What Southwest-AirTran Combo Could Mean for You

Southwest Airlines Aircraft AP

Southwest Airlines' proposed $1.42 billion purchase of fellow cut-rate carrier AirTran will probably be good and bad at the same time for passengers, says CBS News Business and Economics Correspondent Rebecca Jarvis.

It could also give conflicting signals about the economy, she says.

The deal still needs the thumbs-up from regulators and shareholders alike and isn't expected to close until the first half of next year. The airlines expect to fully blend their operations in 2012.

And once the nation's two biggest discount carriers do become one, Jarvis observes, the most noticeable savings will be in baggage fees.

Simply put: There won't be any. Southwest does NOT charge fees, and says that, once the two airlines are fully combined, it won't charge them to any of its customers.

That could make a big difference for people who typically fly AirTran and pay $20 for their first checked bag and $25 for the second.

United and American charge $25 for the first bag and $35 for the second.

It's not clear whether other airlines will adopt the no-baggage-fee policy, Jarvis points out. From April to June of this year, the airlines made $2.4 billion in profits, with more than half. more than half -- $1.3B - coming from add on fees; thanks to all those bags being checked, airlines made $745 million in just three months.

But the likely impact on routes isn't as rosy, she notes.

More carriers covering the same routes means more competition for prices. So, when there's the opposite, consolidation, some prices could go up, especially those involving in Baltimore and Orlando, where AirTran and Southwest primarily overlap. Passengers traveling to and from those cities could face higher ticket prices because less competition traditionally means higher airfares.

But prices on OTHER routes could also go down. In Atlanta, for instance, Southwest says it can save consumers $200 million a year.

The acquisition also gives Southwest a bigger slice of the market in cities major East Coast cities such as Boston and New York.

The deal would also boost Southwest's plans to expand internationally to routes to Mexico and the Caribbean, where JetBlue Airways has a big presence. This could mean some relief when it comes to prices.

On its face, the deal seems like good news for and about the economy, Jarvis adds.

Consumers haven't been shopping much - still lacking the appetite or the stomach to spend money. But corporations, which are sitting on some $1.8 trillion in cash, are starting to spend it, an indicator that, to them, it's time to start turning the page.

The trouble is: If they spend their money MOSTLY on acquisitions, and not on growing their companies internally, it could mean MORE job losses. After acquisitions, you tend to see layoffs due to overlaps, at least in the beginning even as, ideally, a company positions itself to grow more in the future.
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