Hot Stocks: Southwest Airlines Takes Aim at Bigger Rivals With $1.4 Billion Deal for AirTran

In a deal that turns up the heat on its bigger rivals, Southwest Airlines Co. (NYSE: LUV ) yesterday (Monday) announced plans to buy discount carrier AirTran Holdings Inc. (NYSE: AAI ) for $1.4 billion. By nabbing AirTran, Southwest is making a move that supports its long-term growth strategy and targets large network carriers with a large East Coast presence such as Delta Airlines Inc. (NYSE: DAL ) and US Airways Group Inc. (NYSE: LCC ). " This absolutely changes things ," said Gary Kelly, Southwest's chairman and chief executive officer on a call with analysts. The deal will allow Southwest to expand into airports serving major hubs like Atlanta, Washington D.C., Boston, Baltimore and New York City, he added. The move puts Southwest in head-to-head competition with Delta in Delta's home base of Atlanta. The buyout, funded mostly with debt, will also give Southwest a bigger slice of the market in cities like Boston and New York, where it has been expanding. Eventually, the low-cost carrier will expand into international markets, with flights to Mexico, the Caribbean, Canada and possibly South America, Kelly told CNNMoney.com. "It will be several years before you see Southwest airplanes in international markets, but it's going to happen," he said.