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Southwest Invading Minneapolis Stronghold

Of all the airline industry's fortress hubs, Minneapolis is perhaps the most impregnable.

But now Southwest (LUV - Get Report) wants to fly there. The largest low-fare carrier says it will begin taking passengers between Minneapolis-St. Paul International Airport and Chicago's Midway Airport next March.

Why enter territory that is 80%-controlled by one carrier? Simple, Southwest CEO Gary Kelly explained on an earnings conference call. "It is a very high-fare market," he said. "One-way fares are as high as $400, and it's a short-haul market."

Currently Northwest, now part of Delta (LUV - Get Report), handles nearly fourth-fifths of the travelers at Minneapolis, and it has long been considered the most aggressive carrier in defending its turf. Already, it operates 10 daily flights between Minneapolis and Chicago's O'Hare and a half dozen more to Midway.

On Northwest's third-quarter earnings call, Executive Vice President Tim Griffin seemed to relish the Southwest challenge on fares.

"Fares change quickly, and can be changed quickly," Griffin warned. "I don't think that many competitors make entries into an area based on [revenue per available seat mile] performance that they are seeing from others, because those conditions can change fairly quickly." RASM is a common industry measure that reflects fare revenue.

Minneapolis, the nation's 14th-busiest airport with 35 million passengers in 2007, offers several attractions for Southwest. Among them, it can feed passengers into Chicago's Midway Airport, the second-busiest airport in the Southwest system. In fact, the top destination from Minneapolis is Chicago, according to the Bureau of Transportation Statistics.
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