Last Sunday (November 21), Suzanne Ziegler wrote a very nice story about the Metropolitan Airport Commission (MAC) Long-term Comprehensive Plan (LTCP) Update. MAC obscured several issues by planning more MSP expansion, including:
- Economic forecasts
- State and Federal government plans and policy
- Safe rates and capacity of MSP
While it is valuable to know what MAC prefers, a long-term plan is not likely to be useful for programming MSP capital budgets because of the limitations of the need projections -- and doubts about why the plan was written. MAC is involved in approving a 5-year Capital Improvements Plan and the 2010 projects budget. Both documents revive 2005 to 2010 projects that were postponed or abandoned because of Northwest Airlines’ bankruptcy (2005) and merger with Delta (2008).
MAC Deputy Director for Planning and Environment, Dennis Probst told SMAAC the LTCP should be updated every five years, but it has not been. Perhaps the reason for the update now is context for the more immediate future and to have the Met Council “bless” more MSP expansion before a new Governor’s appointments to both bodies?
Delta/NWA and MAC negotiated various changes in MSP development and financing for 2005-2010 (-2012 for gate leases) including various fee and lease reductions. We doubt that all “non-Delta carriers” will move to Humphrey. We expect major airlines, US Airways, United and American and their regional affiliates to remain at Lindbergh.
MAC subsidizes operating costs for Delta/NWA and other airlines at MSP by sharing airport revenues from parking and concessions. Landing fees were reduced. Leases have been stripped of “depreciation” -- that is, monies put aside to repair or replace the facilities and equipment when needed due to wear and tear.
MAC brags that they levy no taxes. They have landside business deals and revenue proportional to airside operations, so MSP is said by the Commission to be self-sustaining. But that depends on continued use as a major hub to manage debt.
As of now, Delta/NWA and MAC are discussing the gate lease renewals, with Delta saying they have no plan for renting fewer gates at the Lindbergh Terminal – that is, not moving the hub or part of the hub elsewhere. But MAC may be committed to building gates at Humphrey before Delta is contractually bound to gates in 2012. Delta may view their contracts with MAC as easily amended, which was Northwest Airlines’ experience.
Delta collects a 35 to 40% fare premium from local flyers, which more than covers lease and landing fee payments made by Delta at MSP. Minnesotans are paying for Delta’s hub operations at MSP. High fares are especially an issue for economic growth as small businesses in Minnesota are disadvantaged compared to their competitors in non-hub cities.
We doubt this is a viable 20 year financial plan.
FAA has no realistic plans for ground or air traffic control systems supporting more gates at MSP, particularly if rates (operations per hour) should increase as a result of more aircraft at MSP. New FAA air traffic control systems are scheduled no earlier than 2017 (assuming MSP is the first airport equipped with Next Gen ATC).
Talk of increasing passenger capacity by use of larger aircraft is just talk. Delta has suggested they have plans to increase seat capacity on regional (collector) flights by re-allocating the merged fleets and crews. This would be counter to the current trend of schedule reductions. The seat capacity mentioned is from about 70 to about 100, this 43% increase in seats is more than the projected increase in passengers through 2030.
James R. Spensley, President
The South Metro Airport Action Council (SMAAC) announced today that it has opened a "Citizens’ log" on its website for residents and travelers encountering unusual annoyances or travel delays during the shutdown of the North Parallel Runway for reconstruction Aug. 17-Oct. 31, 2009. The on-line address is http://quiettheskies.org.
SMAAC, the citizen-based group monitoring issues at Minneapolis-St. Paul International Airport (MSP) has been leafleting summer neighborhood events and MAC public hearings about the runway closure. SMAAC wants reports about loud overflights, both time-of-day and direction, as a check on the announced plan, and passenger anecdotes about MSP or airline problems under delay conditions.
According to the Metropolitan Airports Commission (MAC), weather caused unanticipated difficulties for airlines, airport, and FAA staffs during a similar shutdown of the South Parallel Runway in 2007. Since Delta/Northwest apparently hasn’t much reduced its hub operations, less safe capacity combined with reduced visibility conditions creates airport congestion which likely will slow hourly operations drastically.
"The North parallel runway project shifts the 1,200 daily flights at Minneapolis-St. Paul International Airport (MSP) to the three other runways for the duration," said Jim Spensley, SMAAC president. "This will expose thousands of residents, businesses and travelers to additional health, environmental and safety risks.
Spensley also said that rerouting decisions were made without any meaningful opportunity for affected citizens to propose alternatives in advance, in spite of repeated attempts to do so. As in 2007, using either the new runway or the cross-wind runway instead of a main runway limits safe capacity under calm, good visibility conditions (visual flight rules) because of crossing runways and intersecting runway headings. With higher winds or less visibility, MSP’s safe hourly rates for arrivals and departures are very much reduced.
