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TheStreet Open House

Fargo and North Dakota Airports Grow as Domestic Flying Shrinks

Stocks in this article: ALK DAL LCC MSFT UAL

FARGO, N.D. ( TheStreet) -- Since the end of 2007, U.S. domestic airline capacity has shrunk by 8% and the number of domestic seats has shrunk by 11%. But don't tell the airports in North Dakota. They are growing, thanks to the state's strong economy.

In June, North Dakota's eight airports reported 93,664 boardings, their best June ever. Since June 2007, the number of departures from North Dakota has increased by 73%, reaching 554,673 for the first six months of 2013, according to the North Dakota Aeronautics Commission.

A week ago, Fargo's Hector International Airport, the state's largest airport, scored a coup when Delta (DAL - Get Report) announced it would begin service between Fargo and Atlanta. Starting Dec. 21, Fargo will have Saturday-only service aboard a 76-seat Canadair CRJ-900.

For many airports, Atlanta service is a given. This summer, Delta's Atlanta hub, the largest single-airline hub in the world, has 1,030 peak-day departures to 150 domestic destinations as well as 67 foreign destinations. (The hub offers non-stop flights to 46 states, all but Delaware, Idaho and the Dakotas). Fargo has been waiting.

"This (effort) started five years ago," said Shawn Dobberstein, executive director of Hector International. "Atlanta has been our No. 1 requested destination, because Delta passengers who traveled to the Caribbean, the Southeast, and Central or South America, for a cruise or vacation, couldn't get back here on Saturday" due to the lack of late-day connections. Delta's 43% market share is the biggest at the airport, reflecting the predominance of passengers who connect through the carrier's Minneapolis hub.

"The flight will be a test," Dobberstein said. "If it is successful, we hope it can lead to daily service."

In the first half of the year, Fargo reported 200,528 boardings, up 34% since 2007. That reflects not only the oil boom in the western part of North Dakota but also strength in Fargo's economy, particularly at agricultural equipment manufacturers Caterpillar (CAT), John Deere, Bobcat and Fiat, which ship equipment throughout the world. Each day, the airport has 80 passengers departing for international destinations.

While the oil boom is in the western part of the state, the two biggest airports in Fargo and Grand Forks are in the eastern part. In the west, the number of Williston departures nearly tripled in June to 39,230, after Delta and United (UAL - Get Report) recently added service to Minneapolis and Denver. A new Williston airport is planned, while Minot is planning a new terminal.

In Fargo, one sign of the boom is that every day, a small plane flies in from Williston, bringing oil workers' clothing to be washed at a laundry with heavy duty washing machines, near the airport.

When Dobberstein arrived in in 1991, Fargo's airport had about 181,000 boardings annually on Northwest and United. In 1998, Northwest shut down for two weeks after locking out its pilots. At the time, Northwest had 92% of Fargo's traffic. "All we had left was three 30-seaters a day to Chicago," Dobberstein said. "That's when our community woke up and said, 'Let's work with the airport to see if we can make a difference.'" Business and civic leaders formed a task force to recruit carriers.

Today, Fargo has service on five airlines to 10 cities. Delta flies eight times a day to Minneapolis and twice to Salt Lake City. United, with 23% of the market in June, offers five daily flights to Denver and four to Chicago. Allegiant (ALGT), with 16%, serves four cities. American Eagle, with 12%, flies three times a day to Chicago and once to Dallas. Frontier, with 6%, serves Denver.

Like every airport director, Dobberstein dreams of more service. Seattle is a prime target. "We have been in discussions with Alaska (ALK - Get Report) for three years," Dobberstein said. "It's going well." Microsoft's (MSFT - Get Report) Fargo campus has 1,800 employees, creating demand for Seattle service. Each day, 22 Fargo passengers connect to Seattle.

Southwest (LUV) service would be nice. While the 2011 merger with AirTran might have brought Boeing 717s seating 117 passengers into the fleet, Fargo and other small airports appeared to have a chance for Southwest service. Instead, Southwest leased the planes to Delta. Now the hope is that Southwest could veer off its usual model of multiple daily frequencies in a market.

New York service may still be a long shot, because only about 22 passengers a day depart Fargo for a New York airport.

The airport, by the way, represents a particularly profitable venue for US Airways (LCC). The airline does not serve Fargo, but due to codeshare flights with United it gets 12% of the airport's passenger service charge revenue. The airline collected about $12,000 in April. Dobberstein said the airport is eyeing service to Charlotte.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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