TERMS OF THE DEAL
DELTA AGREED TO:
Move to the Twin Cities the executives overseeing its regional jet operations and the headquarters of Northwest regional subsidiary Compass Airlines
Pay off the bonds six years early
MAC AGREED TO:
Lower the minimum requirement for Delta's Minnesota workforce from 17,000 to 10,000
Delta, MAC reach pact on service, local jobs
- Article by: LIZ FEDOR
- Star Tribune
- December 15, 2008 - 9:31 PM
Delta Air Lines will keep at least 10,000 jobs in Minnesota and locate its regional airline management in the Twin Cities under a tentative deal the carrier reached Monday with the Metropolitan Airports Commission (MAC).
The two sides renegotiated terms of a 1992 bond-debt agreement, which would have allowed the MAC to penalize Delta when it closes the Northwest Airlines headquarters in Eagan. Instead of taking that path, MAC Chairman Jack Lanners said airport officials chose to preserve a Twin Cities hub and thousands of jobs after the Delta-Northwest merger is fully consummated. MAC commissioners are expected to consider a final agreement in January.
An air-service covenant in the original deal required Northwest to operate at least 187 daily flights from the Twin Cities. The new agreement requires Delta to offer at least 400 daily flights from the Twin Cities, including at least 250 with airplanes that seat 70 or more passengers.
Those restrictions mean that Delta will offer a high level of nonstop flights and it will attract considerable connecting traffic, Lanners said.
While the job covenant in the 1992 deal required Northwest to employ more than 17,000 people in Minnesota, the airline has not had that large a workforce in the state since the 2001 terrorist attacks. A clause in the deal allowed Northwest to reduce employment levels in Minnesota when it faced unusual business circumstances, so the carrier now employs fewer than 11,500.
During recent negotiations, Delta General Counsel Ben Hirst agreed to transfer regional airline executives, who now oversee Delta Connection operations, from Atlanta to the Twin Cities. In addition, Virginia-based Compass Airlines, a Northwest subsidiary that flies 76-seat regional jets, will move its headquarters to the Twin Cities.
About 150 to 200 people are expected to work in the Twin Cities to lead Delta's regional carrier operations, said Tammy Lee Stanoch, Delta's vice president of corporate affairs. "That's a significant win for the state of Minnesota," she said.
Stanoch added that the regional executives will join other airline executives in a renovated facility at Minneapolis-St. Paul International Airport called "Delta North."
The MAC intends to spend $10 million upgrading Northwest's "Building C," the white building that houses Northwest maintenance operations and offices that are just off of Interstate 494's 34th Avenue exit. Delta will repay that renovation money over several years.
During the Northwest bankruptcy, the MAC agreed to reduce Northwest's rent on Building C by $1.9 million a year. Under the new agreement, Delta will pay an extra $500,000 a year through 2014, and another $500,000 will be added for 2015 through 2020.
Northwest owes $245 million on the bond debt and it has been making regular payments. Under the new deal, Delta will have to pay off the debt by 2016, instead of 2022. The money is collected by the MAC to pay off the bondholders, so the airline payments cannot be used by the Legislature or MAC for other spending projects.
After he appeared before a Minnesota House committee in November, Hirst said that Delta was willing to specify that it would locate certain business activities in the state.
MAC commissioners will receive a term sheet with those entities spelled out. Delta's commitment to maintain a flight training center and a technology-data center in the Twin Cities will be among the activities listed.
The agreement will specify that Delta must keep those activities for at least three years regardless of business conditions. "That is an absolute guarantee," Stanoch said. Others that fall under that provision are the Delta North headquarters, regional airline management, Compass and Mesaba Airlines headquarters, pilot and flight attendant bases, reservation centers in Chisholm and the Twin Cities and hub airport operations.
The only way Delta could deviate from that provision after three years is if the activity is sold, eliminated or wholly outsourced. That restriction blocks Delta from moving Twin Cities business activities to another Delta hub.
Liz Fedor • 612-673-7709
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