Southwest closes on purchase of AirTran, which serves Lexington

DALLAS — Southwest Airlines Co. closed its $1 billion purchase of AirTran Airways on Monday, securing its spot as one of the biggest domestic airlines and setting the stage for the famed low-cost Southwest's likely entry into the Lexington market for the first time.

For travelers, nothing much changes right away. The airlines will continue to deal with whichever airline sold the ticket. And policies such as checked bag fees are not changing right away. AirTran charges for checked baggage, while Southwest allows two bags for free.

Integrating the two low-cost airlines will take years. Southwest plans to begin painting AirTran airplanes in Southwest colors next year. It expects to get a single operating certificate from the Federal Aviation Administration in the first quarter of 2012.

"It will take several years to fully transition AirTran into Southwest Airlines to become one airline," Southwest said.

Buying AirTran Holdings Inc. gives Southwest its first presence at Blue Grass Airport in Lexington, as well as Ronald Reagan National Airport in Washington, D.C., and Hartsfield-Jackson Atlanta International, the world's busiest hub.

"We have limited information right now," said Amy Caudill, Blue Grass Airport's manager of marketing and community relations. "We are hopeful that Southwest will have a presence in Lexington."

"The community has responded really well to the AirTran product, and we think it would respond well to Southwest," she said, adding that Blue Grass Airport is looking forward to having Southwest here.

Chris Mainz, a spokesman for Southwest, said, "Our intention is to serve most if not all the cities that AirTran serves." But he added that it's too soon to say on a city-by-city basis. "We still have a lot of studying to do," he said. There's no time frame on when those decisions will be made, he said.

AirTran flies from Lexington to two non-stop destinations, both in Florida: Fort Lauderdale three days a week seasonally, and Orlando four times a week, increasing to daily service May 26 for the summer.

The nearest airport that Southwest serves is Louisville.

Southwest says the deal that closed Monday values AirTran at $1 billion. AirTran shareholders are getting $3.75 in cash and 0.321 shares of Southwest in exchange for their shares. Southwest said AirTran shareholders will own 5.6 percent of the company. Southwest used cash to pay for the transaction.

The deal increases Southwest's size by about a quarter.

Southwest said it expects to spend $500 million on the integration. It expects "synergies" — money saved from eliminating overlapping functions, and people — to be more than $400 million by 2013.

Bob Jordan, Southwest's executive vice president of strategy and planning, will run AirTran as its president. AirTran's chairman, president and CEO, Bob Fornaro, will be a full-time consultant for the integration, Southwest said.

Southwest is based in Dallas. It said plans for AirTran's operations in Orlando, where it is based, and Atlanta, its biggest hub, are "under review."

Shares of Southwest (NYSE: LUV) closed at $11.72, down 3 cents.