Southwest Airlines will buy AirTran for about $1.42 billion, the companies announced today. The move will put Southwest in head-to-head competition with Delta in Delta's home base of Atlanta. The buyout, funded mostly with debt, will also give Southwest a bigger slice of the market in cities like Boston and New York, where it has been expanding.
The announcement continues the airline industry's move to consolidate. Continental and United parent UAL Corp. will formally combine at the end of this week and become the world's largest, toppling Delta. Delta claimed that spot when it acquired Northwest Airlines two years ago. In April, AirTran Holdings Inc. CEO Robert Fornaro signaled his interest in making a deal, but when asked by the AP who might be a potential suitor, Fornaro replied, "I'm not sure that we're necessarily a natural fit to be gobbled up by somebody else."