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Airlines

Southwest Airlines should buy Sun Country Air-analyst

* Sun Country would give Southwest int’l routes-analyst

* Southwest would gain 5.2 pct share in Minneapolis

* Southwest’s shares would jump if co buys Sun Country

NEW YORK, Sept 20 (Reuters) - Southwest Airlines LUV.N should scoop up bankrupt Sun Country Airlines to buttress Southwest's growing presence in Minneapolis and boost its shares, a Stifel Nicolaus analyst wrote on Monday.

Buying Sun Country would also give Southwest access to some international routes, Stifel analyst Hunter Keay said.

Minnesota-based Sun Country filed for Chapter 11 bankruptcy in October 2008. About 95 percent of its capacity flies to and from Minneapolis-St. Paul International Airport, an area that Southwest has targeted for modest growth, Keay wrote.

Southwest and Sun Country did not immediately reply to e-mails for a comment.

Delta dominates the Minneapolis airport, but assuming roughly half of Delta’s traffic comes from passengers connecting to other flights, Southwest would gain a 5.2 percent share of the local market if it bought Sun Country, Keay said.

Even with the added gain, Southwest’s market share in Minneapolis would still lag Delta’s, Keay wrote, but buying Sun Country would still boost prices on routes flown to the 32 cities served by Southwest and Sun Country.

An acquisition could jump-start Southwest's shares, which have underperformed the broader Arca Airline Index .XAL this year. Southwest stock has risen 5 percent so far in 2010, while the Arca Airline Index has jumped 23 percent.

Sun Country reports its strongest results in the first quarter, when the carrier caters to people from Minnesota flying to a warmer climate, Keay wrote. The first quarter is Southwest’s weakest.

If Southwest buys Sun Country, it would also gain 11 new destinations in Mexico and the Caribbean, Keay wrote.

Dallas-based Southwest does not currently fly internationally, but on a July conference call, Chief Executive Gary Kelly said the carrier would decide this year whether it would fly routes abroad. [ID:nN29174195]

Prospects for the broader airline industry have brightened this year, helped by the merger of United Airlines' parent UAL Corp UAUA.O and Continental Airlines CAL.N. Experts say consolidation helps the industry trim excess capacity, which helps shore up air fares.

In 2009, Southwest tried to buy Frontier Airlines out of bankruptcy. Southwest was eventually beat out by Republic Airways Holdings Inc RJET.O. (Reporting by Deepa Seetharaman, editing by Maureen Bavdek)

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