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Sat, Feb 02, 2008

Southwest CEO Says LCC Ready For Consolidation

You Are Now Free To... Wait And See What Happens

Southwest Airlines CEO Gary Kelly says he's open to the idea of merging with another airline, though he adds Southwest should make out fine whether it chooses to remain independent or not.

"I think consolidation provides an opportunity for Southwest regardless of what we do," Kelly (above) said Thursday, in a speech before a New York investment conference. "We have enough exposure to other airlines in the US that if they shrink, we'll benefit."

If that sounds familiar, perhaps it's because the CEO of another low-cost carrier recently made similar statements. As ANN reported earlier this week, AirTran CEO Bob Fornaro said he is watching closely for signs of a looming Delta/Northwest union, which could free up more gates for his airline in Atlanta.

"And of course, I wouldn't eliminate the possibility that we would participate in some form or fashion in consolidation," Kelly continued, reports The Dallas Morning News.

That's not the first time Kelly has said publicly he might support a merger, if the terms are right; he made similar comments in December 2007, stressing at that time it would be Southwest writing the big check, and keeping its identity.

This week, Kelly echoed those statements... adding the airline may be willing to move away from one of its best-known trademarks -- its single-type fleet of Boeing 737s.

Kelly told the Raymond James Growth Airline Conference the airline is willing to consider a partner that flies other aircraft types. "If there's an opportunity to acquire another carrier that does not have 737s, we have plans in mind about how we can deal with that," he said.

"While that is an impediment to an acquisition, it's not a deal killer," he continued, before adding he didn't know "exactly how we would resolve that. But at least in today's environment, where the aircraft market is still very, very hot, it wouldn't be too difficult thinking about switching out that fleet... I wouldn't foreclose the idea that we might operate a second fleet type, either... But we have no desire to do that."

Of course, Southwest has been through airline mergers and acquisitions before... with mixed results. The carrier bought Muse Air Corp. in 1985, followed in 1993 by Morris Air Corp. Southwest integrated the later into its operations; it operated Muse, renamed TranStar Airlines, as a separate business, until it closed in 1987.

Even as legacy carriers appear to be close to a series of mergers, however, Kelly said Southwest could chose to do... nothing. He noted Southwest didn't react when US Airways merged with America West in 2005.

"They shrank 15 percent, and we gained market share," he said.

FMI: www.southwest.com

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