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Continued: Delta offers reassurance on retaining Twin Cities hub

  • Article by: LIZ FEDOR , Star Tribune
  • Last update: October 30, 2008 - 10:59 PM

Ed Bastian, in his first day as CEO of Northwest Airlines, sought to reassure Minnesotans that Delta Air Lines will preserve a strong hub in the Twin Cities.

"We're going to look to grow this hub," Bastian said in a Thursday news conference at Minneapolis-St. Paul International Airport. Bastian, who remains Delta's president, made that pledge one day after Atlanta-based Delta completed its acquisition of Northwest.

Bastian, 51, was in the Twin Cities to begin his new role as the top executive of Northwest, which will operate as a Delta subsidiary until operations of the two airlines are merged.

"This hub is secure. We made that commitment right from the outset" of the merger's unveiling in April, Bastian said.

Northwest, long the dominant carrier in the Twin Cities, leases 101 of the 127 gates at the international airport. All of Northwest's gates, as well as Delta's three, are at the Lindbergh terminal.

Bastian said that the new Delta will retain all of those gates, and he anticipates that, over time, there will be an increase in flight capacity among the combined carrier's seven domestic hubs.

Northwest's hubs in the Twin Cities, Detroit and Memphis will remain after the airlines are fully integrated, as will Delta's hubs in Atlanta, New York, Salt Lake City and Cincinnati. Delta executives have said they expect all of the hubs to produce profits. They all survived the Delta and Northwest bankruptcy cases.

After watching the closure or downsizing of hubs in other airline mergers, some people have questioned whether the Twin Cities will remain a major player in the airline industry arena.

Bastian said Thursday that it is in Delta's business interest to keep a healthy hub in Minnesota. He cited a skilled workforce, significant corporate travel accounts and an efficient airport as strong attributes.

"We'd be fools, quite honestly, to let anything happen to that," Bastian said.

Positioned for success

Business travelers and corporate accounts are the lifeblood of big airlines.

Daniel McKenzie, a Credit Suisse analyst, said in a Thursday report that Delta has seized a strong position by closing its merger deal about a month before many observers expected it to occur. Delta and Northwest can now "present themselves as a unified carrier to corporate travel managers, now in the midst of budget setting and selecting preferred carriers for next year."

Given its "superior network," McKenzie said, Delta and Northwest are in line to "walk away with corporate travel business a year earlier than we anticipated."

The combination of Delta and Northwest will create the world's largest airline, serving more than 375 destinations in 66 countries.

Delta and Northwest have been expanding their international businesses and both are reducing their domestic flying in the final quarter of the year. The airlines made those capacity-reduction decisions when oil prices were much higher, but now the reduced supply of seats is on the market as many consumers have put the brakes on discretionary spending.

"The world economy is slowing, if not in recession," Bastian said, which is why he anticipates more modest results in the international market.

With a smaller inventory of seats, he said, "the domestic business is doing quite well when we look at the advanced bookings both for Northwest and for Delta."

Bastian, who hails from Poughkeepsie, N.Y., succeeds Doug Steenland as the chief executive of Northwest. Bastian will lead Northwest as a separate airline because it will take until late 2009 or early 2010 to secure Federal Aviation Administration approval to blend the two carriers' flight operations.

On Thursday, Bastian shook hands and introduced himself to Northwest employees at the airport and he met with the staff at the Eagan headquarters.

He also reiterated Delta's commitment to continue making payments to the Metropolitan Airports Commission (MAC) to retire about $230 million in remaining bond debt. In 1992, bonds were sold as part of a financing deal for Northwest Airlines, and the transaction has continued to hold the attention of an array of Minnesota politicians.

As part of the deal, Northwest agreed to retain its hub and headquarters in Minnesota and employ thousands of Minnesotans. Under terms of that deal, when the Eagan headquarters closes, the MAC could demand that all of the debt payments be made in one sum instead of allowing Delta to make payments through 2022.

Rep. Debra Hilstrom, DFL-Brooklyn Center, announced Thursday that she will chair a legislative committee hearing on Nov. 13 that will examine the merger's effects and Delta-MAC talks over modifying the bond agreement.

Liz Fedor • 612-673-7709

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