No merger for NWA this year, official saysby Martin Moylan, Minnesota Public Radio
Northwest Airlines CEO Doug Steenland says the airline has no plans for a merger this year, and intends to keep its headquarters in Minnesota. Officials with the Metropolitan Airports Commission welcomed the comments. The commission has been considering a deal to help Northwest financially. But in return the commission wants Northwest to keep the airline's hub and headquarters in the Twin Cities.
Eagan, Minn. — Steenland made his comments about Northwest's headquarters after a breakfast meeting Tuesday with business leaders. But Northwest later emphasized that some factors could prevent the airline from keeping its headquarters in the Twin Cities.
Northwest didn't elaborate on those factors. But one would likely include a merger in which Northwest is the junior partner.
"The bigger partner in the transaction will keep their headquarters where it is," said industry consultant Darryl Jenkins.
But Steenland once again said Northwest intends to emerge from bankruptcy by June as an independent airline. And he said Northwest intends to stay independent through 2007.
Some analysts predict a flurry of mergers this year in the airline industry. Others aren't so sure.
"There are so many variables," said airline industry consultant John Pincavage. "You just can't walk out there and say 'this is going to happen and then B, C and D will follow.' It's not that simple."
Pincavage says much depends on US Airways' ongoing attempt to acquire Delta. The pressure for airlines to merge will dissipate if the US Airways-Delta deal dies. But Pincavage expects Northwest will feel pressured to hook up with another airline if Delta and US Airways combine.
"If US Airways can get Delta, then the question becomes whose ox is gored among the big guys so that they have to make a move," he said.
There have been unconfirmed reports of merger talks between Northwest and Delta. Steenland declined to say whether the two have held talks or if Northwest is currently in merger negotiations. But Northwest has hired a merger consulting firm. The airline says it hired the firm so it could be prepared to respond to merger offers.
Consultant Darryl Jenkins predicted several airlines will participate in mergers. He said there are too many seats in the sky and mergers would help cut capacity and increase profits.
"I assume in the next two, three years, we will see perhaps all the major airlines being involved in a consolidation of one type or another," according to Jenkins.
But Jenkins believes the Twin Cities will remain a hub airport, no matter what happens with Northwest. That should mean lots of flights to many destinations. Jenkins said fare competition is less intense at the Twin Cities airport. And that makes doing business there more profitable.
"Minneapolis-St. Paul is very safe," he said. "You have one of the best-defended hubs, perhaps in the world. It certainly has the potential to be a money-maker for whoever hangs their shingle on it for years and years to come."
Currently Northwest averages nearly 300 non-stop flights a day out of the Twin Cities.
Officials with the Metropolitan Airports Commission welcomed Steenland's comments about the airline's plans to keep its Twin Cites headquarters.
The Airports Commission is weighing a plan to give airlines a break on landing and other fees. The commission is also considering giving airlines a greater share of the revenue collected from airport merchants.
The plan would give Northwest about $240 million in benefits over 15 years. Other carriers would share about $40 million.
But the Airports Commission wants some benefits in return. The Commission wants to lock Northwest into a long-term deal that protects airport finances, along with keeping Northwest's hub and headquarters in the Twin Cities.
Commission chairman John Lanners says the rub is getting a commitment like the one Steenland made, but in writing.
"Attorneys can interpret words very differently," he said. "So what words are in there may mean one thing to one party and a different thing to another party. We just need to figure that out a bit."
Most commissioners have signaled they want an agreement that can't be undone in bankruptcy court or by an airline merger.
- All Things Considered, 01/30/2007, 6:24 p.m.