AirTran / Southwest Airlines Merger

At Southwest Airlines’ closing stock price of $12.28 on September 24, 2010, the transaction values AirTran common stock at $7.69 per share, or approximately $1.4 billion in the aggregate, including AirTran’s outstanding convertible notes. This represents a premium of 69 percent over the September 24, 2010 closing price of AirTran stock. Under the agreement, each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines’ common stock, subject to certain adjustments, based on Southwest Airlines’ share price prior to closing. Including the existing AirTran net indebtedness and capitalized aircraft operating leases, the transaction value is approximately $3.4 billion.

The agreement has been unanimously approved by the boards of directors of each company, and closing is subject to the approval of AirTran stockholders, receipt of certain regulatory clearances, and fulfillment of customary closing conditions.

“Today is an exciting day for our Employees, our Customers, the communities we serve, and our Shareholders,” said Gary C. Kelly, Chairman, President, and CEO of Southwest Airlines. “As we approach our 40th Anniversary of providing exceptional Customer Service at everyday low fares, the acquisition of AirTran represents a unique opportunity to grow Southwest Airlines’ presence in key markets we don’t yet serve and takes a significant step towards positioning us for future growth.

“This acquisition creates more jobs and career opportunities for our combined Employee groups, as a whole. It allows us to better respond to the economic and competitive challenges of our industry, and fits perfectly within our strategy for our fifth decade of service. It offers Customers more low-fare destinations as we extend our network and diversify into new markets, including significant opportunities to and from Atlanta, the busiest airport in the U.S. and the largest domestic market we do not serve, as well as Washington, D.C. via Ronald Reagan National Airport. The acquisition also allows us to expand our presence in key markets, like New York LaGuardia, Boston Logan, and Baltimore/Washington. It presents us the opportunity to extend our service to many smaller domestic cities that we don’t serve today, and provides access to key near-international leisure markets in the Caribbean and Mexico. Finally, this accelerates our goal to boost profits and achieve our financial targets.”

The acquisition will significantly expand Southwest Airlines’ low-fare service to many more Customers in many more domestic markets, creating hundreds of additional low-fare itineraries for the traveling public. Moreover, the expansion of low fares should generate hundreds of millions in annual savings to consumers. Based on an economic analysis by Campbell-Hill Aviation Group, LLP*, Southwest Airlines’ more expansive low-fare service at Atlanta, alone, has the potential to stimulate over two million new passengers and over $200 million in consumer savings, annually. These savings would be created from the new low-fare competition that Southwest Airlines would be able to provide as a result of the acquisition, expanding the well-known “Southwest Effect’” of reducing fares and stimulating new passenger traffic wherever it flies.

“Both companies have dedicated people with kindred Warrior Spirits, who care about each other, and who care about serving Customers. We will continue to build upon our outstanding Customer experiences, strong and unique Cultures, and award-winning, safe operations,” said Kelly. “We believe this acquisition can benefit all Stakeholders. Ultimately, we are very excited to spread low fares farther and look forward to working together with AirTran to realize the new opportunities and benefits we expect to derive from this combination.”

Bob Fornaro, AirTran Airways’ Chairman, President and CEO said, “This agreement is great news for our Crew Members, our shareholders, our customers and the communities we serve. Joining Southwest Airlines will give us opportunities to grow, both professionally as individuals and as a group, in ways that simply would not be possible without this agreement. This agreement with Southwest is a testament to the success and hard work of the more than 8,000 AirTran Crew Members who have built this airline. I am tremendously proud of the things we have accomplished together and look forward to continuing that great work during this next exciting chapter of our history.”

AirTran revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $2.5 billion and $128 million, respectively. Southwest Airlines revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $11.2 billion and $843 million, respectively. The proposed transaction, including the anticipated benefit of net synergies, but excluding the impact of one-time acquisition and integration costs, is expected to be accretive to Southwest Airlines pro forma fully-diluted earnings per share in the first year after the close of the transaction and strongly accretive thereafter. Net annual synergies are expected to exceed $400 million by 2013. One-time costs related to the acquisition and integration of AirTran are expected to be in the range of
$300 million to $500 million.

As of June 30, 2010, the combined unrestricted cash and short-term investments of the two companies was $3.7 billion. Southwest Airlines intends to fund approximately $670 million in cash consideration for the transaction out of cash on hand. Since June 30, Southwest’s cash and short-term investments balance has increased from $3.1 billion to $3.3 billion. In addition, Southwest Airlines has a fully available, unsecured revolving credit facility of $600 million.