Airport staff estimated that delays during the project will be two to four times normal for this time of year.
SMAAC notes, however, that less use of the new runway (R17-35) over Minneapolis, compared to the similar 2007 project, is planned this time. South Minneapolis residents and schools complained bitterly during the Fall 2007 project, and SMAAC appealed to Congress for more Federal review.
Under the Federal Aviation Administration’s temporary air traffic control plan, the usual southerly departures and northerly approaches using the new runway over Bloomington, Eagan and Apple Valley will be continued, slightly increased. The plan is to alternate two departures or arrivals each on the South parallel runway (R12R-30L) and the new runway (R17-35) with one operation on the cross-wind runway (R4-22), wind and weather permitting. If this plan is implemented, 240 operations per day would be using the cross-wind runway over Bloomington, Richfield, and Burnsville to the Southwest of the airport, or Minneapolis and St. Paul to the Northeast of the airport.
August (2009) delays are already up compared to 2008, and during the first week of the 2009 project, more delays than predicted by the MAC were recorded.
The MAC’s two roles in planning the temporary operations are key delay elements: scheduling the $17 million runway repair project (when and how long) and opening and closing the adjacent runway (R4-22).
The South Metro Airport Action Council continues to advocate for quieter and safer neighborhoods around the Minneapolis-St. Paul (MSP) airport. The newest issue for residents began mid-August 2009. Work on the North Parallel Runway (R12R-30L) is re-routing more and new flights over residential neighborhoods. More residents and businesses are exposed to unnecessary health, environmental and safety risks -- without having any meaningful opportunity to propose alternatives in advance.
Citizens are being asked to send SMAAC a log of noisy overflights and to report travel difficulties during the project by flyers being passed out at public meetings. SMAAC expects a membership increase as people experience overflights and travel difficulties. The campaign is also waged through the internet: http://quiettheskies.org.
Delta/Northwest dominates MSP, but has been slow to de-peak its hub during the runway project. A similar project in 2007 resulted in many delays and problems, which were laid off on weather rather than poor planning. Estimates of delays this year ranged from 2 to 4 times normal, and weather is variable this time of year in Minnesota. The project is expected to keep safe capacity limited at MSP through October.
Elected officials are scrambling to disavow any connection with the project, which could not only congest and disrupt airport operations but also result in a bad accident or passengers held on airliners for hours. Already, a Continental flight diverted from MSP to nearby Rochester had its 47 passengers sitting overnight -- without food or toilets --on the tarmac there waiting for a fresh crew. Continental was unable to arrange ground transportation or terminal access through Delta Airlines, which provides arrival services for "visiting" aircraft as a contractor to the Rochester airport authority.
Many thanks to the Southside Pride for publishing the article Watchdog Group Wants Attention To Pending MSP Runway Closure in the May edition. The closing of the other main runway for weeks in 2007 didn't go well at all. Poor planning, some weather interruptions, and air traffic control delays resulted in noisier-than-projected days, and congestion at the airport with passengers stranded at MSP or confined to aircraft for hours on the ground.
Peculiarly, the May article and parts of my messages to the Minneapolis City Council were criticized by Merland Otto, the city airport planner. In a message to me, Dan Boivin, four City Council Members, and Erica Prosser, an aide to Mayor Rybak, Mr. Otto disagreed with just about every paragraph in the article -- and every topic we suggested for the City-MAC-FAA public meeting we were seeking.
Although, as we said, Minneapolis received the lion‚s share of additional overflights that affected new and unexpected neighborhoods and activities in 2007, city authorities and elected officials were passive, at best, this time. Council Member Elizabeth Glidden, the City Delegate to the MSP Noise Oversight Committee (NOC), said last Fall that she would work at NOC in two ways: try to limit noise exposure, even for temporary overflights (as well as publicizing them), and not to pretend that NOC had any say, or could make any informed recommendations, about safety or air pollution.
As plans were being slowly revealed to NOC, predictions of noise and complaints arising from temporary operations and the usual hub rates seemed way too low. The reduced safe capacity at MSP notwithstanding, about 500 daily overflights in SW Minneapolis (200 more than usual), 300 or more flights over south-central Minneapolis using the new runway "backward," and 10 to 80 flights over neighborhoods along the Mississippi River toward SE Minneapolis are planned for weeks on end. Not only will this be annoying, it clearly increases the number of people, homes, schools, and sensitive businesses impacted, that is noise exposure. A bevy of phone calls and Email messages have been sent in advance complaint, some demanding City action.
