MAC OKs Delta deal for jobs and bond payoff

With a deep recession as its economic backdrop, the Metropolitan Airports Commission (MAC) on Monday easily approved a deal with Delta Air Lines that will retain 10,000 airline jobs in Minnesota through 2016.

The MAC endorsed a complicated deal that links job and air service commitments to the timetable for paying off $245 million in bond debt owed by Northwest Airlines.

Delta, which acquired Northwest in October, will have to pay off Northwest's debt by 2016, six years earlier than under the original deal.

But the airports commission won't penalize Delta for closing Northwest's headquarters in Eagan within the next few years when the merger is fully consummated.

The agreement also requires Delta to maintain a hub at Minneapolis-St. Paul International Airport and operate at least 400 flights a day through 2020. The air service level is locked in for a longer period of time, because the hub covenant is included in the airline's terminal lease.

"We would love to have the Delta headquarters based in Minnesota," said MAC Chairman Jack Lanners. But he told the commission that since the world's largest airline will be based in Atlanta that he and MAC staff negotiators focused on getting as many job, air service and business commitments as possible from Delta.

In the 1992 bond agreement, Northwest had to offer at least 187 daily flight departures from the Twin Cities. The new deal sets the minimum at 400, which is slightly lower than what Northwest and Delta now offer. Tom Anderson, MAC general counsel, testified at a Minnesota Senate hearing last week that the two carriers operated 456 daily flights in August. Northwest's peak operations are in the summer, so the number of flights being flown this winter is lower.

In addition to the job and air service commitments, Delta agreed to specify which business activities it will continue to operate in Minnesota. Delta will preserve Northwest's pilot and flight attendant bases, reservation centers in Chisholm and the Twin Cities, the pilot training and technology centers in Eagan and the headquarters of Mesaba Airlines.

During the negotiations with MAC staff, Delta also agreed to relocate the headquarters of Compass Airlines, which flies Embraer regional jets, from Virginia to Minnesota. In addition, the Twin Cities will become the headquarters for the management of Delta's regional airlines. The executives who now oversee Delta's many regional carriers are based in Atlanta.

The merged carrier plans to locate many of its executives to a Delta North office building at the Twin Cities airport. The MAC will be renovating what is now called Building C, the white Northwest building and hangar near the 34th Avenue exit off of Interstate 494.

The MAC-Delta agreement was approved Monday 9-1, with one abstention. Four commissioners were not present for the vote.

Thirteen of the 15 MAC commissioners were appointed by Gov. Tim Pawlenty. "The governor's office has expressed full support of this agreement," Lanners said Monday. However, Pawlenty's backing of the deal became public before the Minnesota Legislature held hearings last week.

The Legislature does not need to ratify the deal, according to the Minnesota Senate's legal counsel.

The lone vote against the deal came from Dan Boivin, who represents Minneapolis Mayor R.T. Rybak on the MAC. Boivin said the commission had conceded too much to Delta and that he thinks the MAC has little leverage with the new Delta, except for withholding concessions revenue if the carrier violates an agreement.

The majority of yes voters expressed views such as those of Lisa Peilen, who said, "At the end of the day, we are better off with this [agreement] than without it."

Commissioner Mike Landy called it a "good" but "not fabulous" deal, and he added that he hopes the new Delta is successful because the airport's financial health is tied to Delta.

As Delta makes its bond payments through 2016, the money will go to the bond holders. It cannot be used by the Legislature or the MAC for government spending.