Based on current operations, the combined organization would have nearly 43,000 Employees and serve more than 100 million Customers annually from more than 100 different airports in the U.S. and near-international destinations. In addition, the combined carriers’ all-Boeing fleet consisting of 685 active aircraft would include 401 Boeing 737-700s, 173 Boeing 737-300s, 25 Boeing 737-500s, and 86 Boeing 717s, with an average age of approximately 10 years, one of the youngest fleets in the industry. Southwest Airlines also announced, previously, that it is evaluating the opportunity to introduce the Boeing 737-800 into its domestic network to complement its current fleet, providing opportunities for longer-haul flying and service to high-demand, slot-controlled, or gate-restricted markets. This acquisition supports Southwest Airlines’ evaluation of the Boeing 737-800.

Until closing, Southwest Airlines and AirTran will continue to operate as independent companies. After closing, Bob Fornaro will continue to be involved in the integration of the two companies. Southwest Airlines plans to integrate AirTran into the Southwest Airlines Brand by transitioning the AirTran fleet to the Southwest Airlines livery, developing a consistent Customer Experience, and consolidating corporate functions into its Dallas headquarters. Subject to receipt of necessary approvals, Southwest Airlines’ integration plans include transitioning the operations of the two carriers to a Single Operating Certificate. Plans for existing AirTran facilities will be developed by integration teams and decisions will be announced at appropriate times. The carriers’ frequent-flyer programs will be combined over time, as well.

Terms of the Agreement
Under the agreement, each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines’ common stock, subject to certain adjustments. The number of shares to be issued by Southwest Airlines is subject to adjustment if the average of Southwest Airlines closing prices for the 20 trading days ending three trading days prior to closing is below $10.90 or above $12.46. This adjustment mechanism is intended to provide at least $7.25 in value and up to $7.75 in value per share of AirTran common stock. If the average closing price noted above exceeds $12.46, the value will be $7.75 with fewer shares of Southwest common stock issued. If the average closing price noted above is less than $10.90, the value will be $7.25 with additional shares of Southwest common stock issued. Additionally, Southwest Airlines has the option of substituting cash in lieu of issuing incremental shares if the average closing stock price is less than $10.90. Assuming an exchange ratio of 0.321 and the conversion of AirTran’s outstanding convertible notes, AirTran stockholders would receive approximately 57 million shares of Southwest Airlines common stock, which represents approximately seven percent of the pro forma Southwest Airlines common shares outstanding, as well as approximately $670 million in cash.

Citigroup Global Markets Inc. and Dahlman Rose & Company acted as financial advisors to Southwest Airlines. Vinson & Elkins L.L.P. acted as legal counsel to Southwest Airlines.

Conference Call and Webcast Information
Southwest Airlines will discuss the strategic acquisition of AirTran with the analyst and investor community on a conference call at 7:30 am Central (8:30 am Eastern) today. A live broadcast and replay of the conference call will be available at www.southwest.com/investor_relations and www.lowfaresfarther.com.

Press Conference
Southwest Airlines will present the key benefits of the acquisition at a live press conference today from Southwest Airlines Headquarters in Dallas, Texas, at 9 am Central (10 am Eastern). A live broadcast and replay of the conference will be available at www.lowfaresfarther.com .

* Economists from Campbell-Hill Aviation Group, LLP (Alexandria, Va.) were retained by Southwest Airlines to evaluate the potential benefits of the transaction for the traveling public.

About Southwest Airlines
After nearly 40 years of service, Southwest Airlines (NYSE: LUV) continues to differentiate itself from other low fare carriers–offering a reliable product with exemplary Customer Service. Southwest Airlines is the nation’s largest carrier in terms of originating domestic passengers boarded, now serving 69 cities in 35 states. Southwest also is one of the most honored airlines in the world known for its commitment to the triple bottom line of Performance, People, and Planet. To read more about how Southwest is doing its part to be a good citizen, visit southwest.com/cares to read the Southwest Airlines One Report TM. Based in Dallas, Southwest currently operates more than 3,200 flights a day and has nearly 35,000 Employees systemwide.

