NEW YORK (CNNMoney.com) -- Southwest Airlines plans to acquire AirTran Holdings for $1.4 billion, the airlines said on Monday.
Southwest (LUV, Fortune 500) said the deal values AirTran at $7.69 per share, a 69% premium over AirTran's closing price of $4.55 on Friday. AirTran's (AAI) stock surged 62% to $7.24 at the start of trading, while Southwest rose 14%.
Southwest chief executive officer Gary Kelly said the deal will allow his airline to expand into airports serving major hubs like Atlanta, Washington D.C., Boston, Baltimore and New York City.
Southwest said the total deal, including AirTran's debt and aircraft operating leases, is valued at about $3.4 billion.
Both of the airlines serve domestic markets and present themselves as low-cost carriers. Kelly told CNNMoney.com that he plans to eventually expand into international markets, with flights to Mexico, Latin America, the Caribbean, Canada and possibly South America.
"It will be several years before you see Southwest airplanes in international markets, but it's going to happen," he said.
He said that a possible expansion into European and Asian markets is "down the road," but his airline does not currently have jets that can make those flights.
The deal has been approved by the board of directors of each airline, and is now contingent upon the approval of regulators and AirTran stockholders.
Southwest spokeswoman Brandy King said that once the merger goes through, all the airplanes would fly under the Southwest logo and adopt the Southwest policy on fees, which are less burdensome than most of its competitors.
For example, Southwest does not charge a fee for their first two checked bags, while AirTran charges coach travelers $20 for their first checked bag and $25 for the second.
King would not provide an estimate on when the deal is expected to be completed.
This is just the latest deal in an industry that has been consolidating. Several other airline stocks rose after the markets opened, including American Airlines (AMR, Fortune 500), Continental Airlines (CAL, Fortune 500), United Airlines (UAL), US Airways (LCC, Fortune 500) and JetBlue Airways (JBLU).
Stockholders approved a merger of United and Continental on Sept. 17 and that deal is expected to close by the end of the year. The combined company will fly under the logo of both United and Continental.
Nike is opening up shop on Amazon.com and the company plans "big shifts" over the coming year. More
The shutdown, which raised protests from navigator groups, will occur from midnight to noon on on all but one Sunday. More
As if Uber's new CEO didn't already have his work cut out for him, Dara Khosrowshahi has to deal with losing London. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
When you're making big career decisions, you turn to your mentors and your trusted peers. But how do you find these mentors and trusted peers in the first place? More