Delta and the MAC Reach Deal

 
Old Dec 20, 08, 7:16 pm
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Delta and the MAC Reach Deal

I'm a little suprised this hasn't been brought up yet, unless I missed it.

From "The Widget"
Delta Air Lines and the Metropolitan Airports Commission, which manages Minneapolis-St. Paul International, reached a tentative agreement that will allow the airline to largely retain financial benefits that subsidiary Northwest Airlines received for maintaining its headquarters and primary hub there.

In exchange, the combined carrier will base its "Delta North" headquarters in Minneapolis, keep 10,000 NWA/DL employees based there--1,500 fewer than were based at NWA HQ prior to the merger--and operate at least 400 daily flights at MSP. Under terms of long-time NWA/MAC pacts, if NWA moved its headquarters the airport authority could demand immediate payback of a $245 million loan given to the carrier in the form of bonds in 1992 as well as withdraw from rent-reduction and concessions/parking revenue-sharing agreements at MSP that saved NWA about $12 million annually.

Delta decided to transfer all main headquarters operations to its Atlanta base post-merger, which angered Minnesota officials and caused MAC to assert that NWA had "a legal commitment to this state". Under an agreement outlined to the Associated Press and Minnesota media, Delta said it would pay off the bonds, originally due in 2022, by 2016 and also pay an extra $500,000-$1 million in annual rent.

Delta will move Compass Airlines, a wholly owned NWA subsidiary currently based in Chantilly, Va., near Washington Dulles, to Minneapolis. Delta's regional airline operations will be managed from the Delta North offices. MAC is expected to approve the deal officially next month.


Here's another article from USA Today: http://www.usatoday.com/travel/fligh...msp-deal_N.htm
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Old Dec 20, 08, 7:26 pm
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Well that sounds like pretty good news for just about everybody...?
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Old Dec 20, 08, 8:50 pm
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It appears to put a floor under employment and daily flight counts, although I suppose the Compass relocation to MSP will be netted. That floor is some distance down, however.
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Old Dec 20, 08, 8:59 pm
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Here's another article from the Minneapolis StarTribune:
http://www.startribune.com/business/36404209.html

Something interesting I noticed from the article:
The new deal, which requires that Delta keep at least 10,000 jobs in Minnesota, adds language that spells out which business activities will be located in the state, including headquarters for Mesaba and Compass airlines and a pilot training center. If Delta violates that business provision, the agreement requires Delta to replace the lost jobs with "an equivalent or greater average monthly payroll."
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Old Dec 20, 08, 9:28 pm
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Originally Posted by 3Cforme View Post
It appears to put a floor under employment and daily flight counts, although I suppose the Compass relocation to MSP will be netted. That floor is some distance down, however.
Sure, but 10,000 jobs is a lot closer to 11,500 jobs than to 0 jobs.
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Old Dec 21, 08, 8:04 am
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Originally Posted by DanTravels View Post
Sure, but 10,000 jobs is a lot closer to 11,500 jobs than to 0 jobs.
Of course it is. Small consolation, though, if you are one of the 1,500.

But this is small potatoes. DL's stated objective is to pay off the bonds by 2016, as a poster mentioned above. This is all about DL versus the MAC. As DL pays down its obligation, DL will continue to put the screws to MSP and its job count. It will take 7 years, but there is little doubt the plan is to reduce MSP as much as possible during and after the MAC obligation. If those debt instruments weren't in place, that 10,000 figure would be far less.

400 flights a day? What is the current count now? MSPers, wake up and smell the coffee...you are being marginalized, slowly. Same premise as boiling the frog. Do not just throw frog into boiling water. Start with cold water, increase heat slowly over time. Frog never knows what hit it.
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Old Dec 21, 08, 9:07 am
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Originally Posted by drsan View Post
Of course it is. Small consolation, though, if you are one of the 1,500.

But this is small potatoes. DL's stated objective is to pay off the bonds by 2016, as a poster mentioned above. This is all about DL versus the MAC. As DL pays down its obligation, DL will continue to put the screws to MSP and its job count. It will take 7 years, but there is little doubt the plan is to reduce MSP as much as possible during and after the MAC obligation. If those debt instruments weren't in place, that 10,000 figure would be far less.