There was no response from the Mayor's office or his MAC Representative. Ms. Glidden‚s invitation to MAC and FAA to discuss operations, overflight noise and pollution, and local passenger concerns seems to be stymied.
What Mr. Otto did not mention was safety. In 2007, Carl Rydeen, then the acting FAA Air Traffic Control Tower Manager, said it was "perfectly safe" to maintain 140 to 150 operations per hour at MSP during peak hours with a main runway closed. If this were so, there was no need to build the new runway, which offers less safe capacity than either of the parallels. (Editor's Note: The referenced article in May issue dealt with safety prominently.)
What Mr. Otto offered as opinion or related facts could be debated if there were a public meeting, but there isn‚t going to be one unless there is a turn-about at City Hall. I take strong exception to two points because Mr. Otto implies Mayor or Council policy positions that haven‚t been stated or dated.
Is it policy to limit Council Member questions of, and to exclude the public from commenting on, the MAC or FAA representations? Mr. Otto wrote "Neither MAC nor FAA is obligated to have separate presentations to communities." (Emphasis added.) By this he meant they won't openly meet with the Council, the Mayor, or a Council committee for discussion? Council Member Benson submitted several questions to MAC, asking that they been answered at the meeting.
The public can attend the committee meeting July 21, 9:45 AM in the City Council Chamber, but residents and businesses hoping for recognition and attention may not be invited to comment or ask questions. Come, and if the Committee refuses to hear your concerns, learn from that.
A committee sponsoring a presentation so it can be webcast while its members sit and politely listen? This was Mr. Otto's recommended benefit, more people told, fewer listened to. No Council committee should substitute a presentation for a committee's usual purpose of attaining relevant information for conducting City business and protecting the public interest. MAC‚s tortured rationale --that informing the public what has already been decided, without any public discussion of alternatives -- is insufficiently transparent.
Where, and how low, jets fly doesn‚t change noise impacts or air pollution? Mr. Otto wrote "There is no greater burden of noise or pollution associated with the temporary change of runway use. The distribution does change but since air traffic is no greater, there is no significantly added (noise exposure) burden on a temporary basis during periods of construction." (Emphasis added.)
It used to matter a lot. There have been disagreements about noise exposure maps for about three decades and the City went so far as sue the MAC over noise exposure mitigation. Hundreds of millions of dollars were spent for insulation and removal of buildings due to exposure to noise levels said to be based on the number of annual overflights and usual routes and altitudes. Mr. Otto implies the City is content that 2,000 to 3,000 added flights per week for several weeks over Minneapolis are insignificant. On an annualized basis this is 50 times the annual threshold for re-mapping, and about 7 times the threshold for a 5-year period, according to Federal regulation CFR14 Part 150.
President, South Metro Airport Action Council
The MAC presentation will be at the Transportation and Public Works Committee, July 21, 9:45 AM, Council Chambers, City Hall.
Minneapolis was the city most impacted when the south parallel runway (R12L-30R) at MSP was closed for several weeks for
major repairs in 2007. The Metropolitan Airports Commission (MAC) said for years that the “new” runway would not be used
over Minneapolis. But two years ago, the new Runway (17-35) was used for about 300 flights per day over Minneapolis.
There was little or no advance coordination with local governments or the public. The schedule was chosen for the
convenience of the airlines. The City of Minneapolis was unable to limit additional flights over the City, or chose not to
because of economic considerations.
The South Metro Airport Action Council (SMAAC) spoke out strongly that closing a major runway at Minneapolis-St. Paul
International Airport should not result in descents over downtown Minneapolis (homeland security), more frequent use of the
“cross-wind” Runway 4-22 (safety), or take-offs over un-insulated neighborhood schools during classes (violates noise
compatibility agreements). Now, after a year’s delay for the Republican National Convention, airport plans are to close the
north parallel runway for repairs for several weeks starting in mid-August.
It is expected that the new runway will be used frequently over Minneapolis and that many more flights, at lower altitudes, will
be directed over southwest Minneapolis and Richfield. Also, more use will be made of the cross-wind runway (R4-22) in spite
of safety concerns: this runway crosses the other runways and associated taxiways at MSP on the ground. The changes will
be handled under temporary air traffic control procedures and by re-routing most flights.
