikely to maintain AirTran's crew base--of 70 to 90 pilots--in Milwaukee after a merger, though he expected the number of airport staff to expand as it worked to boost frequencies. He also said Southwest has yet to determine the fate of AirTran's code share deal with Skywest Airlines Inc. (SKYW). Southwest's pilots' contract precludes domestic code sharing.
