Delta Air Lines opposes amending MAC deal

  • Article by: LIZ FEDOR , Star Tribune
  • Updated: January 13, 2009 - 8:58 PM

The airline wants a decision on the agreement this month so it can move ahead with plans to locate business activities in Minnesota.

Delta Air Lines is unwilling to renegotiate a deal it recently struck with the Metropolitan Airports Commission (MAC) staff, which means commissioners likely will be asked to accept or reject the agreement on Jan. 26.

Some commissioners said last week that they wanted to amend the deal that spells out Delta's timetable for repaying bonds issued on behalf of Northwest Airlines and rescinds penalties for closing Northwest's Eagan headquarters.

"We are not prepared to agree to any substantive amendments," Ben Hirst, Delta's general counsel, told the Star Tribune Tuesday.

He added that Delta wants to sign a legal agreement to keep at least 400 daily flights at the Twin Cities hub and 10,000 jobs in Minnesota. "No other hub in the Delta system has commitments remotely like this," Hirst said.

But some commissioners, including attorney and former legislator Bert McKasy, said last week that they reserved the right to make changes. McKasy said Tuesday that he likes most elements of the agreement, but he was attempting to strengthen Delta's time commitment for keeping several business activities in the state.

"I hope that we are both trying to do what is in the best interest of job retention in Minnesota. That's the bottom line," McKasy said Tuesday.

The great majority of the 15-member commission was appointed by Gov. Tim Pawlenty. Pawlenty spokesman Brian McClung said Tuesday that the governor supports the deal that Delta and MAC staff reached in mid-December.

In response to the Delta-Northwest merger, "it's important that we maintain our hub status and every job we can," McClung said.

Northwest was acquired by Delta in October and it owes about $245 million on bonds that the MAC issued on behalf of Northwest in 1992. Under the deal reached by the MAC and Delta, the bondholders would be paid off in 2016 -- six years earlier than the original bond terms.

If the MAC enforced the original bond agreement, it could force Delta to pay off the bonds in 2012 after the Northwest Eagan headquarters is closed.

"We could easily pay back the $245 million note to the bondholders and not make any firm [legal] commitments" in Minnesota, Delta CEO Richard Anderson said in a Thursday message to employees. But he added that "we're committed to Minnesota, we're committed to the Minneapolis hub," so Anderson said he wants the MAC agreement to be approved at the Jan. 26 commission meeting.

Under the tentative agreement, executives overseeing Delta's regional carriers would move from Atlanta to the Twin Cities and Delta would relocate the headquarters of its Compass Airlines subsidiary from Virginia to Minnesota.

Consequences of rejection

If the MAC rejects the tentative agreement with Delta, Hirst said that Delta management would take a second look about where to place those jobs.

MAC chairman Jack Lanners characterized the deal as a "fair and solid agreement for the state and region" and said that any major changes "could jeopardize the entire agreement."

The deal was negotiated by two key MAC staff members in the final months of 2008 after they solicited the top priorities from the MAC commissioners, Lanners said. "There is no way that a negotiation of this sort could occur with 15 or more [people] and have much hope of resolution," he said.

As part of the deal, the MAC would renovate a Northwest building along Interstate 494 at Minneapolis-St. Paul International Airport that would serve as "our long-term [Minnesota] headquarters for staff and the reservations center," Anderson said.

Lanners indicated that he anticipates that the deal the MAC staff reached with Delta will receive majority support from the commission.

But before the commission meets on Jan. 26, four Minnesota House committees are scheduled to hold a joint hearing Jan. 22 to review the terms of the deal.

The DFL chairmen who've called for that hearing are Reps. Joe Atkins, Inver Grove Heights; Frank Hornstein, Minneapolis; Bernie Lieder, Crookston, and Michael Nelson, Brooklyn Park.

Liz Fedor • 612-673-7709

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