The MAC did not discuss closing the cross-wind runway because of its proximity, at the runways’ intersection, to the
construction projects. They did say that FAA rules do not require closing this runway unless work is within 60 feet of the
runway edge. So the immediately adjacent part of the north parallel runway will be completed during early morning hours, at
extra cost. SMAAC noted that FAA rules do not prohibit closing the cross-wind runway either, and this runway contributes little
to safe capacity. Our concern is that using this small gain in capacity safely introduces substantial complications to air and
ground traffic management, particularly during periods of high demand or in case of an emergency. Airline pressure to
maintain schedules leads to increased control problems on the ground, SMAAC notes, leading to delays or worse.
“The repair of the main parallel runways at MSP is obviously beneficial to Northwest/Delta, because they, and the other
airlines, need a smooth and clean runway.” according to Jim Spensley, SMAAC President. “These repairs were postponed for
years to keep MSP suited for hub operations until the new runway came online. Frequent cleaning and minor repairs for
safety were done over those years as an airport expense, and again Northwest/Delta again benefitted. Once the new runway
was available, costly maintenance of the main parallel runways was continued for even higher rates. Something is surely
wrong if rates cannot be reduced temporarily during safety-essential and airline-beneficial runway re-construction.”
SMAAC objected to changed flight routes instead of reduced rates in 2007, noting that noise mitigation, emergency response,
zoning (hazards to flights and height restrictions) were all planned for the usual flight paths. SMAAC again complained that
temporary routes, rates, and ground and air traffic control issues were not openly discussed by the MAC for the 2009 project.
It would be better if schedules were adjusted away from the busiest hours so that better, safer plans could be made by FAA
Instead, the MAC referred the temporary operations plans to its Noise Oversight Committee (NOC). Unfortunately, there is
nothing much for NOC to review: details of the temporary runway use and airspace design changes have not been released
by FAA, and may never e released in detail. Using NOC staff assumptions and how the 2007 closure was handled, NOC is
planning a series of announcements and presentations to alert the public to flight routes during the north parallel runway
[NOC’s purpose is to bring airport users and city representatives together to discuss airport noise and submit reports to the
MAC. NOC is co-chaired alternately by an airline and a citizen representative; it is staffed by the MSP noise manager. Are the
cities allowing important concerns -- community coordination, safety, security, and air pollution -- to be decided by NOC?]
MAC staff has run simulations that suggest peaks would be somewhat reduced compared with 2007 if Northwest/ Delta daily
schedules are reduced in August as planned. Delays will be significant for local travelers anyway, and more so if runway-use
changes are made daily due to variable winds and weather conditions. The south parallel runway is longer than the north
parallel runway, so – according to MAC -- more aircraft might use it without crossing another runway, giving MSP a small rate
boost compared to the 2007 project. Requests to depart on the south parallel runway starting beyond the intersection with the
cross-wind runway is a complicated traffic issue, because a safe runway length depends on aircraft gross weight and wind
velocity, aircraft type, and other variables.
How will cities deal with the thorny issues raised in 2007 and as yet unaddressed for the 2009 project? Minneapolis’ NOC
member, Council Member Elizabeth Glidden, has asked the City Transportation and Public Works Committee to invite MAC
for clarifications of operations during the project. The Committee’s July meeting would allow little time for changes, if any, or
for the city to consider complementary changes such as traffic or emergency response.
SMAAC suggested that the Committee should also hear from independent safety and noise experts. However, if 2007 is
repeated, the temporary, complicated operational plan will be sprung on the public just before the project begins, and daily
attempts will be made to maintain rates in spite of reduced safe capacity.
Objections to “Airspace Redesign” as Funded Through September 2009
The $410 Billion Omnibus Appropriations Bill as passed by the Senate includes FAA funding for the fiscal year ending September 2009. FAA gets $300 million for Next Generation Air Traffic Control (ATC) projects; however, any portion of this can go to Airspace Redesign. The announced purpose of airspace re-design in the Northeast Corridor is to “reduce delays” (increase operations per hour at busy airports) and “save fuel” (reduce en route separations and flight durations).
Legitimate concerns about this possibility were raised by many communities expecting more overflights, including in
new areas, without adequate planning, environmental review and consultation. Pilots and air traffic controllers doubt
the feasibility, in practice, of adapting the existing ATC and cockpit systems to more traffic and more complex traffic
This use of the appropriation lacks scientific value for Next Gen, at best duplicating a statement of requirements. it
is unlikely any significant changes will be implemented in six months. Monies spent for successful improvements to
the existing systems would show that expensive Next Gen communications of GPS data are unnecessary.
FAA presented airspace re-design to Congress as a simple route planning exercise. It isn’t. In the Northeast
Corridor, there are numerous ATC centers and radar/transponder locations with coverage and responsibility for
current routes. At airports, Instrument Flight Rule (IFR) systems correspond to established approaches, and in the
New York City/New Jersey area, detailed mapping of tall buildings, towers and bridges. This cannot be done in six
months, and how much of an improvement is needed isn’t set in the Next Gen design.
