Taken together, the two carriers' combined 155.7 million passenger count in 2010 would rank Southwest as the second-largest airline in the world in terms...

Southwest Airlines has closed on its purchase of all of the outstanding common stock of AirTran Holdings, Inc., which was the parent company of AirTran Airways.

In 2010, Southwest Airlines carried just under 131 million passengers on scheduled services and AirTran carried more than 24.7 million.

Taken together, the two carriers’ combined 155.7 million passenger count in 2010 would rank Southwest as the second-largest airline in the world in terms of passengers carried, just behind Delta Air Lines (which carried more than 162 million, including passengers carried on regional-airline-franchised Delta Connection flights). However, United Airlines will become even bigger than Delta when its operational merger with Continental Airlines is complete.

Completion of the transaction makes Southwest Airlines the world’s third-largest airline group in terms of the size of its mainline-aircraft fleet, which now totals 690 aircraft. Of these, 86 are Boeing 717s operated by AirTran Airways and the remainder are Boeing 737-300s, 737-500s and 737-700s.

Both Southwest and AirTran Airways operate Boeing 737-700s and together the two airlines already have at least 410 737-700s in service. In addition Southwest and AirTran have combined outstanding orders for 198 737NGs (20 of which are 737-800s ordered by Southwest), as well as options and purchase rights for 135 more 737NGs.

Southwest will now begin the process of merging with AirTran operationally to create a single airline, a process it expects to take several years.

A Southwest Airlines Boeing 737-700 takes off at Las Vegas McCarran International Airport, one of the airline's major destinations

“The successful closing of this transaction is a significant accomplishment and marks a great day in the history of Southwest Airlines,” Gary Kelly, CEO, chairman, and president of Southwest Airlines said in a statement. “The acquisition of AirTran represents a unique opportunity to extend our network into key markets we don’t yet serve, such as Atlanta and Washington, D.C., via Ronald Reagan National Airport.”

Kelly continued: “It gives us the opportunity to serve more than 100 million customers annually from more than 100 different airports in the U.S. and near-international destinations, providing customers more low-fare destinations as we diversify and expand the well-known ‘Southwest Effect’ to hundreds of additional low-fare itineraries for the traveling public. Today, we also celebrate the promise of expanding our presence at New York LaGuardia, Boston Logan, Milwaukee, and Baltimore/Washington, as well as extending our service to many smaller domestic cities that we don’t serve today, with access to key near-international leisure markets in the Caribbean and Mexico.”

Added Kelly: “The timing of today’s closing in the current market environment could not be more important. With soaring fuel costs putting many airlines, yet again, in the red, Southwest brings many strengths to bear. Southwest not only brings profitability and financial strength to make this deal feasible, but it also positions the combined companies with an industry-leading investment grade balance sheet to weather the energy-price storm.”

Kelly noted: “In addition, it currently positions Southwest to offer improved job security, compensation, and benefits to AirTran crew members who join the Southwest family. Further, Southwest’s profitability and financial strength, along with the United States’ largest low-fare network, puts AirTran crew members in a position to be part of a growing company again, once AirTran is integrated into Southwest.”

Based on the  $11.90 average of Southwest Airlines’ share closing prices for the 20 trading days ending three trading days prior to May 2, 2011, the transaction values AirTran’s common stock at approximately $7.57 per share, or $1.0 billion in the aggregate, excluding shares issuable upon conversion of AirTran’s outstanding convertible notes.

Each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines’ common stock. Assuming no conversion of AirTran’s outstanding convertible notes, AirTran stockholders will receive 44 million shares of Southwest Airlines common stock, which will represent 5.6 per cent of the Southwest Airlines common shares outstanding. Additionally, they will receive cash of $518 million.

For more on Southwest’s purchase of AirTran, see page 2

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