About AirTran
AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI) and a Fortune 1000 company, has been ranked the number one low cost carrier in the Airline Quality Rating study for the past three years. AirTran Airways is the only major airline with Gogo Inflight Internet on every flight and offers coast-to-coast service on North America’s newest all-Boeing fleet. Airtan’s low-cost, high-quality product also includes assigned seating, Business Class and complimentary XM Satellite Radio on every flight.

Southwest Airlines offers Partnerpalooza

Southwest Airlines introduced the Partnerpoolza sweepstakes last year, and it did so well that they are back for another season. The grand prize this year is 12 Rapid Rewards Award Tickets and a Rapid Rewards Companion Pass for a full year.

The First Prize is 6 Rapid Rewards Award Tickets and a Rapid Rewards Companion Pass for one year.

The Second Prize is 2 Rapid Rewards Award Tickets and A-List status for one year.

In order to participate, you must be a Southwest Rapid Rewards member. If you are an member you will earn sweepstakes entries by providing your Rapid Rewards number at the time of purchase with any of Southwest Airlines partners.

There is also an instant win game called the “Daily Shuffle”. It can be played at www.southwest.com/partnerpalooza/ where you can also read all the rules.

Spirit Airlines raises prices on carry-on luggage

If you have a carry-on bag that will fit under the seat in front of you, without causing any problems, you are allowed to store it there. However, it must fit under the seat, so that turbulence can not knock it free. Also if you prepay for your bag online prior to the flight, you will save 30% off the price. If you log onto SpiritAir.com and purchase your bag that way, it will only cost you $30 each way.

SpiritAir has raised it’s prices on checked bags and carry-on backs a few times in the past 12 months. A lot of people get angry over these added on prices, saying that they are deceiving. However airlines are not allowed to accept payment until they have let you know about these additional charges.

Air Berlin

American Airlines President Tom Horton said, “We have flown to both Dusseldorf and Berlin in years past, and with the presence that Air Berlin brings on this end, this may well offer us an opportunity to expand our presence in Germany with some of our own flying. We’ve made no decisions on that, but that’s the sort of things we’ll look at going forward.”

All parties involved seems to be very pleased with the new partnership agreement.

Air Canada

“Air Canada is very pleased to offer customers service between Toronto and New Orleans, the eighth new route from Toronto to the U.S. we will launch this year. New Orleans was recently voted one of the top ten cities to visit in the U.S. and Canada by the well-respected Travel + Leisure magazine and there are also important business connections between New Orleans and Canada. Customers will enjoy the choice of two classes of service, the opportunity to collect and redeem Aeroplan miles, and for those who are eligible lounge access and concierge service,” said Ben Smith, Executive Vice President and Chief Commercial Officer. “This route further enhances our Toronto hub at Lester B. Pearson International Airport where our operations are centralized in a single terminal with streamlined customs procedures, making it an extremely convenient gateway to and from the U.S. and an ideal transfer point for domestic, transborder and international travelers connecting to our extensive global network.”

Beginning October 30, 2010, Air Canada will begin the only non-stop, daily service between Toronto and New Orleans. Flight AC7971 will depart Toronto Lester B. Pearson International Airport at 9:50 and arrive at Louis Armstrong New Orleans International Airport at 12 noon. Flight AC7972 will depart New Orleans at 12:35 and arrive in Toronto at 16:20.

“There is a special relationship between Canadian travelers and New Orleans, making Canada our number one international market,” said Stephen Perry, president and CEO of the New Orleans Convention and Visitors Bureau. “With the return of Air Canada, we will see this relationship strengthen and grow. We are grateful for this partnership, and we look forward to welcoming additional Canadian travelers to experience the rich culture and history of New Orleans.”

“It’s great to see the continued growth and expansion of Air Canada’s service at its Toronto hub,” said Pamela Griffith-Jones, Chief Marketing and Commercial Officer for the GTAA. “This new service reinforces the attractiveness of the Toronto market and once again brings more choice to passengers travelling through Toronto Pearson.”

Already this year, Air Canada has launched new daily service between Toronto and seven American cities including: Orange County (Santa Ana) and San Diego, California; Portland, Oregon; Memphis, Tennessee; Cincinnati, Ohio; Portland, Maine; and Syracuse, New York. Flights are non-stop and conveniently timed for connections with flights on Air Canada’s extensive domestic and international network. Customers can earn and redeem Aeroplan miles on each route.

