Mergers with AirTran Airlines
Mergers with AirTran Airlines
Organizational Strategy and Information Systems
Southwest Airlines ’ merger with AirTran Airlines , valued at over US$3 billion, made Southwest the largest domestic car- rier based on number of passengers fl own. 25 The merger increases Southwest ’ s presence in a number of major cities, most notably New York (LaGuardia) and Washington D.C. (Ronald Reagan National Airport). Thanks to AirTran , Southwest now fl ies into the coveted Atlanta ’ s Hartsfi eld‐Jackson Atlanta International, the world ’ s busiest airport, along with a number of international vacation destinations such as Aruba, Puerto Rico, and the Bahamas. In all, 21 new cities were added, 7 of which were in the international market, positioning Southwest to expand in Central and South America. The result was a signifi cant increase in profi tability for Southwest , growing from $178 million in 2011 to $1.1 billion in 2014. 26
Southwest has grown organically, acquiring only two other smaller carriers—Morris Air and Muse Air —in the 1980s. This has made it easier to maintain its quirky identity. On the other hand, AirTran was created from several airlines, includ- ing the former ValuJet , about 15 years ago. It is known mostly as a low‐cost, on‐time carrier. The Company Culture page on AirTran ’ s Web site prior to the merger claimed that “loyal crew members keep AirTran airways customers soaring” and who have a “timely and accommodating demeanor.” AirTran ’ s values included a total commitment to safety, technical ex- cellence, continuous learning, fun, and profi t. 27
Southwest , headquartered at Love Field in Dallas, uses the ticker symbol LUV and uses all kinds of ways to show that “Luv” to their customers. Southwest has cultivated a corporate culture that focuses on employees and customers having a good time while fl ying. The company carefully selects its employees using interviews that involve creative activities and even asking the recruits to wear tutus. Southwest ’ s training program with karaoke and amusing challenges is designed to socialize the new recruits into the airline ’ s fun‐loving culture. According to its Web site, its cultural values include “A Warrior Spirit, A Servant ’ s Heart, A Fun‐Luving Attitude.” 28
Wharton management professor Peter Cappelli commented just after the merger was announced in 2010 that “South- west ’ s whole business model is built on a particular approach to managing employees. It ’ s a big bet they are making that they can swallow AirTran . . . . This is a very different approach, taking thousands of AirTran employees, dumping them into the system and hoping it works. It ’ s a pretty risky move.” Cappelli adds that airline mergers are always diffi cult because integration has to take place while a carrier continues to carry out complex operations. Thousands of employees can ’ t easily be put through an orientation program in the merger ’ s short time frame, and the information systems supporting the complex operations of two airlines can ’ t be easily changed. 29
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