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Friday, February 22, 2013

Southwest Airlines and AirTran Airways to integrate networks through codeshares by end of April

Southwest Airlines (WN) and AirTran Airways (FL) will soon offer a higher number of codeshared services, allowing customers to travel on any of the two airlines, regardless of which airline's channels they used for booking. The aim is to fully connect the two networks by the end of April, which will be an important milestone in the slow merger of these two carriers.

Boeing 737 - Southwest - N, Las Vegas McCarren, N921WN 11-2011.jpgPreparations for the integration began on 26 December before the earliest stage of integration began exactly a month later - on 26 January - when joint itineraries were introduced across five markets. Officially, phase one will be implemented on 25 February as the two carriers aim to launch across 39 cities, followed by phase two in March. The two are confident that they will fully combine their networks in April and jointly offer 97 destinations, including international services. WN calls the integration of FL's network a "major milestone" in the merger and "priority in 2013". It aims to fully integrate AirTran in 2014, or 2015 at the latest.

Parallel to codeshares with FL, WN is working on completely converting some of FL's destinations by replacing the Atlanta-based airline's service with its own. So far, there are very little cities which saw the transition, but WN already announced that more will follow in the coming months. In other cities, both airlines remain present with no firm date of transition to WN. There are also around 15 services which were operated by FL, but closed as WN did not want to inherit them.

WN has also clarified what it will do about baggage fees and international flights, which are present solely in FL's operation. Baggage fees will remain in use at FL, but customers traveling on an itinerary with at least one WN segment will not be charged for the first two checked bags. Although some analysts are sure that WN is losing out financially by not introducing baggage fees, the airline remains loyal to its "Bags Fly Free" campaign, which is among the key differentiators of the airline in the US market. International flights will be covered in the codeshare agreement with FL, but they will be bookable only from FL's channels since WN's older system simply did not know about international destinations. As both airlines transition to a new system, a new webpage will be rolled out to include international flights.

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WN closed the deal to acquire FL on 2 May 2011, but the integration of the two carriers has been very slow. Their merger is indeed not an easy one as the two airlines have different business models and characteristics, although both are considered LCCs.

WN initially claimed it would keep Boeing 717s from FL's fleet, but it managed to come to an agreement with Delta Air Lines and decided that the deal would be a better idea than introducing a new type to its fleet. The 717's will be subleased (from Boeing) to Delta Air Lines where they will replace smaller regional jets, with 16 to be delivered this year, 36 in 2014 and another 36 in 2015.

The merger gave WN a major base in the much-wanted but constrained Atlanta which would otherwise be hard to reach, reduced competition, provided WN with additional aircraft and international operations know-how, and forced it to transition to a more modern reservation system. So far, roughly 30% of FL's employees joined WN, while 11 Boeing 737-700s were retrofitted to WN's standards. Integration of seniority lists and other employees-related tasks have been proceeding well. WN already realized $142 million of net pre-tax synergies in 2012, and expects to achieve another $400 million in 2013.