(LUV) Southwest Airlines Consolidates Operations

Leading global passenger air service provider Southwest Airlines (LUV) announced plans of combining its existing call center operation in Atlanta and two other in Georgia to form a single unit, which will be located in Atlanta

These three units were part of AirTran Holdings – that was acquired by Southwest Airlines in May last year and now operates as a wholly owned subsidiary under the name, AirTran Airways.

The new Atlanta Customer Support & Services (CS&S) Call Center, located in the AirTran Corporate Center (ACC) in College Park, will be Southwest Airlines’ first call center in the Eastern Time Zone and seventh across the U.S. The other six centers are based in Oklahoma City, San Antonio, Phoenix, Houston, Chicago and Albuquerque.

The to-be opened center in Atlanta will become operational from May 2013 and will handle all AirTran Airways calls in the initial level. Thereafter, the center will also start looking after the Southwest Customer calls.

With the expected shut-down of the Carrollton and Savannah Call Centers on July 31, 2013, Southwest Airlines will offer job opportunities in the new unit to all the employees of the two centers.

This move on the company’s part highlights the initiatives to integrate its business lines with AirTran as well as extend superior customers services in the Atlanta region.

The merger of Southwest Airlines with AirTran is expected to be accretive to Southwest’s earnings in the upcoming quarters and will be on the rise when realized fully. The transaction is expected to generate net synergies of more than $400 million by 2013 on full integration.

We also expect the company to register healthy revenue growth in the coming months, owing to its cost leadership position, strong balance sheet, low cost, flexibility, network optimization and fleet modernization. The company is also adding novel features to its services as well as introducing new products, which are enhancing its value and profitability.

Nevertheless, high operating costs like fuel, maintenance, salaries, wages and airport fees, new advertising policy along with heavy investments are expected to limit the upside potential of the stock. Competitive threats are also prevalent as Southwest Airlines exists in an industry along with heavyweights like Delta Air Lines Inc. (DAL).

Dallas, Texas based Southwest Airlines currently retains a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral recommendation on the stock.
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