Graham Warwick/WASHINGTON DC

VALUJET AIRLINES has agreed a merger with AirTran Airways which will rid the carrier of its stigmatised name, increase its maintenance capability and overcome US Federal Aviation Administration restrictions on its growth.

The ValuJet and AirWays holding companies will merge, but the two low-fare carriers will continue on separate operating certificates, at least initially.

ValuJet will be renamed AirTran Airlines and its McDonnell Douglas (MDC) DC-9s will be repainted in the same livery as that of AirTran's Boeing 737-200s.

ValuJet will issue shares worth almost $62 million in exchange for all of the AirTran stock. ValuJet president Joseph Corr says that the merger "-is driven by economics". AirWays chairman Robert Swenson says: "The combined entity will be stronger than the two operating independently." Corr will be president of the new AirTran Holdings, with Swenson as chairman.

ValuJet lost more than $41 million in 1996, and almost $19 million in the first quarter of 1997, but still has more than $130 million in cash. AirWays lost $7 million in the year ended 31 March, blaming the aftermath of the May 1996 ValuJet DC-9 crash in Florida. Together, the airlines operate some 40 aircraft to 46 destinations. These will be replaced by the 50 MDC MD-95s on order for ValuJet, Swenson indicates, while Corr says that the capabilities of AirTran's Orlando, Florida, maintenance centre will be expanded. The new company is likely to be based at Orlando.

Corr says that codesharing may begin before the merger is completed, and the combined route structure is being examined. ValuJet's fleet and route growth have been tightly restricted by the FAA since the DC-9 crash, and the merger offers a way to expand services, using AirTran.

Source: Flight International