‘Southwest Effect' may be mixed in AirTran deal

Many fliers hope Southwest Airlines’ arrival in the Atlanta market will lower travel costs, given the Dallas-based carrier’s reputation as a fare-buster. The reality, however, may be less clear-cut.

Southwest’s pending buyout of AirTran Airways gained government approval Tuesday, and the two companies expect to close the deal next Monday. Southwest will quickly assume management control of AirTran, though the two airlines will remain separate operationally for several months to come.

What happens to fares and service as they stitch those operations together will range from noticeable changes in some areas to not much at all in others, experts say. Some fliers might even pay more, they add.

One clear effect of the deal: the eventual end of AirTran’s checked luggage fees. Southwest doesn’t charge for the first two bags.

Southwest hasn’t said when the policy takes effect for AirTran operations, but when it does it will mean an instant savings of at least $40 round-trip for those who check luggage -- assuming fares aren’t boosted to offset it. Atlanta giant Delta Air Lines, which like most carriers also charges a separate fee for bag check, hasn’t said how it will respond.

Beyond that, airline industry experts differ on whether Southwest will mean lower fares in Atlanta.

“They don’t always offer the lowest fare in every market,” said Chris McGinnis, editor of The Ticket newsletter for Atlanta travelers and a business travel columnist for BBC.com. “The major carriers are fighting with them and will go lower.”

Volodymyr Bilotkach, an assistant professor of economics at the University of California at Irvine, studied Southwest fares in 2007 and found that the cheapest last-minute fares on Orbitz.com averaged 8.5 percent less than similar deals from Southwest.

“I would say that for the last-minute fares,” he added, “you would see Southwest offering lower fares about half the time and offering higher fares about half the time.”

Southwest does not sell through major online travel agencies like Orbitz and Travelocity, instead selling predominantly through its own website. That allows Southwest to capitalize on its low-cost reputation by attracting last-minute travelers who don’t shop around, Bilotkach said.

He also noted that evidence shows that when Southwest enters a market, fares in that market tend to drop.

But that effect will be muted in Atlanta because Southwest is not entering as an additional competitor, but rather taking over the operations of AirTran, which already plays the role of scrappy fare-cutter.

Moreover, fare fluctuations are highly dependent on the economy, fuel costs and airlines’ actions to add or cut flight capacity. Lately, the trend has been to raise fares to offset high fuel costs, with Southwest instigating some increases.

Southwest has not yet determined when it would take over pricing for AirTran, spokesman Chris Mainz said.

“That’s not something that would happen on Day 1,” Mainz said. “That is one of those details that will be worked out through the integration process.”

Another detail that could affect fares: any changes to AirTran’s route network out of Atlanta. If Southwest drops a city AirTran served, fares could rise. One example: Southwest will have to stop flying AirTran’s Atlanta-Dallas route, due to unusual legal restrictions on its operations from Dallas that stem from its founding as an intra-state Texas airline. That will leave giants Delta and American as the only nonstop carriers on that route.

But if Southwest adds Atlanta service to a market AirTran doesn’t serve — say, Nashville, Louisville or Hartford, Conn. — fares could fall.

Mainz maintained the net effect will be lower fares.

“We are the nation’s low fare leader, and while we may not have the lowest fare on every single flight every day, more often than not, we have the lowest fares. Our low fares also put pressure on our competitor’s to keep their fares low, which is the Southwest Effect in action.”

He also said the lack of fees for checked bags and some other services factors into the equation. “Many times, once you add up the fees, we are lower than another competitor’s published fare.”

The Southwest-AirTran merger is the latest in a string as the airline industry consolidates. The overall reduction in competition has an effect, said Bijan Vasigh, a professor of air transportation at Embry-Riddle Aeronautical University.

“As you have more concentration and consolidation, we shall say goodbye to cheaper tickets,” he said.

Removing competition means “they don’t really need to match the ticket prices,” Vasigh said.

Southwest in recent years has tried to attract more business travelers, who usually pay higher short-notice fares with fewer conditions. It offers non-refundable “Wanna Get Away” discounted fares; more expensive “Anytime” fares that offer more frequent flier points, are refundable and allow same-day changes; and the most expensive “Business Select” fares.

A recent search for roundtrip Birmingham -San Francisco flights on Southwest’s website, for example, offered a variety of flights with one or two stops, priced from $328 for the “Wanna Get Away” to $958 for the Business Select fare.

Business Select fares are also refundable, earn even more points, and include an alcoholic beverage and automatic entry into the first boarding group.

The latter is a benefit because — unlike AirTran and most carriers — Southwest does not have assigned seating. Late boarders can end up with middle seat or split from their group. Southwest also has no business class.

Those two features have already caused consternation among AirTran loyalists, some of whom set up a website to try to persuade Southwest to reconsider, though there’s been no indication it will.

“After business class goes away, I will not fly AirTran again,” said Don Turner, an elite frequent flier who always flies in business class on AirTran.

Meanwhile, other airlines are picking up Southwest’s efforts to draw travelers to its own website, which decreases comparison shopping. Most notably, American pulled its fares from Orbitz during a contract dispute last year and tells customers that its own website is “the best place to do business online with American Airlines.”

“Any strategy that leads to the airlines showing their fares at a place that they are not easily comparable to competitors’ prices -- that will lead to higher fares in the long run,” Bilotkach said.