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It's bad enough that Boeing (NYSE: BA ) has -- apparently -- been caving in right and left on pricing demands internationally. But now comes Forbes, commenting on the news that Southwest (NYSE: LUV ) will snap up AirTran (NYSE: AAI ) , and predicting that a bigger Southwest's increased buying heft will help it wring similar concessions out of Boeing.
Yesterday, my Foolish colleague Tim Beyers regaled you with what Southwest's AirTran purchase means to rivals like UAL Corp. (Nasdaq: UAUA ) and Continental. In essence, the merger makes Southwest a stronger competitor to Delta (NYSE: DAL ) around the latter's Atlanta hub. It preserves Southwest's status as the nation's No. 4 (by size) airline -- behind United, Delta, and AMR (NYSE: AMR ) , in that order -- post Continental-United merger. It will quite possibly make Southwest a more profitable company, promising to capture operational "synergies" of perhaps $400 million per year by 2013. At the same time, it keeps Southwest's airplane fleet streamlined, efficient, and all-Boeing.
But speaking of Boeing ... what does the merger mean for Boeing?
I have to admit, Fools, on first reading yesterday's news, and learning of Forbes' take, I was inclined to agree. A combined Southwest/AirTran will boast an airfleet of 682 Boeings. That's a tremendous chip Southwest can play against Boeing in any negotiations for future airplane sales. By way of comparison, when first Rosavia, then Aeroflot (aka Russian Technologies), inked twin deals to purchase 737 airliners from Boeing earlier this year, the companies were reportedly able to extract "below-market" rates as Boeing haggled most willingly in an effort to edge Aeroflot out. So what's to prevent Southwest from using its huge size to extract similar price concessions from Boeing?
One word: self-interest.
Fools, I cannot believe it's a coincidence that when Southwest went looking for a discount merger partner, it chose all-Boeing AirTran over, say, Airbus/Embraer hybrid JetBlue (Nasdaq: JBLU ) or all-Airbus, near-IPO Spirit Airlines. Seems to me, one reason Southwest is so confident in its ability to achieve large synergies in this deal is because it's sticking with an all-Boeing fleet. Flying just one manufacturer's planes lowers pilot training and maintenance costs dramatically, and is one reason Southwest has maintained an unbroken record of profitability for 37 straight years. It gives Southwest strong incentive to stick with Boeing -- whatever the costs.
So my take: Buying AirTran looks like good news for Southwest shareholders, but it's even better news for Boeing.