More About The NWA-Delta Deal
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Apr 21, 2008 6:47 pm US/Central
MAC Fires Off Tough Talk About NWA Obligations
MINNEAPOLIS (WCCO) ―
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According to its contract with MAC, the airline would have to quickly pay back $245 million it owes to the state.
CBS
The Metropolitan Airport Commission fired off some tough talk about holding Northwest Airlines accountable for the promises it made to the airport and the state. Northwest Airlines announced it is moving its headquarters out of Eagan to Atlanta, Delta's home once the Northwest-Delta deal is complete.
That would violate Northwest's promise to keep the headquarters in Minnesota. According to its contract with MAC, the airline would have to quickly pay back $245 million it owes to the state.
There is plenty of suspicion surrounding what will happen with Northwest. As evidence of its damaged reputation, it's sometimes referred to by critics as "North-worst", in part because some people complain Northwest has a history of breaking promises.
"I watched a maintenance building in Duluth slide away," said MAC Commissioner Robert Mars.
On Monday, several MAC members expressed irritation with recent comments from Delta's CEO Richard Anderson who said they'll live up to the spirit of its agreement with Minnesota.
"They signed their names, we signed our names and I think it's a serious matter," said MAC Commissioner Mike Landy.
"You can have a contract and then somebody can say we're doing it in the 'spirit' of the contract. What the hell? ... This isn't spirit. This is a financial arrangement," said Mars.
A struggling Northwest agreed to keep its headquarters in the Minneapolis-St. Paul metropolitan area in exchange for a huge loan from the state. Currently, Northwest is making payments on $245 million in bonds; payments will end in the year 2020.
However, if the headquarters moves to Atlanta the penalty would require the airline to pay back that huge debt in three years. And that's not all. Northwest got a discount on renting gates from MAC, valued at $200 million in savings for the airline.
MAC's chairman said that would also go away if the headquarters leaves Minnesota.
"We've positioned our self well. We've got hooks and we have full guarantees of repayment on all the funds at this point," said MAC Chairman Jack Lanners.
MAC's chairman also praised Northwest, saying the airline has never asked to have its loan forgiven. Northwest is repaying the loan. The issue is the time frame for repayment, he said.
It's likely decisions about the penalty are at least a year away.
Some analysts view the situation this way: If you play hardball, Northwest could pay the penalty and leave Minnesota with very little.
However, if you allow the airline to avoid the penalty, Northwest might agree to move more jobs to Eagan. Some people say lots of good-paying jobs and lots of flights at MSP are more valuable than keeping the CEO in town.
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