400 flights a day? What is the current count now? MSPers, wake up and smell the coffee...you are being marginalized, slowly. Same premise as boiling the frog. Do not just throw frog into boiling water. Start with cold water, increase heat slowly over time. Frog never knows what hit it.
I believe there are about 420 flights a day. There are about 480 flights in the summer months. I am a little suprised the MAC put the required figures believe the current levels, but I guess they really want Delta.
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Old Dec 21, 08, 9:36 am
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Originally Posted by drsan View Post
Of course it is. Small consolation, though, if you are one of the 1,500.
...
It will take 7 years, but there is little doubt the plan is to reduce MSP as much as possible during and after the MAC obligation
...
MSPers, wake up and smell the coffee...you are being marginalized, slowly...
I guess there are two different sorts of announcements that could have been made wrt this issue, and I must say I prefer this one to the alternative.
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Old Dec 21, 08, 10:40 am
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Originally Posted by flyingrox View Post
I believe there are about 420 flights a day. There are about 480 flights in the summer months. I am a little suprised the MAC put the required figures believe the current levels, but I guess they really want Delta.
Does that estimate of 420 flights include the ~20 'legacy Delta' flights DL or DL Connection operated MSP-ATL/CVG/SLC/JFK?

The MAC could have overplayed a weak hand and declined to amend the bond agreement. DL makes cuts, MAC declares DL in default, DL pays off the bonds, and DL then has no Minnesota bond agreement (or FTC requirement, or DOJ requirements as conditions of the merger) so it cuts immediately and as deeply as it chooses. This deal continues MAC's modest negotiating leverage and allows the MN employees ample time to demonstrate labor cost efficiency.
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Old Dec 21, 08, 11:30 am
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Originally Posted by drsan View Post
Of course it is. Small consolation, though, if you are one of the 1,500.

But this is small potatoes. DL's stated objective is to pay off the bonds by 2016, as a poster mentioned above. This is all about DL versus the MAC. As DL pays down its obligation, DL will continue to put the screws to MSP and its job count. It will take 7 years, but there is little doubt the plan is to reduce MSP as much as possible during and after the MAC obligation. If those debt instruments weren't in place, that 10,000 figure would be far less.

400 flights a day? What is the current count now? MSPers, wake up and smell the coffee...you are being marginalized, slowly. Same premise as boiling the frog. Do not just throw frog into boiling water. Start with cold water, increase heat slowly over time. Frog never knows what hit it.
is the sky really falling (e.g. DL dumping MSP like how AA dumped STL after TWA) and does DL really want to downsize MSP?

Makes for good speculation and copy, sure there will be realignment with smaller nicer EMBs and the like replacing DC9s or perhaps A320/A319 on some routes, probally see more A333 swapped with 763/764 and so forth.

Sure there will be some reduciton where multiple flights from the combined NW/DL are not needed between MSP and CVG/JFK/SLC/ATL etc. Likewise some poor performing ones may be dropped or suspended which makes good business sense.

MSP may very well see many more EMBs/CRJ9xxx which if that is the case instead of downsized to a CRJ2xx, that's fine with me as well.

However unless economy stays in poor condition for the next 7+ years, I would expect the number of flights to stay about the same maybe even increase with some new domestic and international destinations, granted, using smaller A/C or via JV and partners.

NW did not have the right A/C to do some international flights say to the Nordics, swaping A/C around enables the combined DL now to look at using smaller right sized A/C if those routes can make money.

-H
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Old Dec 21, 08, 12:48 pm
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Originally Posted by hooverer View Post
is the sky really falling (e.g. DL dumping MSP like how AA dumped STL after TWA) and does DL really want to downsize MSP?

-H
I can not see it being that extreme. The issue with AA is you have a small hub 150 miles or so from your 2'nd largest hub. Also the city is not growing. If delta were to close nwa hubs my guess would be MEM followed by DTW. DTW is a great airport just not sure about the local economy.
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Old Dec 21, 08, 1:05 pm
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Originally Posted by 3Cforme View Post
Does that estimate of 420 flights include the ~20 'legacy Delta' flights DL or DL Connection operated MSP-ATL/CVG/SLC/JFK?

