Now departing: AirTran Airways flies off into the sunset after Southwest merger - Dallas Morning News

On April 21, 2010, Southwest Airlines Co. chairman and chief executive Gary Kelly called Robert Fornaro, his counterpart at AirTran Airways Inc.

“I’d like to talk to you about a business deal,” Kelly told him.

They followed that with a face-to-face meeting two weeks later in May 2010 in the Dallas area. That led to a September 2010 agreement for Southwest to buy AirTran, a $1.5 billion stock-and-cash deal that closed on May 2, 2011.

Late Sunday night, more than 4½ years after Kelly first picked up the telephone, the final chapter of that story comes to an end. AirTran Airways will operate its last flight, AirTran Flight 1 from Atlanta to Tampa, Fla., and then disappear into history.

Bob Jordan, the Southwest executive vice president who took the title of AirTran president after the May 2011 merger, said AirTran employees are both happy and sad.

“The word I hear all the time is bittersweet. They’re just so proud of their AirTran history and their company, and they should be. And they’re equally proud to be part of Southwest, and they’re really happy to be moving forward,” Jordan said.

“But it is bittersweet. It’s kind of like when you move. You love your new house, but it’s a little sad to say goodbye to the old house with all the memories.”

The end of AirTran operations wraps up a pivotal year in Southwest’s history, much of it related to the AirTran merger:

Southwest finished expanding its domestic route system with the addition of a number of AirTran cities, including major markets like Atlanta and entry into Washington Reagan National Airport.

It ended 43 years as a strictly domestic carrier on July 1 when it launched service to Aruba, Jamaica and the Bahamas. AirTran served those three destinations as well as four others. On Nov. 2, Southwest finished absorbing AirTran’s international system.

The addition of international flying forced Southwest to update its reservations technology so it could handle international itineraries.

In an interview, Kelly called the merger an unqualified success for shareholders, employees and customers.

“I think the integration has gone superbly,” he said.

“The nice thing is that AirTran has continued to contribute to the bottom line since we acquired them. They were profitable in 2010 when we struck the deal. Through integration we’ve been able to add to their profitability over this 3½-year time period,” Kelly said.

“We had a $400 million synergy target for 2013, and we hit that. We will surpass that number here. You add that to the profits they were already making, and it’s a very, very substantial contribution to Southwest’s bottom line,” he said.

Through the first nine months of 2014, Southwest has reported a net income of $946 million. Stop there, and that would be a record year for the Dallas-based carrier. But analysts expect the airline to add close to $400 million in the fourth quarter, excluding any charges or items. For 2015, they’re expecting profits of $1.9 billion.

Kelly called AirTran “a good financial opportunity for Southwest in that we were able to boost our earnings, boost our stock price. It really did accelerate the earnings growth at Southwest Airlines.”

At the time of the May 2011 closing, Southwest flew to 72 U.S. cities; today it flies to 86. AirTran gave Southwest an entry into several important markets and a stronger foothold in other markets where AirTran and Southwest competed before the merger.

“AirTran brought a lot,” Kelly said. “First of all, it brought a route expansion for us. It allowed us to expand our network essentially to all the major cities in the 48 states.”

In all, Southwest offers 21 more destinations that it picked up from AirTran, including seven international cities.

International passport

In 2010, Southwest was revamping its frequent-flier program. It committed to buy Boeing 737-800s, a larger version of the aircraft that makes up Southwest’s fleet. It also decided to replace its reservations system.

But adding international cities to the route system? Southwest executives weren’t sure about that step. Kelly said until Southwest bought AirTran, “we were not fully committed” to the idea of flying internationally.

“It was only when we closed on AirTran and were able to talk to the AirTran leadership and look at the performance of those international markets that we made the commitment to develop the capabilities to fly international,” Kelly said.

The AirTran purchase forced a decision on international flying because Southwest knew it would have to pick up the expertise — and routes — from AirTran if it wanted to keep them.

Southwest had already decided to replace its old reservation system. With the decision to fly internationally, Southwest committed to have Amadeus build it a system for international reservations. In May of this year, Southwest picked Amadeus to build the domestic system.

The plane truth

While Southwest wasn’t sure about flying internationally at the time of the deal, its executives were confident they wanted to keep the Boeing 717, even though adding a fleet type violated the long-held Southwest tenet that it would fly only one aircraft type.

The airline had 88 in place and two on order, nearly two-thirds of AirTran’s fleet.

