THE POWER OF A MERGER : SOUTHWEST
Southwest, long recognized for its discount airfares and its targeting of the price-conscious consumer, has combined forces with another discount carrier-AirTran. AirTran asserts that with such a merger the potential exists for the expansion of discount airfares in the industry. In an industry where profit motive is high, consolidation is not uncommon even among major airlines, but the air traveller still sees fewer seats and higher prices. While major carriers seek profits, particularly in add-on fees, Southwest continues to press the compitition by refraining from excessive fees.
1. What would make the arrangement between southwest and airtran a merger and not an acquisition
2. What were the reasons that southwest and AirTran had for merging? What approach(es) did these companies use?
3. What would cause the southwest/airtran merger not to be successful?
4. What strategies would you recommend to Southwest should it need to rescructure?