The MAC could have overplayed a weak hand and declined to amend the bond agreement. DL makes cuts, MAC declares DL in default, DL pays off the bonds, and DL then has no Minnesota bond agreement (or FTC requirement, or DOJ requirements as conditions of the merger) so it cuts immediately and as deeply as it chooses. This deal continues MAC's modest negotiating leverage and allows the MN employees ample time to demonstrate labor cost efficiency.
For November 2-December 16

ABQ 2
ABR 4
ALB 1
ALO 4
AMS 2
ANC 1
ATL 5
ATW 5
ATY 2
AUS 2
AVL 1
AZO 1
BDL 3
BIL 2
BIS 5
BJI 3
BNA 3
BOI 2
BOS 4
BRD 3
BWI 3
BZN 2
CID 5
CLE 4
CLT 3
CMH 3
CMX 3
COS 2
CPR 1
CUN 1
CVG 4
CWA 6
DAY 2
DBQ 2
DCA 5
DEN 6
DFW 6
DLH 5
DSM 7
DTW 14
DVL 0(THROUGH)
EAU 4
ESC 0(THROUGH)
EWR 5
FAR 8
FCA 1
FLL 1
FNT 1
FOD 0(THROUGH)
FSD 7
FWA 1
GEG 2
GFK 4
GRB 5
GRR 5
GSO 1
GTF 2
HIB 2
HLN 1
HNL 1
IAD 3
IAH 4
ICT 2
IDA 1
IMT 1
IND 5
INL 2
JAX 1
JFK 3
JMS 2
LAN 1
LAS 5
LAX 5
LGA 6
LHR 1
LIT 0(THROUGH)
LNK 4
LSE 6
MBS 1
MCI 7
MCO 4
MCW 3
MDT 1
MDW 5/6
MEM 7/8
MHT 1
MIA 1
MKE 7/6
MLI 4
MOT 3
MQT 1
MSN 5
MSO 2
MSY 1
NRT 1
OGG 0
OKC 2
OMA 6
ORD 9
ORF 1
PBI 0(THROUGH)
PDX 4
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PHX 5
PIA 3
PIR 0(THROUGH)
PIT 4
PSP 1
PVD 1
RAP 3
RDU 2
RHI 3
RIC 1
ROC 1
RST 7
RSW 2
SAN 3
SAT 2
SBN 1
SDF 3
SEA 5
SFO 5
SGF 1
SJC 1
SLC 3
SMF 2
SNA 2
STC 4
STL 7
SUX 5
TPA 3
TUL 2
TUS 1
TVC 1
TVF 0(THROUGH)
TYS 1
VPS 0(3 PER WEEK)
XNA 2
YEG 2
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YQT 2
YUL 1
YVR 1
YWG 5
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YYZ 4

431
Doesn't count Delta's 20 or so flights.
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Old Dec 22, 08, 1:22 am
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Originally Posted by troyintn View Post
I can not see it being that extreme. The issue with AA is you have a small hub 150 miles or so from your 2'nd largest hub. Also the city is not growing. If delta were to close nwa hubs my guess would be MEM followed by DTW. DTW is a great airport just not sure about the local economy.
Local Economy??? Thankfully the local economy plays such a small part in hub operations...
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Old Dec 22, 08, 1:57 am
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Originally Posted by socrates View Post
Local Economy??? Thankfully the local economy plays such a small part in hub operations...
Yeah - the very name "WorldGateway" kind of says "we're not expecting a lot of O&D here."
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Old Dec 22, 08, 10:16 am
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Originally Posted by flyingrox View Post
In exchange, the combined carrier will base its "Delta North" headquarters in Minneapolis, keep 10,000 NWA/DL employees based there--1,500 fewer than were based at NWA HQ prior to the merger--and operate at least 400 daily flights at MSP.
What's the measurable and point of "based"? Payroll taxes?

Just thinking it's possible (for example) for 8000 of those based employees to be living anywhere in the US, and commuting to MSP to start their shift. Is this "feasible"?

Steve B.
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