Airtran 2010 Annual Report Download - page 10

Recent Development – Proposed Acquisition of AirTran by Southwest Airlines
On September 26, 2010, AirTran, Southwest Airlines Co., a Texas corporation (Southwest), and a wholly-owned
subsidiary of Southwest (the Southwest merger subsidiary) entered into an Agreement and Plan of Merger (the Merger
Agreement), providing for the acquisition of AirTran by Southwest. The Merger Agreement provides that, upon the terms
and subject to the conditions set forth in the Merger Agreement, the Southwest merger subsidiary will be merged with and
into AirTran (the Merger), with AirTran continuing as the surviving corporation and as a wholly-owned subsidiary of
Southwest. Following the effective time of the Merger, AirTran will merge with and into a wholly-owned limited liability
company subsidiary of Southwest.
If consummated, the proposed acquisition of AirTran by Southwest will combine AirTran with the largest low cost airline
in the United States. We believe Southwest possesses one of the strongest brands in the industry and, based on U.S.
Department of Transportation data as of June 30, 2010, was the largest domestic air carrier in the United States based on
the number of originating passengers boarded. The acquisition, if consummated, will have material impacts on the
business strategy, liquidity, operating results, financial commitments, and financial position of AirTran. The discussion in
this report generally does not address or quantify the impacts of the proposed acquisition of AirTran by Southwest.
Southwest and AirTran currently expect the closing of the Merger to occur in the second quarter of 2011. However, the
Merger is subject to regulatory clearance and the satisfaction or waiver of other conditions as described in the Merger
Agreement, and it is possible that factors outside the control of Southwest and AirTran could result in the Merger being
completed at a later time, or not at all.
The Merger Agreement contains certain termination rights for both AirTran and Southwest, including if the Merger is not
consummated on or before September 26, 2011 (subject to extension by mutual agreement of the parties) or if the
approval of AirTran’s stockholders is not obtained. The Merger Agreement further provides that, upon termination of the
Merger Agreement under specified circumstances, including termination of the Merger Agreement by AirTran as a result
of an adverse change in the recommendation of AirTran’s board of directors, AirTran may be required to pay to
Southwest a termination fee of $39 million.
Business Strategy
Our business strategy is centered on providing quality low fare service by operating a strong hub and network system
utilizing a modern fleet of all Boeing aircraft. Our strategy continues to place strong emphasis on providing high quality
and friendly service while maintaining our low unit cost advantage.
As demonstrated by our number one ranking in the Wall Street Journal’s annual airline scorecard, our 2010 operational
performance was outstanding. Our year 2010 number one ranking among all major U.S. airlines was based on our
performance in the key operational areas of on-time arrivals, cancelled flights, baggage handling, involuntary denied
boarding passengers, and customer complaints.
While the assessment for 2010 is not yet available, for 2009, AirTran Airways was selected as the top low-cost carrier for
the third consecutive year in the prestigious Airline Quality Rating (AQR) study, developed in 1991 as an objective
method for assessing airline quality. Our rating was the highest of all low-cost carriers and significantly higher than our
legacy airline competitors. The year 2009 was the sixth consecutive year for which AirTran ranked third or higher for
quality among all U.S. carriers. This independent rating is conducted by professors at Purdue University’s Department of
Aviation Technology and the W. Frank Barton School of Business at Wichita State University. The AQR evaluates
airlines in four major areas: on-time performance, denied boardings, mishandled baggage, and customer complaints.
2