Northwest Airlines has agreed to be swallowed by Delta Airlines, creating the world’s biggest airline, pending US government approval. At least for a week or so until United subsumes Continental. The big question for Minnesotans is whether or not we’ll retain our hub. Northwest CEO Doug Steenland—who’s out of a job but gets a seat on the board—says the hub will be maintained. Delta CEO Richard Anderson—who used to be Northwest’s CEO, is it becoming clear yet?—is mum on the subject.
The winners are clear: the executives from both airlines and the bankers who brokered the deal will be well taken care of; Steenland’s employment agreement reportedly has a change-in-control provision that’s worth about about US$7.8 million. The losers are just as clear: the Northwest back-office employees, Northwest pilots, Minnesota taxpayers, and Twin Cities air travelers are all screwed.
It would be silly for Delta to maintain a hub in both Detroit and the Twin Cities (and Memphis, Atlanta, and Cincinnati for that matter). Several will surely have to go. I don’t travel as much as I have in the past, but if I did I’d be worried about having to fly those 50-seat puddle-jumpers to Detroit.
It galls me that Minnesota’s Republican governor, Tim Pawlenty, says he’s going to be “closely scrutinizing the impact of the merger and will strongly stand up for Minnesota’s interests.” He’s too busy preening for the vice presidential bid as exemplified by this quote in the Star Tribune: “They either are going to owe us a substantial amount of money, or we will expect them to renegotiate those commitments in a way that’s favorable to Minnesota for jobs, for flight operations, and for hub status.”
Northwest owes Minnesota a boatload of money—US$245 million in bond debt if Northwest headquarters and MSP hub are closed. But the state has already given US$445 million to keep the Northwest headquarters and MSP hub. And in February, Pawlenty seemed eager to scrape the crumbs off the floor, positioning MSP as a prime location for the merged airline’s cargo operations. It’s probably a bad strategy to start a renegotiation by begging for scraps.
Here’s how to start the renegotiations in earnest, if Pawlenty were really concerned about Minnesota’s interests: direct the Metropolitan Airports Commission to confiscate the Northwest gates effective immediately upon execution of the deal. The next day hold an open auction for those gates. After all, those gates belong to the citizens of Minnesota and are leased to Northwest Airlines which, after the deal goes down, will cease to exist.
Update: Wednesday, 16 April 2008 08:15PM CDT: Tom Elko at Minnesota Monitor dug up a timeline outlining the relationship between Northwest Airlines and the state of Minnesota. This timeline clearly shows how the airline bilked the state and its employees repeatedly and methodically.
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