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Southwest Merger Targets Atlanta

Stocks in this article: AAI DAL LUV

ATLANTA ( TheStreet) -- The world's biggest airline in terms of passengers does not operate at the world's busiest airport, a key fact in understanding the $1.4 billion merger between Southwest (LUV - Get Report) and AirTran (AAI) that was announced Monday.

"The story here is about Atlanta, about us bringing more competition, more low fares," said Southwest CEO Gary Kelly on a conference call with analysts Monday morning, shortly after the merger was announced. "We see a number of city pair opportunities ... we see very healthy passenger growth with lower fares out of Atlanta."


Orlando-based AirTran operates its biggest hub in Atlanta, so it is not as if hub carrier Delta (DAL - Get Report) does not have low fare competition. But Southwest, the largest low-fare airline even before the merger, will bring new strength to the hub and tougher competition for Delta.

Kelly said the acquisition will likely shape Southwest's expansion focus. In the 1990s, he said, the carrier focused on growth in California. Then Chicago became a focus, following the acquisition of ATA slots at Midway airlines. More recently, Southwest has been expanding in Denver.

As Southwest seeks to grow its appeal to business travelers, Kelly said that Atlanta has become "the gaping hole when we do our market surveys around the country ... one of the top markets business customers are looking for is Atlanta."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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