How would a NWA/Delta merger affect Minnesota?by Annie Baxter, Minnesota Public Radio
Merger discussions between Eagan-based Northwest Airlines and Atlanta-based Delta Air Lines appear to be on a fast-track. If the two carriers merge, the combination could crimp parts of Minnesota's economy. That is, if a merger leads to the loss of the Twin Cities hub or Northwest's corporate headquarters -- or both.
St. Paul, Minn. — Delta Air Lines is reportedly seeking to work out a merger agreement with either Northwest or United Airlines in two weeks.
Citing unnamed sources, the Wall Street Journal reports Delta officials plan to make their recommendation for the best merger partner to the carrier's board of directors early in February.
Northwest will not comment on developments, though the company's CEO has told employees the airline could benefit from a merger.
In the past, Northwest has been favored as Delta's most likely merger partner. And that has prompted experts to mull how the Twin Cities hub and Northwest's corporate headquarters could fare in a possible consolidation.
A number of airline analysts, including Ernie Arvai believe the Minneapolis-St. Paul International Airport would likely stay intact as a hub. If there are service reductions, Arvai thinks it would be a small percentage.
"Some people have said as much as 15 percent, I would say more in the 5 percent range, given the fact that Delta doesn't really have a great presence in the upper Midwest to Northwest's part of the country. Their nearest hub is Salt Lake City, their other nearest hub was Cincinnati, which they greatly deemphasized, and I think as an East-West connecting hub, Minneapolis is more convenient than Salt Lake City," Arvai says.
That's also the view of Bill Blazar of the Minnesota Chamber of Commerce, the state's largest business group. And it's a view he finds comforting. Blazar says losing the Twin Cities hub would make the area a much less convenient place from which to do business. And, he says, most business owners he speaks to value the hub enough that they don't mind paying Northwest a premium for non-stop flights.
"Some of them use stronger terms to describe how much they're paying to fly nonstop. And I say to them, well maybe the hub isn't important, and they say, 'Well, it's worth every dime,'" he says.
With 20 Fortune 500 Blazar thinks companies in the area, there's a good argument to be made to keep a hub in the Twin Cities. So he's more concerned about how such a move would affect the 12,000 Northwest jobs in the state -- and other jobs, too.
"Certainly we think about the job consequences," Blazar says, "the jobs that are at the corporate headquarters and how a merger would affect the nature and volume of work done at the Eagan headquarters, but also on a variety of suppliers, who provide functions related to the headquarters."
Blazar fears businesses like accounting, law, and engineering firms with ties to Northwest could suffer.
But he is also worried about the more intangible economic effects of a headquarters loss. He says an exodus of Northwest executives could chip away at the Twin Cities' corporate stature and the sense that this is a good place for companies to do business.
Northwest's lease and other agreements with the Metropolitan Airports Commission commit the airline to keeping its hub and headquarters in the Twin Cities.
Last year, the MAC sharpened the language of its agreement with Northwest, stipulating that Northwest's senior management be located here in order to satisfy the company's promise to be headquartered in Minnesota.
But MAC and state officials say the agreement cannot force Northwest to keep a headquarters here. So, Governor Pawlenty set up a team just last week to look at issues like the cost of Northwest leaving.
Dan McElroy, commissioner of the state's Department of Employment and Economic Development, says the historical record doesn't give a consistent indication of what happens when companies move their headquarters. He says some have resulted in significant job loss.
"There are other cases like Wells Fargo where the headquarters technically went to San Francisco, and there are more Wells Fargo employees in Minnesota today than there were before that change," he says. "So there are various historic patterns as to the impact." McElroy says as he studies the effects of a possible merger, he's not just going to look at the down sides. He says it's always possible that in a merger with Delta or another airline, Northwest would be the dominant carrier, and that it would actually add more headquarters jobs.
- Morning Edition, 01/15/2008, 7:55 a.m.