Based on AirTran’s common shares outstanding and assuming conversion of AirTran’s outstanding convertible notes, AirTran stockholders will receive $671 million in cash. Including AirTran’s existing net indebtedness (including outstanding convertible notes) and capitalized aircraft operating leases, the total value of the transaction is $3.2 billion.
Southwest expects net annual synergies from the takeover to exceed $400 million by 2013. It estimates one-time costs related to the acquisition and integration of AirTran to be approximately $500 million.
As of March 31, the combined unrestricted cash and short-term investments of the two companies was approximately $5.0 billion. Southwest’s funding for the transaction will be from its cash on hand. In addition, Southwest Airlines has a fully available, unsecured revolving credit facility of $800 million.
Bob Jordan, Southwest’s executive vice president of strategy and planning, will serve as president of AirTran. Bob Fornaro, who has served as chairman, president and CEO at AirTran, will become a full-time consultant for the integration of the two airlines, working closely with Kelly and Jordan to ensure a smooth transition.
Southwest Airlines’ headquarters will remain in Dallas, with plans for AirTran’s operations and presence in both Orlando and Atlanta still under review. Southwest says it will make additional announcements during the integration of the two airlines as plans unfold.
Jordan will continue to serve on the joint Integration Board consisting of Kelly; Fornaro; Mike Van de Ven, Southwest’s executive vice president & chief operating officer; Loral Blinde, AirTran’s senior vice president human resources and administration; and Jeff Lamb, Southwest Airlines’ senior vice president of administration & chief people officer). The Integration Board will continue to provide overall direction of the efforst to integrate the two airlines operationally and administratively.
Until a single operating certificate is secured from the Federal Aviation Administration to allow AirTran to be merged operationally into Southwest Airlines, AirTran’s operational departments will continue operating under the AirTran operating certificate with the full authority of its operating teams led by Klaus Goersch, AirTran’s executive vice president operations and customer service. Goersch will report directly to Jordan, and will work closely with Mike Van de Ven.
Southwest and AirTran are beginning work immediately to integrate AirTran into Southwest Airlines. However, AirTran will continue to operate under the AirTran brand with its same policies, procedures, and product features for a period of time.
Dallas-based Southwest says it plans to integrate AirTran into Southwest Airlines over time by transitioning the AirTran fleet to the Southwest Airlines livery, developing a consistent customer experience, and transitioning the operations of the two carriers onto a single operating certificate (SOC). Southwest expects to will obtain a SOC in the first quarter of 2012 and estimates it will take several years to fully transition AirTran into Southwest Airlines to become one airline.
In the near term, customers flying on AirTran will continue to make reservations or check in at airtran.com or by calling 800-247-8726, and visit AirTran kiosks and ticket counters. AirTran employees will assist on scheduled AirTran flights.
Customers flying on Southwest will continue to make reservations or check in at southwest.com or by calling800-435-9792, or at Southwest kiosks and ticket counters. Southwest employees will assist on scheduled Southwest flights. Customers will continue to earn and redeem through the respective frequent flier loyalty programs, as they do today, until those programs are combined over time.
Southwest plans to provide the ability for Customers to connect across the networks and integrate key customer-service policies for a more consistent customer experience this fall or early next year, depending on both companies’ readiness. Southwest says any changes to the customer experience on either carrier will be communicated in advance via southwest.com, airtran.com, and in direct customer communications.