INTERVIEW: Southwest plans to buy Airtran for almost $1.5 billion

By Ryan Nobles - bio | email

RICHMOND, VA (WWBT) - Two major airlines are reportedly joining forces. Southwest plans to buy Airtran for almost $1.5 billion.

The companies said that the new Southwest-Airtran operation would operate from more than a hundred different airports and serve more than 100 million customers.

Airtran currently flies out of Richmond International Airport.

Dr. George Hoffer, a economics professor from VCU and the University of Richmond, joined NBC12 to discuss the impact of this merger on the Richmond market.

RYAN: First off, from your view, is this good or bad news for Richmond?

DR. GEORGE HOFFER:  I think definitely its good news for several reasons. First of all, what this merger does, it really just continues the consolidation that occurs in the industry. What makes this different is it's between two discount carriers, and in the long run, it's not good for the consumer, but nonetheless, in the short run it is, and for Richmond it is. I think it's good for Richmond for several reasons. First of all, Southwest would have never come to Richmond in its own right simply because on three sides Southwest surrounds Richmond only from the west. Richmond stands to gain now people in Fredericksburg, people north of Fredericksburg. People in Charlottesville have more reason to come to Richmond.

RYAN: You were saying it's probably not a good idea overall for consumers because it reduces competition between the low cost carriers.

DR. HOFFER: Exactly. We don't see it here in Richmond, but you go to Baltimore, Milwaukee. Southwest and Airtran were just duking it out. Both have major presence in both Baltimore and Milwaukee, and that's one of the reasons for the merger. What's happened is over the last 10 or 15 years, there have been four major discount carriers which have really grown internally by themselves, and until now have really competed with each other relatively minimally, frontier in the west, Airtran in the southeast and the east. We have Southwest, and of course, we have JetBlue. But now they've really grown as much as they can without competing with each other. Now it was going to get pretty nasty. There was another reason Richmond stands to gain. The two discount carrier services Richmond has really kind of underperformed. We know JetBlue pulled out of the New York market, and unless they get back, which gives them access to their system, they'll eventually pull out of Richmond. Again, that's up in the air because there is a lot more going on with the landing spots in LaGuardia causing all the problems, and Airtran has cut back in Richmond, also. So there for, really both of them have underperformed here. This will really give Richmond a shot in the arm. Richmond stands to gain. Norfolk stands to gain. Norfolk will get Airtran, which they wouldn't have gotten otherwise. Who the potential loser here is Patrick Henry Field, Newport News. It's really been the most innovative airport in Virginia for a number of reasons, and they're kind of like the meat in a sandwich. But clearly Richmond, you keep. Clearly you keep Norfolk, and you've got this funny situation. What do you do with Patrick Henry? What do you do with Newport News? That's another story for some other time, and it will unfold later. Probably the biggest loser here is going to be Delta. Delta loses for a couple of reasons. Delta loses its real dominant position in the southeast. In one swoop, they lose Atlanta, and it opens up a real premium airport, LaGuardia, to now discount carriers. When you add the Southwest slots to the Airtran slots, all of a sudden LaGuardia comes into play to real price competition.

RYAN: All right. We'll have to leave you there. Thank you for that information. So in the short-term, he's saying it's good news for Richmond.

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