Southwest Airlines Merger
BASIC STRATEGY: In order to make up for increasing expenses Southwest needs to expand. My recommended strategy for Southwest to pursue, is to merge with Air-Tran and expand into areas where Air-Tran has a heavy presence and Southwest has none. With Southwest having a weak presence in the southeastern U.S., a key area to expand would be Atlanta’s Hartsfield-Jackson International, which is the busiest airport in the U.S. There is obviously a need for the low air-fare company at this site. Southwest’s unique approach of no extra charge for luggage and extra friendly service should help Southwest. The merger is estimated to cost Southwest $1.4 billion dollars; Air-Trans income for 2010 was around $128 million, and along with the 138 new planes and locations Southwest will acquire, the benefits to cost seem great. Competition at Atlanta’s Hartsfield-Jackson International is fierce. Delta Airlines flew nearly 56% of the total passengers from Atlanta in 2009 and will be Southwest’s major competition (Challenges Delta with $1.4B Deal). Southwest will by far be the biggest low-fare option at the Atlanta hub. Some advantages of expanding here, is that Atlanta’s Hartsfield-Jackson International. has been the busiest airport by passenger traffic and number of landing and take-offs since 1999. Air-Tran also flew nearly 18% of the total passengers at this location in 2009. The Atlanta hub also allows an advantage for a great connection site for other flights, which will help with travel to the many sites in Florida and other southern states. Southwest’s flight traffic was up 13.2% in January and up 13% in February which also shows a growing need for Southwest’s flights and an advantage. Some disadvantages are that Flying out of such a busy airport may affect Southwest’s flight times and have customers experiencing more unusual delays than normal from the airline which is a disadvantage. Also keeping Air-Tran employees on in Atlanta may be a disadvantage to the unique
References: Schumann, Mark. "What Can Southwest Airlines Teach Us About Mergers (A Lot)." A Communicators View. Brands, 28 Sept. 2010. Web. 18 Apr. 2011. <http://www.acommunicatorsview.com/what-can-southwest-airlines-teach-us-about-mergers-a-lot/>. In Southwest’s successful acquisitions communication to the employees about what is expected from them now has lead to success to past acquisitions. They ask employees what they like and what they fear. They also help new employees feel needed through continuous communication. A long with strong communication to the public about how they will go about closing the door on the acquired company and how processes will occur. "Successful Acquisitions." Openlearningworld.com. Web. 19 Apr. 2011. <http://www.openlearningworld.com/olw/courses/books/Corporate%20Strategies/Diversification%20Using%20Mergers%20and%20Acquisitions/Successful%20Acquisitions.html>. Cisco has really stressed sharing its core values in all of their acquisitions. Only three of Cisco’s acquisitions have failed, and their goal in acquisitions is to fill in gaps in which their company is weak. With the many acquisitions of Cisco and strong push for shared values in the acquisition it shows that obtaining shared values through an acquisition is vital.