DAL/NWA maybe not-discuss
 

http://www.startribune.com/business/13847972.html


Merger math: NWA could face $215M penalty for relocating HQ

By Joshua Freed, Associated Press
Last update: January 16, 2008 - 5:15 PM


where would the duo be based? The answer could be worth $215 million.


Northwest stands to lose that much in rebates and discounts at the Minneapolis airport if it doesn't live up to written commitments to keep a hub and headquarters here. That complicates the already tricky calculations as Northwest looks into a potential merger. It could also be forced into early repayment of a $245 million bond.
Two Northwest Airlines Corp. executives told Minnesota Rep. Jim Oberstar that the Eagan-based airline is holding talks with Delta Air Lines Inc., said Oberstar, a Democrat and chairman of the House Transportation and Infrastructure Committee.
"They confirmed that there are talks under way with Delta and Northwest, and that Delta is also exploring options with United Airlines, in both cases for a merger," Oberstar said on Wednesday. He said he invited the two executives to his office on Tuesday because he wanted to hear firsthand about any talks between Northwest and other carriers, which had been reported but not confirmed by the airlines. Oberstar said he gathered that the talks were in early stages.
Northwest and United have been seen as the best fit for Delta. Both have strong Pacific routes that would complement Delta's flights across the Atlantic. Either combination would create the nation's largest airline — ensuring antitrust scrutiny. Oberstar said he would oppose any major airline mergers.
"We did not deregulate aviation in 1978 to create consolidation of the industry, but rather to expand competition," Oberstar said. "And we're at a point now where consolidation will result in a rather rapid collapse of the industry into two or three megacarriers worldwide."
Also Wednesday, Sen. Johnny Isakson, R-Ga., said Delta CEO Richard Anderson confirmed in a phone conversation Friday that "as far as he was concerned" Delta would merge only if it keeps its name and maintains its current presence in Atlanta, where it is headquartered.
"He said that unequivocally," said Isakson, who called Anderson after reading reports of merger talks. But it has not been clear whether Anderson would be willing to move Delta's headquarters as part of a combination with another carrier.
A headquarters move for Northwest could prove expensive.
Last year it signed an agreement with the Metropolitan Airports Commission, which runs the airport, pledging to keep its chief executive, chief financial officer, and "a majority of its other senior management team members" in Minnesota, and to maintain a hub here.
The agreement — which would also apply to a company that bought Northwest — gives Northwest an estimated $147 million in concessions revenue rebates and $68 million in rent reductions on a maintenance hangar through 2020.
Similar hub-and-headquarters language is attached to bonds issued in 1992 by the airport authority on Northwest's behalf. The bonds were controversial because many in Minnesota saw them as a state bailout for Northwest. They include an agreement — which survived bankruptcy — that Northwest could be forced to pay the bonds back early if its headquarters leaves Minnesota. It still owes $245 million on the bonds, which are due by 2022, said Patrick Hogan, spokesman for the Metropolitan Airports Commission.
"We've made it very clear that there would be some fairly severe financial penalties to the airline if they decide to violate either one of the covenants of the agreement," said Metropolitan Airports Commission Executive Director Jeffrey W. Hamiel, who was involved in the two-year-long negotiations that led to the agreement with Northwest.
Steenland said last year that Northwest intends to keep its headquarters in Minnesota. On Wednesday, the company declined to comment on its headquarters plans.
Moody's Investors Service analyst George Godlin said the language tying Northwest's headquarters to Minnesota is fairly strong — but that doesn't mean the headquarters will stay here. He pointed out that the airport needs Northwest, too — a major tenant that contributes to the state's economy.
He said a merged airline might start to explore what exactly it means to keep a CEO here — in effect, keeping the headquarters in Minnesota in name only.
"Does that mean 181 days per year? Or does it mean every single day per year," he said. "I think a lot of those terms could be negotiated despite the survivability of these particular covenants. I wouldn't put too much stock in these exact terms, given that it will be equally important to Minnesota to maintain" Northwest's presence.
Delta's lease at Hartsfield-Jackson Atlanta International Airport does not appear to tie its headquarters to that city, said Peter Stettler, a Fitch Ratings analyst who has reviewed the agreement.
Also, Stettler said, Delta hasn't "had any specific bonds that I'm aware of that were structured like the bonds up in Minnesota where the government did give some incentives for Northwest to maintain their facilities up there."

I would like to see only 2 or 3 carriers in the United States.... and gov't intervention / regulation (to some degree) as well.

I agree, as much as I hate government intervention, it might help stabilize the industry.

Agreed. This is the only industry in America where the product is sold routinely for less than it costs to produce.

If America wants a healthy airline industry, some form of reregulation is in order.

"Consumer is God" thinking is dead.

america doesn't care if the airline industry is healthy. they just want cheap tickets. ask anyone if they cared when 3 of the top 5 carriers were in bankrupcy.