In their first crack at Northwest Airlines since plans for a merger with Delta Air Lines were announced, state legislators got to press Northwest on Friday about the effects the merger could have on jobs, travelers and the airline’s financial obligations to the state.

Ben Hirst, Northwest’s general counsel and senior vice president for corporate affairs, told members of the House Commerce and Labor Committee that he felt the merger would benefit the company’s “front-line” employees and travelers in Minnesota, but that it was unlikely the state could persuade Delta, which would become the world’s largest airline, to put its corporate headquarters here.

Before or during merger talks, Hirst said, “I simply don’t think that there was ever that opportunity.” And conversations with legislators or state officials about it simply “didn’t occur.”

That disappointed Rep. Joe Atkins, DFL-Inver Grove Heights, the committee’s chairman, who after the meeting called the merger the “single most important economic event that Minnesota has seen in a long, long time.”

“You would think that they would at least sit down with [the state] before they do this,” he said. “Apparently, they didn’t even pick up the phone.”

Keeping the hub

While Friday’s hearing seemed to do little to ease worries about loss of the headquarters, legislators’ concerns about whether Delta would keep a hub here seemed eased.

Myles Shaver, a University of Minnesota business professor, and Dan McElroy, commissioner of the state’s Department of Employment and Economic Development, told the committee that the hub is here because the area generates the airline traffic to support it.

While testifying before Congress on Thursday , Northwest CEO Douglas Steenland and Delta CEO Richard Anderson had estimated that about 1,000 jobs would be lost in the deal, because of redundancies in the staffs of the two headquarters.

McElroy promised legislators the state would “fight for every job.”

Losing the red tail

In 1992, the Metropolitan Airports Commission issued $270 million in general-obligation bonds and used the money to buy property and equipment from the airline. Northwest leased the property and equipment from the MAC, with lease payments equal to what the MAC had to pay bondholders.

According to the agreement, Northwest had to keep its corporate headquarters and a hub in the Twin Cities, as well as a certain employment level, until the bonds were paid off. By the end of 2009, Northwest estimates, it will still owe $211 million on the bonds.

Hirst said Delta will either pay off the remainder owed on the bonds or try to renegotiate the agreement with the MAC.
“If the merger goes forward,” he said, “Delta would be a successor to Northwest’s obligations.”

Legislators also expressed disappointment that the Northwest name will go away, and Hirst agreed.
“I’ve been with the airline since 1990, and I feel like it’s a part of me,” he said. “I hate, like everybody else … to see the red tail go away. But we feel like we had to put our emotions aside” to deal with the challenges facing the airline.

“It’s the best we could do ... for our employees and the communities we serve.”

Emily Johns • 952-882-9056