Air Canada has also added four new international destinations from Toronto with the launch this summer of flights to Athens and Barcelona, non-stop flights to Copenhagen, and same-plane year-round service to Brussels via Montreal.

Air Canada offers up to 141 scheduled flights each day to 53 U.S. destinations from its hub in Toronto. In total, this summer Air Canada will operate up to 230 flights per day from six points in Canada and 58 destinations in the U.S. In addition, this summer Air Canada is also serving 30 domestic and 45 international destinations from Toronto.

Air Canada was named Best Airline North America in a worldwide survey of more than 17 million air travelers conducted by independent research firm Skytrax for its 2010 World Airline Awards.

Air Canada also won four top honours in Business Traveler magazine’s “Best in Business Travel” 2009 annual reader survey: “Best Flight Attendants in North America,” “Best In-flight Services in North America,” “Best North America Airline for Business Class Service,” and “Best North American Airline for International Travel.” In 2009 as well, the readers of Global Travel magazine voted Air Canada “Best Airline in Canada” and “Best Airline in North America.”

Air Canada is Canada’s largest domestic and international full-service airline providing scheduled and charter air transportation for passengers and cargo to more than 170 destinations on five continents. Canada’s flag carrier is the 15th largest commercial airline in the world and serves 31 million customers annually. Air Canada provides scheduled passenger service directly to 59 destinations in Canada, with New Orleans 59 in the United States and 60 in Europe, the Middle East, Asia, Australia, the Caribbean, Mexico and South America. Air Canada is a founding member of Star Alliance, the world’s most comprehensive air transportation network serving 1,167 destinations in 181 countries. Air Canada customers can collect Aeroplan miles for future rewards through Canada’s leading loyalty program, and Top Tier members enjoy reciprocal frequent flyer benefits including lounge and priority services.

TAM Airlines

This cooperation builds on the reciprocal frequent flyer program agreement signed on April 6 between Continental Airlines and TAM and supports Continental’s growth in the Brazilian market. Both airlines are members of Star Alliance, the first truly global airline alliance to offer worldwide reach, recognition and seamless service to the international traveler.

“Codesharing between Continental and TAM Airlines improves the link we established between the two airlines before TAM joined Star Alliance,” said John Slater, Continental’s staff vice president Latin America and the Caribbean. “We look forward to growing our relationship with TAM in the near future.”

“We are expanding our international network through this new stage of our partnership with Continental. Through the agreement, we are able to offer more convenience and better services to our customers,” stated TAM Airlines commercial and planning vice president, Paulo Castello Branco.

Continental Airlines is the world’s fifth largest airline. Continental, together with Continental Express and Continental Connection, has more than 2,700 daily departures throughout the Americas, Europe and Asia, serving 132 domestic and 137 international destinations. Continental is a member of Star Alliance, which overall offers more than 21,050 daily flights to 1,167 airports in 181 countries through its 27 member airlines. With more than 40,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with its regional partners, carries approximately 63 million passengers per year.

Continental consistently earns awards and critical acclaim for both its operation and its corporate culture. For nine consecutive years, FORTUNE magazine has ranked Continental as the top U.S. airline on its “World’s Most Admired Companies” airline industry list. For more company information, go to continental.com.

TAM Airlines (www.tamairlines.com.br), a member of Star Alliance, leads the Brazilian domestic market since July 2003 and has ended the month of May with a 40.9% market share. The company flies to 43 destinations in Brazil. With the business agreements signed with regional companies, it goes to 87 different destinations in national territory. TAM’s market share among Brazilian airlines that operate international flights was of 87.9% in May. International flights include direct flights to 18 destinations in the United States, Europe and South America: New York, Miami and Orlando (U.S.A.), Paris (France), London (England), Milan (Italy), Frankfurt (Germany), Madrid (Spain), Buenos Aires (Argentina), La Paz, Cochabamba and Santa Cruz de la Sierra (Bolivia), Santiago (Chile), Asuncion and Ciudad del Este (Paraguay), Montevideo (Uruguay), Caracas (Venezuela) and Lima (Peru). Furthermore, it has codeshare agreements that allow sharing seats in flights with international companies, thus allowing passengers to travel to another 78 destinations in the U.S.A., South America, Europe and Asia. The Star Alliance network, in turn, offers flights to 1,167 airports in 181 countries. TAM is a pioneer in launching a loyalty program airline in Brazil. TAM Fidelidade now has 6.9 million members and has already distributed 10.6 million airplane tickets through point redemption.

