Southwest Merger Targets Atlanta

A key reason for the Southwest-AirTran merger is that the world's biggest airline does not serve the world's busiest airport.
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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.

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Ted Reed