“We had to be sold on the 717 because it was a big piece of the deal,” Jordan remembered.

“All the due diligence we did and everyone we talked to said the 717 is a workhorse. It’s a great aircraft. And it’s a good aircraft particularly in the shorter-lengths haul, which was our intent to use them. So we had no plan, no desire to do anything other than ingest the 717,” Jordan said.

But Southwest officials soon decided that the airline would be better off flying only the Boeing 737, its aircraft choice since its first flight in June 1971. The 737 was just a better fit than the 717, and rising fuel prices made the 737’s advantage even bigger, Kelly said.

“The higher fuel prices go, the more it renders small airplanes and small markets unprofitable,” he said. “Both of those were working against the success of the 717.”

Jordan said the “game changer” was when Southwest received an offer from Delta Air Lines Inc. to take the 717s off Southwest’s hands.

“We had to think really hard about that. It made a lot of sense. The financial deal, which is confidential, worked for both of us,” Jordan said.

Finishing touches

In July 2012, Southwest announced it would send the Boeing 717 airplanes to Delta Air Lines beginning in August 2013, at a rate of about three a month.

While Southwest has been converting AirTran’s smaller fleet of Boeing 737s to Southwest’s paint and interior, no Boeing 717s have been brought into the Southwest fleet.

As of this Wednesday, about 54 717s will have left the AirTran fleet and are either being converted or have already arrived in Delta’s fleet. With the final AirTran flight Sunday, the remaining three dozen or so will be parked until they can be converted. The last 717 will enter Delta’s fleet in late 2015, unless Delta decides it wants to take them faster.

AirTran flew its last Boeing 737 flight Nov. 30 from Baltimore to Las Vegas. The plane was retired to start its conversion to Southwest’s colors and furnishings.

“My hat’s off to all the AirTran family members in particular, because they worked hard to keep AirTran as a very reliable operation during the integration,” Kelly said. “The entire company has pitched in. Everybody’s done their part. I just think it’s been superb.”

In all, Jordan said, around 5,000 AirTran employees decided to accept jobs with Southwest, out of the 8,000 working for the carrier at the time of the May 2011 merger.

About 500 employees, most of them pilots and flight attendants, still remained at AirTran. Over the next three months, they’ll be retrained as Southwest pilots and flight attendants.

Some additional training and behind-the-scenes conversions still linger. But for all intents and purposes, the merger is complete.

“We’re calling it done,” Jordan said. “So the integration is done for customers on Dec. 28.”

AirTran timeline

July 1992: Organizers file incorporation papers in Nevada for Charter Way Inc. The company changed its name in May 1993 to ValuJet Airlines Inc.

October 1993: ValuJet launches its first flights with two airplanes and eight flights a day.

May 1996: ValuJet Flight 592 crashes into a Florida swamp after a fire in the cargo area disables the aircraft. All 110 aboard are killed.

June 1996: ValuJet surrenders its operating certificate and stops flying in a consent decree with the Federal Aviation Administration. It resumes limited service three months later.

July 1997: ValuJet agrees to acquire Airways Corp., which operates as AirTran Airways. ValuJet changes its name to AirTran Airlines two months later.

November 1997: ValuJet closes the merger and acquires Airways.

November 2005: AirTran takes delivery of its 100th airplane and says it reached that milestone faster than any other airline.

January 2009: AirTran reports a net loss of $274 million for 2008, its first annual loss since 2001.

April 2010: Southwest chairman and CEO Gary Kelly calls AirTran chairman and CEO Robert Fornaro to discuss an unspecified business matter.

May 2010: Kelly and Fornaro meet in a Dallas suburb, and Kelly broaches the idea of Southwest’s acquiring AirTran. Fornaro says AirTran would consider any offer.

September 2010: The boards of the two airlines agree to a merger.

May 2011: The merger closes.

July 2012: Southwest, which originally said it planned to keep flying AirTran’s smaller Boeing 717 aircraft, announces that it will send the 88 airplanes to Delta Air Lines beginning in August 2013.

November 2013: Southwest converts the last three domestic cities operated by AirTran — Richmond, Va., Memphis, Tenn., and Pensacola, Fla. — to Southwest stations.

November 2014: Southwest finishes its takeover of AirTran’s international system as it replaces AirTran on several international routes.

Dec. 28, 2014: The last AirTran flight is scheduled to fly between Atlanta and Tampa.

SOURCES: The airlines; Dallas Morning News research

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