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Twin Cities airport board approves Delta deal

Minnesota's hold on Northwest Airlines got a little looser on Monday.
/ Source: The Associated Press

Minnesota's hold on Northwest Airlines got a little looser on Monday.

The commission that runs Minneapolis-St. Paul International Airport voted to let Delta Air Lines Inc. out of Northwest's old agreements to keep its headquarters here. In exchange, Delta agreed to accelerated repayment — by 2016 — of the $245 million debt tied to the headquarters promise, and it retained minimum job and flight levels in the state.

In 1992 Northwest promised to keep its headquarters and a hub in Minnesota in exchange for financial help from the state, on which it still owes $245 million. When Delta bought Northwest last year, it inherited that debt and the agreement to keep a headquarters here. That was a problem because Delta plans to run the new airline from Atlanta, although for the moment Northwest still has its own CEO and other executives.

The controversial 1992 help was viewed by many as a corporate handout. But the airport commission's only leverage to enforce the headquarters deal was to make Delta pay the money back early. And the state wouldn't even get the money — it would go to bondholders.

Metropolitan Airports Commission chairman Jack Lanners said enforcing the old deal would have accomplished nothing, and left it with no leverage over Delta in the future.

There was also the potential that Delta would shift traffic away from Minneapolis, which has gone from being the headquarters hub for Northwest to only being Delta's third-largest hub, behind Atlanta and Detroit.

"In so many words, they didn't say that, but it's fairly obvious that connecting passengers can be directed to some extent to other hubs," Lanners said.

The new agreement requires Delta to pay the debt off by 2016, instead of the 2022 currently scheduled. After that, the jobs requirement expires. The hub requirement is also part of Delta's lease for the airport terminal and that runs through 2020.

The new deal keeps a requirement for 10,000 jobs in the state, although nearly 12,000 work here now, and the original agreement required 17,883. The new agreement also requires 400 flights per day by Delta and regional partners, more than the old deal called for.

Delta agreed to keep the old Northwest flight simulator operation here, its phone reservations centers in Bloomington and Chisholm, and to run its regional flight operations from the Twin Cities, including moving its Compass subsidiary from its current base in Chantilly, Va. Delta regional airline Comair will continue to be based in Cincinnati.

Delta General Counsel Ben Hirst said other Delta hubs envy the guarantees won by Minneapolis, and that it still limits Delta's flexibility more than his bosses would have liked.

Northwest renegotiated parts of the original deal during its bankruptcy reorganization which began in 2005.

"Every time we go into a negotiation session with Northwest Airlines, we seem to be giving something away," said airports commissioner Daniel Boivin. "We are losing every ounce of leverage we've ever had in negotiations with them, and I predict in two to three years we'll be back at the table with them."