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Covenant change sought

Published (1/30/2009)
By Mike Cook
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Thousands of jobs could remain in the state thanks to a new airline agreement.

A 1991 agreement called for the Metropolitan Airports Commission to issue $270 million in bond debt for Northwest Airlines provided the carrier keep its headquarters in the Twin Cities metropolitan area, maintain a hub at the Minneapolis-St. Paul International Airport and retain a specified level of employees.

Violation of any clause could force automatic repayment of the remaining debt.

With Delta Air Lines’ recent acquisition of Northwest, if the MAC were to enforce the covenants, there would be no guarantee of service to the airport or of jobs remaining in the state once the bonds were paid.

The commission’s board approved 9-1 terms of a new deal Jan. 26.

Agreement details were shared at a Jan. 22 joint meeting of the House Commerce and Labor Committee, House Transportation Finance and Policy Division, House Transportation and Transit Policy and Oversight Division and the House Local Government Division. No action was taken.

“I think this a glass half-full or half-empty kind of thing,” said Rep. Mary Liz Holberg (R-Lakeville). “The MAC has done a good job of renegotiating this.”

Terms of the deal include:

• the hub commitment would be set at an average of 400 flights per day (approximately today’s level), at least 250 of which must be on aircraft with more than 70 seats;

• a minimum 10,000 jobs remain in the state until the bonds are paid off;

• Delta’s headquarters for its regional airline management would be in Minnesota, including the moving of Compass Airlines headquarters from Virginia;

• reservation centers would remain in Chisholm and the Twin Cities metropolitan area; and

• the bonds would be paid off in 2016, six years earlier than required.

Rep. Frank Hornstein (DFL-Mpls) and Rep. Jeremy Kalin (DFL-North Branch) remain concerned about agreement clauses that could result in job outsourcing after three years.

“I’d feel a lot more comfortable with this agreement if we could have an ironclad commitment that there will not be outsourcing of Minnesota flight attendants, Minnesota pilots, reservation agents and others,” Hornstein said.

Ben Hirst, general counsel for Delta Air Lines, said he has heard of no plans to outsource any functions that will be housed in Minnesota.

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