Bond deal might help state land airline jobs

To avoid early repayment of $245 million to the Metropolitan Airports Commission, Delta Air Lines is willing to make commitments to keep more jobs in Minnesota.

Delta General Counsel Ben Hirst said Thursday that Delta, the new owner of Northwest Airlines, would support strengthening the job covenant that was part of a 1992 agreement in which the MAC sold bonds to raise capital for Northwest.

That agreement included a condition that requires Northwest to employ more than 17,000 people in Minnesota, but it allows the carrier to cut jobs when Northwest faces bad economic circumstances. Today, Northwest, which emerged from bankruptcy protection last year, employs about 11,500 people in the state.

Hirst said that it would be in the best interest of Minnesotans for MAC officials to lock in a new job covenant with Delta that specifies certain business operations be located in Minnesota.

"As the economy improves, you've got the function here and you know you're going to get the benefit," Hirst said following a Minnesota House oversight hearing on Northwest's agreement with the MAC.

As part of the original bond deal, the carrier also agreed to maintain a hub and headquarters in the Twin Cities. But the combined carrier will be based in Atlanta.

The MAC or the state Department of Finance could enforce the agreement and insist that Delta repay the money by 2012, instead of allowing the carrier to pay it off as originally planned by 2022.

In testimony before Congress this year, Delta CEO Richard Anderson said that Delta would retain Northwest's Chisholm and Twin Cities reservation centers and pilot and flight attendant bases in Minnesota. In addition, the chief executive pledged to keep Minnesota's flight training center, cargo facility, data center and the front-line employees needed to operate a hub in the Twin Cities.

About 400 jobs in the system operations control center at Minneapolis-St. Paul International Airport will be shifted to Atlanta.

But Hirst said that Minnesota still has an opportunity to capture more jobs and business activities beyond those that Richard Anderson cited on Capitol Hill.

There are about 1,800 Northwest salaried jobs in Minnesota, including about 1,000 at its Eagan headquarters, which is expected to close within the next two years. Delta plans to pare management ranks at the two headquarters.

"Some of the airline operations that Delta is prepared to consider locating here, it might locate elsewhere," Hirst said, which is why he wants to renegotiate the MAC debt agreement within two months. "It's necessary, otherwise the kinds of decisions that we have to make will be made and they may not involve Minnesota."

However, one example could be housing the executives who will oversee the joint operations of the Delta and Northwest regional carriers. Northwest owns Mesaba and Compass airlines and Delta owns Comair, and several regional carriers operate Delta Connection flights under contract.

Steve Gorman, Delta's chief operating officer, said in a recent interview that Delta expects to place its regional executives in either the Twin Cities or Atlanta. He considers both locations to be reasonable options, and the new Delta has regional carriers based across the United States. Mesaba has offices in Eagan, near Northwest's current headquarters.

Rep. Debra Hilstrom, DFL-Brooklyn Center, who chaired Thursday's hearing, acknowledged the Legislature is not a direct party to the Northwest-MAC agreement. But she said citizens have a right to know what's transpiring between Delta and the MAC in their discussions about the deal and Northwest should be held accountable for its contracts.

When Delta repays the bond debt, the money will flow to the bondholders. It cannot be used by the Legislature or the MAC for spending on projects or programs.

Rep. Ann Lenczewski, DFL-Bloomington, told Hirst during the hearing that Northwest had benefited from the state's tax policy, including breaks for buying a high volume of jet fuel. She said she would review what she considers tax subsidies to corporations during the 2009 session.