Hawaiin Airlines

Mark Dunkerley, Hawaiian’s president and CEO, commented, “This is a historic day for Hawaiian Airlines that’s been years in the making and sets us on a new course to improve our service to customers, grow our company, and expand the range of destinations we serve on both sides of the Pacific.”

Passengers on the inaugural flight were greeted at the boarding gate in Honolulu with Hawaiian music and hula by the Hawaiian Airlines Serenaders, and presented with fresh orchid lei to commemorate the first commercial flight aboard Hawaiian’s new “fleet of the future.”

Named Hokule’a or “star of gladness,” for the star known as Arcturus that served as a guiding beacon for Polynesian voyagers in ancient times, the new, 294-seat A330 immediately adds 30 more seats per flight to Hawaiian’s popular twice-daily Los Angeles-Honolulu route as the peak summer travel season begins.

Passengers flying in coach class will enjoy the comforts of more legroom and a state-of-the-art, on-demand entertainment system, with high-resolution LCD touch screen monitors in each seatback allowing them to choose from a wide selection of movies and video programs, audio channels and video games. Each system also includes a USB port allowing connectivity for personal media players. First class passengers will enjoy the added advantages of larger in-seat LCD screens and iPOD compatibility.

Among the passengers on today’s Inaugural Flight were Gene and Melissa Caliwag of Mililani, who were randomly selected from more than 200,000 entries in an online sweepstakes by Hawaiian offering free tickets on the Inaugural Flight (return flight included) and three nights of accommodations at the JW Marriott Los Angeles L.A. LIVE. As fate would have it, the Caliwags submitted their entry to Hawaiian via Facebook on May 20, the same day as their 21st wedding anniversary.

Hawaiian’s first A330 flight departed Honolulu today as Flight #2 at 1:15 p.m. and is scheduled to arrive in Los Angeles at 9:35 p.m. The inaugural return flight of the A330 will depart Los Angeles on Saturday as Flight #1 at 8:35 a.m. and arrive in Honolulu at 11:25 a.m.

Hawaiian plans to introduce up to 27 new Airbus aircraft into its fleet by the end of the decade, representing a commitment of approximately $5 billion if all options are exercised. Hawaiian is initially leasing three new A330s, the third of which will join its fleet in November, and has a purchase agreement with Airbus to acquire seven A330s starting in 2011 and six A350XWB-800 (Extra Wide-Body) aircraft starting in 2017, along with purchase rights for an additional five A330s and six A350s.

Air Wisconsin

APPLETON, Wis.  May 14  – Air Wisconsin Airlines Corporation today announced it has promoted Chris White to the position of managing director of safety, reporting directly to President and CEO Jim Rankin.

“I am very excited to have Chris as a member of our senior leadership team,” noted Rankin. ‘Since filling the role of Interim Managing Director of Safety in January, Chris has been instrumental in initiating a strategic review of our numerous safety programs and bringing a renewed focus and energy to our culture of  ’safety first.’ With his unique combination of leadership qualities and experience, I’m confident Chris will take our safety efforts to even greater heights of operational excellence.”

White brings extensive knowledge and experience to his new role. Prior to joining Air Wisconsin, Chris spent 17 years with Midwest Airlines in Milwaukee, where he most recently served as Vice President-Safety and Regulatory Compliance. His experience includes flight and ground safety, emergency response, occupational health and safety, corporate and operational security programs, insurance claims and risk management.  He also served as Midwest’s corporate liaison to the Federal Aviation Administration (FAA), the National Transportation Safety Board (NTSB) and other regulatory agencies.

“I have been privileged to come aboard to lead Air Wisconsin safety efforts and to continue fostering the organization’s high-level focus on emphasizing safety as a top priority for customers and employees,” stated White.

Chris holds a Master of Science in Management from Cardinal Stritch University and completed additional graduate coursework through Boeing’s MBA Executive program at Seattle University. He earned a Bachelor of Science in Mechanical Engineering from the University of Michigan.

Air Wisconsin, the largest privately held regional airline in the United States, operates as US Airways Express, scheduling nearly 500 departures per day to 69 cities in 26 states and two Canadian provinces. The fleet includes 70 Canadair Regional Jets. Additionally, Air Wisconsin performs ground-handling services for United Express at over 30 locations throughout the country.