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United Gaining Foothold in Northwest's Turf

December 30, 1987|From Reuters

MINNEAPOLIS — United Airlines has begun frequent flights from here to Chicago, the first step in what analysts say is a growing turf battle in Northwest's own home base.

Under deregulation, carriers have largely carved up the nation, with one or two airlines dominant in most major cities. Other carriers have found it difficult to compete with an airline that offers a wide range of flights and times for travelers from a given city.

United spokesman Matt Gonring said the airline's new hourly service between Chicago and Minneapolis--Northwest's main hub--was "immediately profitable" in its first month of operation.

United's expansion plans are apparently a response to Northwest's continuing problems with keeping its customers happy. Throughout the summer, the airline ranked near the top in passenger complaints about its service and its planes were often late. Northwest has said that the problems have been caused by some employees who are unhappy with their labor contract.

Although Gonring would not say that United is trying to take advantage of problems at Northwest, one airline industry source said, "A number of carriers are looking to take advantage of another carrier's service problems," referring to Northwest.

He said the moves are being made quietly. "No one wants to talk about it," he said.

United's 13 daily flights between Chicago and Minneapolis operated at a load factor of "better than 60%" in November, Gonring said. "You start making money at 58% to 59%."

Gonring said United, a unit of Allegis Corp., is considering expanding its challenge in Minneapolis to Northwest. "It is fair to say we are looking at additional expansion opportunities in Minneapolis," he said.

Gonring would not provide details of United's expansion plans, but one airline industry source said United was considering service between Minneapolis and San Francisco or Los Angeles, two of its busiest centers serving the Pacific Rim. Analysts said United might also begin flights to Seattle or New York from Minneapolis.

A spokesman for Northwest, a subsidiary of NWA Inc., responded in a fighting way. "We like to think we are providing them with competition in their main hub (Chicago)," said Steven McGregor.

Northwest flies 15 flights daily between Minneapolis and Chicago's O'Hare International Airport, United's home base.

According to the Minneapolis Airport Commission, United carried only 58,216 paying passengers out of Minneapolis in October, compared to Northwest's 967,079. But the effect of United's increased effort in Minneapolis may be starting to show. October's boardings were 6% of those made by Northwest, up from 5% in October, 1986.

The Northwest spokesman attributed the declining ridership on Northwest's planes to reduced capacity as Northwest combined its operations with Republic Airlines, purchased last year. He said United increased its capacity in the October-to-October period.

The industry source said AMR Corp.'s American Airlines and Delta Airlines Inc. may also be mounting challenges to Northwest in Detroit and Memphis. Northwest dominates both of those markets.

American spokesman William Wren acknowledged that American has begun advertising that focuses on its top ranking among major airlines in on-time performance.

"We were, fortunately, No. 1 in on-time performance. We quickly ran advertising to capitalize on that," he said. "It is aimed not only at Northwest, but also at the other carriers."

A spokesman for Delta likewise denied that the airline has pegged Northwest as a target.

Most analysts said United will find it difficult to expand too far in Minneapolis because of Northwest's dominance there.

But Michael Hamilton, analyst with Piper Jaffray Inc., said United's successful Chicago-Minneapolis service reflects a challenge to Northwest in its own backyard.

He said United's direct, 45-minute flights to Chicago offer passengers connections to the entire United system and might attract customers unhappy with Northwest.

Paul Karos, analyst with L. F. Rothschild, Unterberg, Towbin, said United's hourly service "basically opens up the entire world to anyone willing to do a one-stop flight."

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