Southwest Airlines Is Expanding Flight Destinations After AirTran Purchase

Southwest Airlines Co. (LUV) is adding flights from Houston Hobby airport and Chicago Midway while its AirTran unit will begin service to Puerto Rico and Mexico as the carriers shuffle planes after their combination in May.

AirTran’s changes include domestic flights from Baltimore- Washington International to New Orleans, Los Angeles, San Francisco and Seattle, and service from Denver to New York LaGuardia and the Ohio cities of Dayton and Akron-Canton, Southwest said yesterday in a statement.

Southwest is changing AirTran’s network to create more point-to-point flights to bigger cities and reduce reliance on less-profitable passengers who make connections. The AirTran unit has announced plans to drop service to 10 of the 71 cities it served before being bought by Southwest, and these new flights are being added in part by repositioning those jets.

“The demand is there, the fares are high, the financials on the routes look good,” Bob Jordan, president of the AirTran unit, said yesterday on a conference call with reporters. “In today’s economy, we wouldn’t be adding the routes if the routes didn’t make really strong financial sense.”

AirTran’s Puerto Rico flight will travel from Ft. Lauderdale, Florida, to San Juan. New service to Mexico, which needs government approval, includes San Antonio to Cancun and Mexico City. More international flights are coming, Jordan said, without elaborating.

Houston Hobby Flights

Southwest’s new flights from Houston Hobby travel to Raleigh-Durham, Kansas City and Seattle. The Chicago Midway flight will go to Oklahoma City.

Southwest and AirTran must keep flying separately until the Federal Aviation Administration grants them a joint operating certificate in the first quarter of 2012. The carriers will begin codesharing and blending networks in mid-2012, Jordan said.

These changes build on a Nov. 11 announcement by AirTran that it will cease flying to five airports next year including Miami and Washington Dulles, because of rising fuel costs and sluggish demand. AirTran had previously started pruning its network to drop smaller unprofitable cities such as Asheville, North Carolina, before the Southwest purchase was completed.

Passengers who fly nonstop are more profitable than those who connect, and changes to AirTran’s network including its Atlanta hub may generate $750 million to $1 billion in new annual revenue for Southwest, Chief Executive Officer Gary Kelly said in an October interview. Those projections are already included in the airline’s $400 million target for so-called merger synergies, he said.

Profitability

During the first quarter of this year, the last full period before the $1 billion AirTran deal was finished in May, Dallas- based Southwest reaped 11.99 cents for each passenger flown a mile, compared with 10.43 cents for AirTran, according to a regulatory filing.

About 75 percent of Southwest passengers fly nonstop, while only 35 percent flew that way on AirTran, according to data provided by Southwest.

Buying AirTran gave Southwest access to Atlanta, the biggest U.S. city it didn’t already serve, and a second fleet type with AirTran’s Boeing Co. 717 jets. It also eliminated AirTran as a low-fare competitor.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

To contact the editor responsible for this story: Sylvia Wier in New York at swier@bloomberg.net

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