Negotiation might solve Northwest headquarters issue

Associated Press

ST. PAUL — It’s getting easier to see how Minnesota and Northwest Airlines might negotiate their way out of financial incentives aimed at keeping the airline based here.

Delta Air Lines Inc. would probably be willing to commit to keeping a minimum level of jobs and flying here in exchange for a release from the financial penalties of moving the headquarters, a Northwest executive told state lawmakers on Friday.

And Gov. Tim Pawlenty said he would use the leverage of the headquarters commitment to try to keep a hub and jobs here.

That looked like a roadmap to a solution. The Northwest executive, General Counsel Ben Hirst, said no formal talks between the airlines and the state have taken place yet.


Pawlenty also said the state has leverage because it can weigh in with the Justice Department as it considers whether there are antitrust problems with the planned Northwest-Delta tie-up. Pawlenty said in a statement on Friday the state would not do that until the new Delta "specifies its commitment to Minnesota regarding hub operations, headquarters and employment levels."

Two out of three of those won’t be a problem. Delta has said it will close no hubs or furlough front-line workers because of the combination. It has said it would cut about 1,000 administrative jobs. Hirst told a legislative hearing on Friday that those jobs would be cut in both Atlanta and Eagan, where Northwest is based.

Northwest’s agreements go back to 1992, when the Metropolitan Airports Commission issued $270 million in bonds on Northwest’s behalf. Northwest has been making payments on those bonds ever since.

The state can require immediate repayment if Northwest leaves. Hirst said that would cost about $212 million at the end of 2009, around the time the headquarters would be likely to leave. As of now Delta and Northwest have about $7 billion in cash between them.

Northwest also gets roughly $200 million a year in subsidies that act like a rent reduction at Minneapolis-St. Paul International Airport. It could lose those if it moves the headquarters.

Hirst said if the state is willing to negotiate the issue, "I believe that there will be a willingness on the part of Delta to try to work out commitments" for jobs and hubs "that will be very satisfactory to the state."

Rep. Kurt Zellers, R-Maple Grove, assistant minority leader, has been pushing a package of incentives aimed at enticing Delta into moving its headquarters to Minnesota after the deal closes.

Hirst said it’s doubtful that Delta will reconsider.


Hirst’s appearance before the House Commerce and Labor committee brought him face-to-face with a co-worker — Rep. Leon Lillie, a Democrat from North St. Paul and Northwest baggage handler.

Lillie criticized the airlines’ decision to bring pilots into negotiations early, but not Northwest’s baggage handlers. And he told Hirst he was disappointed Northwest executives didn’t do more to avoid having Minnesota lose the airline, the name, and the headquarters.

Hirst said Delta felt those items were nonnegotiable because of public statements it made when it fought off an attempted merger with US Airways Group Inc. more than a year ago. Hirst, who has worked at Northwest for most of the time since 1990, said he regretted the loss, too.

"I hate, like everybody else, I think, that’s connected with this, to see the red tail go away. But we felt we had to put our emotions aside in trying to deal with the situation that the airline finds itself in."

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