Pawlenty presses Northwest to honor its commitments to Minnesota

1:32 PM, Feb 19, 2008   |    comments
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St. Paul, MN -- Governor Tim Pawlenty can't keep Northwest Airlines from merging with Delta, but he's pressing the airline to honor it's commitments to Minnesota. He admitted Monday much remains unknown about the proposed marriage of the two airlines, which could be announced as early as Wednesday. "We will need to see what kind of arrangements, what kind of offer they're going to make to Minnesota, what kind of commitments they're going to make to Minnesota," Pawlenty told reporters at the Capitol, "So it's difficult to respond until we actually see the deal." Senate Majority Leader Larry Pogemiller of Minneapolis, among the legislative leaders who flanked the governor Monday, was brief but pointed in his remarks. "Northwest Airlines has been an excellent company for Minnesota," Pogemiller said, "And Minnesota has been excellent to Northwest airlines." Northwest still owes a balance of $245 million on the $270 million loan the state gave the carrier in 1992. The airline pledged at the time to keep its headquarters in Minnesota and make Minneapolis Saint Paul International its principal hub. If you add $200 million in concessions NWA has received in its leases from the Metropolitan Airports Commission, the airline will owe the state $445 million if leaves the state. "We would hope for all we've done for them over the years, over the decades, and what they've done for us," said Pawlenty, "That this positive partnership could continue." Delta Airlines chief executive Richard Andersen has already said the combined airline's headquarters should be in Atlanta, in part because Delta is the bigger of the two fish. That could spell trouble for the estimated 1,000 Northwest employees based at the company's world headquarters in Eagan. And yet the governor believes the new management could be convinced the Minnesota operation offers strategic advantages, including Information Technology staff and the air cargo expertise. He's a bit more comfortable with the propects of the other 10,500 Northwest employees in Minnesota because MSP is a logical hub no matter which airlines are operating here. "It appears that the hub status of Minneapolis Saint Paul is highly desirable hub in terms of profitability and convenience and a number of other factors that relate to hub service," Pawlenty remarked. And he asserted the airline's half billion dollar debt may give the state some leverage, when it comes to negotiating new deals with the merged companies. But the Governor doesn't expect any answers yet from the two executives, Delta's Andersen or NWA's Doug Steenland. He contends the companies can't legally discuss such issue until stockholders are formally notified. In the meantime, he's already looking at the silver lining. "If a merger were to go forward Minnesota would be home to the world's largest airline. And there are new connections and doors that would be open for the traveling public." Does that mean he supports the idea? "You can put me down until then as concerned," said Pawlenty when asked if he supports the merger, "Very concerned about how this might impact Minnesota. And our decision about the merger will depend upon how they treat Minnesota." Justice makes the call
Technically the United States Department of Justice would have to sign off on such a merger, which it will do unless the agency finds it will result in a violation of federal anti-trust laws designed to protect consumers against monopolies. That process can take as long as a year, creating the prospect the next administration could make the final call on the NWA-Delta union. Minnesota Congressman Jim Oberstar, who heads the powerful transportation committee in the United States House, has expressed deep concerns about the merger. In an opinion piece written for Business Week magazine last week, Representative Oberstar predicted further consolidation of the airline industry would translate to higher fairs, fewer flight choices and fewer jobs. Some analysts predict that if Northwest and Delta join forces it will push United and Continental into a merger so those carriers can remain competitive. Oberstar said the flurry of deals could result in a "three-airline future" in domestic air travel. "With only three major airlines, there would be enormous incentives for each carrier to refrain from competing with the others at their strong hubs and routes." He argues it will effectively negate the point of airline deregulation 30 years ago, which was intended to encourage competition and bring more affordable fares. "If (the departments of) Transportation and Justice will not act to cool this merger mania, then Congress should. We should just say no!"

By John Croman, KARE 11 News

(Copyright 2008 by KARE11. All Rights Reserved.)

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