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TheStreet Open House

Alaska Air Seeks San Diego Niche

Stocks in this article: ALK DAL LCC LUV SAVE

SAN DIEGO ( TheStreet) -- Let's just say upfront that although Alaska Airlines (ALK - Get Report) has added six new destinations at San Diego International Airport over the past year, it is not trying to build a hub.

That would be illogical, given that the airport has one very severe limitation -- a single runway -- as well as major presences by all four big U.S. carriers headed by Southwest (LUV - Get Report). Rather, in San Diego, said Andrew Harrison, Alaska vice president for planning and revenue management, "We are looking for underserved niche markets. Look at our history, that's really what we've done."

Alaska's approach has won favor from many airline analysts, giving it a sort of "golden boy" status in the industry, partially as a result of its route selection, partially as a result of its ability to leverage off its prime real estate in Seattle where it operates the only hub at one of the country's best gateways to Asia. Shares closed Monday at $59.58, up 35% this year.

Last month, Alaska began San Diego to Boston flights. In the preceding 12 months it boosted its San Diego operation with three new California destinations -- Fresno, Monterey and Santa Rosa -- as well as Orlando and Kauai. Its other destinations from San Diego are Portland and Seattle; Honolulu and Maui, and Los Cabos, Monterrey, and Puerto Vallarta in Mexico. The three California destinations are served with 76 seat Q400 turboprops flown by partner Horizon Air. This summer, Alaska and Horizon combined will offer 24 daily departures to a dozen destinations.

To the extent possible given its single runway, San Diego International is growing. In 2012, the airport accommodated 17.2 million passengers, up 2.1% from the preceding year, with about 500 daily departures. In June, US Airways (LCC) began service to Washington Reagan National Airport, saying San Diego was the largest U.S. city without non-stop service to Washington. In November, Japan Air Lines began service to Tokyo in November, saying San Diego was the largest U.S. city without non-stop service to Asia. Fast-growing Spirit (SAVE - Get Report)added flights to Dallas in June and to Portland and Los Cabos in November. American (AAMRQ.PK) will add a Miami flight this June. Southwest is the airport's leading carrier with about 38% of the traffic.

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