Southwest Airlines is already figuring out ways to bring in higher revenue from AirTran Airways, as it works to fold AirTran's operations into its own.
"We'll have big schedule changes occurring within the AirTran unit throughout the year," Southwest chief executive Gary Kelly said during the company's analyst conference call Thursday on its $178 million profit report for 2011.
Southwest's average fare for all its flights -- including AirTran's -- rose 10 percent in the fourth quarter of 2011, the carrier said. And Dallas-based Southwest is counting on bringing in more revenue to increase the value of its acquisition of Orlando-based AirTran last year.
That's important in part because the AirTran deal was costly, due to inherited debt and integration costs.Southwest now expects the integration of AirTran to cost $500 million.
The company is pulling AirTran service out of cities where its service is not profitable. It has already discontinued AirTran's flights from Atlanta to Atlantic City, N.J., and in March AirTran will stop flying from Atlanta to Newport News, Va.
And as Southwest prepares to launch its own service in Atlanta next month, it is making plans to gradually dismantle AirTran's connecting hub, instead shifting to a large operation focusing more heavily on travelers going to or from Atlanta than those passing through.
"We can win customers in Atlanta," Kelly said. "We're the low-cost guy, we're the low-fare leader, and I think we'll do something different in the market."
Southwest has already found ways to eke out more revenue on AirTran, the company's executives said. That's done partly by altering the mix of fares charged by the airline, in the complex alchemy of varied prices paid by different passengers on each flight.
They expect to further increase revenue after this year, with additional changes to AirTran's schedule and by connecting the two airlines' route networks. The company expects to bring in $200 million in net "synergies" from the acquisition this year, with the bulk of the increase coming from moves to increase revenue.
