With football team code names and a tight circle of secrecy, executives at AirTran Airways and Southwest Airlines opened merger discussions last spring.
AirTran, Orlando-based but Atlanta-focused, was “Falcon.” Dallas-based Southwest was “Cowboy.”
Southwest Airlines CEO Gary Kelly had called his counterpart at AirTran, Bob Fornaro, in April to see if he wanted to entertain offers. They knew each other well.
“I’m kind of a bottom-line guy, and Bob is too, and I’m sure that’s why we’ve been friends all these years,” Kelly said. Fornaro told him AirTran wasn’t for sale, but “he was open to at least hearing what I had to say.”
Game on.
Over the summer a handful of executives and lawyers on each side worked through the details that led to Monday’s announcement of a $1.4 billion buyout of AirTran by Southwest, a deal that will change the travel landscape for Atlanta fliers.
“When Gary called, first of all, I wasn’t sure what the subject would be,” Fornaro said. “I certainly went with the mindset, ‘Let’s see what Gary has to say. I was really unsure, but... I thought about Southwest relative to AirTran.”
Among other things, he said, he thought about the much-larger Southwest’s “vast resources” to not only pull off a large-scale acquisition but also fuel future growth.
“It’s a tough industry,” he added. “You’ve got to put yourself in the situation where you can win . . . And that was the motivation from my perspective. The company would be in a better position and 8,000 [employees] would get the benefit of that.”
Fornaro visited Atlanta employees later in the week and talked with the Atlanta Journal-Constitution.
Q: What are employees thinking?
A: First off there’s some amount of flattery -- the airline with the best reputation in the United States is buying us. [There are] a lot of questions about what happens. Nothing really happens until the Department of Justice and the shareholders approve it. We’re guessing March of 2011. We’re going to be putting together transition teams but we’re still competitors.
Q: Do you think there will be employee unrest going forward that could affect AirTran’s operations?
A: We want to impress our future partners at Southwest. That’s my message.
Q: What did you want in the deal?
A: Any potential deal had to be friendly. It was very important because the cultural fit had to be there. And quite frankly it had to be a deal that took care and created opportunities for both employee groups. My expectation is that Atlanta’s going to grow. We expect to see more jobs in Atlanta. From the shareholder perspective it’s great because it’s a premium of 65 to 70 percent [based on share price before the announcement].
Q: Did you win anyone over on any concerns that AirTran board members had?
A: We got a good premium for our shareholders. At the end of the day the board was absolutely unanimous to approve this deal.A number of people have been on our board for quite a number of years and [it was] very important to them that if we were going to sell, our company would be in strong hands.
Q: Was there any other bidder?
A: No other bidder . . . I’ve been here a number of years and no one’s made a bid for our company.
Q: How will AirTran executives fare in this deal?
A: That remains to be seen. You can only have one senior management team. There’s only one CEO. Gary Kelly asked me to stay on for a while . . . to make sure we have a smooth transition, make sure we’re running a good airline and maybe have some input in how the companies will be jointly run in the future.
Q: A lot of people say they will really miss AirTran, and some frequent fliers tell us they don’t plan to fly Southwest. Some will really miss business class.What would you say to those customers?
A: We’re going to have to work on all those things. I think it most likely will be an all-coach airline. Certainly the business class was something what distinguished us, but at the same time part of what makes an airline is attitude. There’ll be some trade-offs. One thing Southwest does is run more frequencies in more places.
Q: How will Southwest continue AirTran’s civic engagement?
A: I would encourage Southwest to do what we’re doing and more. We are active in the community beyond our corporate size and my understanding of Southwest in the communities that it’s big in is they’re very active. In due course we will introduce Southwest people to the right people here.
Q: What will you remember most about your time at AirTran?
A: Every time we were hit with something tough we responded and came out stronger. After 9-11 we made some huge strategic changes which really created opportunity for us. We had a very tough 2008 where we were battling to survive, but we had the best rebound. Every time we got pushed around, we pushed back. We’re tough and we’re going to bring those attributes to the merged company.
