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Low-Fare Battle Brews in Milwaukee

Two of the nation's three largest low-fare carriers are set to square off at Milwaukee's General Mitchell International Airport.

Southwest (LUV - Get Report) announced Wednesday it will begin service late this year to Milwaukee, where AirTran (AAI) has been growing rapidly and is now the airport's second largest carrier with a 20% market share.

Southwest said it will begin Milwaukee service late this year with multiple, unspecified destinations. The move will enable the carrier, which already operates at Chicago Midway, to "better serve the Northern Chicago Area," CEO Gary Kelly said in a prepared statement.

At one time, such announcements were feared by incumbent carriers because of Southwest's low fares, low costs and efficient operations. But now, low fares are more widespread, Southwest's costs are rising, and the two other major low-fare carriers, AirTran and JetBlue (JBLU - Get Report), offer more amenities -- an imbalance Southwest is moving to correct.

"I feel pretty good about our ability to compete," says Kevin Healy, AirTran senior vice president of marketing and planning. "We've done it before and now, as opposed to entering a market they are in, they are coming to a market that we have been building for several years."

AirTran has been growing particularly rapidly at Milwaukee since it dropped out of a bidding war for hometown carrier Midwest Airlines in 2007, trumped by a $450 million bid from Northwest Airlines and private equity firm TPG.

AirTran said Wednesday it will add gates at Milwaukee and offer 34 daily departures, representing a 57% growth rate since last year. On Thursday, it will add flights to Denver and St. Louis, after recently adding Branson, Mo. and Minneapolis. Existing destinations include Atlanta, Baltimore, New York LaGuardia, Washington National, Denver, four Florida cities and five West Coast cities.

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