Questioning Interim Airport Improvement Projects (AIP)
$3.515 billion also goes to Airport Improvements (AIP) funding. This is in addition to the $1.1 billion for AIP grants in the recently passed stimulus package. Congress has insufficient evidence for a positive outcome and must improve oversight of FAA developments and operations for these appropriations.
As the oldest citizens' group monitoring airline noise and safety procedures in Minnesota, SMAAC is deeply
concerned over use of these funds for two principal reasons: 1) the funds could go toward implementing regional
airspace redesigns in violation of due process, environmental and transportation law; 2) AIP funds could also be used
to support further expansion of the major hub airports.
In response to recent allegations of wrongdoing in the media, prior audits and GAO studies, DOT Inspector General
Calvin Scovel established a special team to oversee the $44 billion DOT is slated to receive from the stimulus bills.
With due respect, IG reviews are rare, tardy and ineffective, and the Congress has not specified the purpose, goals,
funding or reporting of FAA development issues by Mr. Scovel’s team. Congress has not yet ordered adequate
reporting for committee oversight functions or required transparent dealings with airports, State transportation
agencies, or local communities.
The sensible approach is to reduce schedules at the busiest hours. Major airlines oppose this approach
because of their large banks, many gates and business-hour dominance at hubs. The government has no business
supporting such practices by reducing safety standards or spending unwisely to increase air traffic rates. Using
current technology, these are the same error. If the Senate intended to protect public safety, rather than the
business prospects of major airlines, the appropriations should have been explicitly tied to today’s limitations and
original design capabilities (rate and separation standards) and realistic ATC improvements, not Next Gen concepts.
Thank you for your consideration of these issues.
James R. Spensley,
President, South Metro Airport Action Council (SMAAC)
Note: SMAAC and similar citizen organizations are urging their Members of Congress to be more thorough
evaluators of air traffic control systems and technologies. FAA has been rudderless since 2007 when its R&D,
staffing, and systems repair and upgrade programs were cut or abandoned in favor of the overly ambitious and
technologically unproven Next Generation systems. Even if Next Gen is not the desperation punt we think it was
when announced, even its proponents do not see deployments for many years after billions have been spent in
design and test.
By Dick Saunders and Jim Spensley
The Metropolitan Airports Commission (MAC) raised enough questions to delay a decision for three weeks, but voted 11-1 at a special meeting Feb. 4 to allow Delta Airlines to vacate Northwest Airlines' Eagan corporate headquarters without major penalty.
However, in the process, MAC may have, in our opinion, put the state into a weakened position as a major transcontinental airline hub for the long term Exactly how MSP will be impacted if the current world recession continues or worsens over the next several years, as a growing number of economists are hinting, is a question.
The changes at issue until last week lay in the 1992 loan agreement that used MAC's top-ranked credit ranking to float $250-million in bonds for Northwest Airlines while NWA was standing at bankruptcy's door .The new agreement extinguishes MAC's right to force repayment of the bonds if NWA had given up for any reason its Eagan offices before the bonds expired in 2022.
As part of its acquisition of NWA in October 2008, Delta agreed to pay off the balance of $183 million projected to be remaining on the loan by 2016, six years ahead of schedule. In exchange, Delta committed to a series of four hub covenants. The most important covenant requires Delta to keep at least 10,000 of its present 11,500 Minnesota jobs in the state and maintain an annual average of 400 flights a day until the loan expires.(A Delta spokeswoman said the airline currently is running 440 flights a day at the Twin Cities hub)
In the Feb. 4 meeting, MAC Vice Chair Bert McKasy of Sunfish Lake, was the sole abstention, contending that a covenant clause not clearly understood by commissioners, the legislature or the public during January reviews, permits a 10 percent "cushion" of 40 flights (to 360 daily flights) before a penalty would be triggered. The penalty would eliminate Delta's share of MAC's annual concession revenues. (That share amounted to $7-8 million last year.)
At its first review meeting Jan. 26, Dan Boivin, representing the mayor of Minneapolis, asserted that the deal "isn't strong enough to keep Delta from coming back to the table to ask for more relief" if its corporate health worsens in a few years. "I fully expect that will happen. We are not strong enough to prevent it."
Paul Rehkamp, a 16-year commissioner from Mankato, noted that "We have in effect given up an (enforceable) contract for a series of operating covenants that remain unclear as to the definition of a breach." He later voted in favor. (The final agreement attempts to resolve those questions.)
The Delta job guarantee is 37% below Northwest's peak of 18,000 employees in 2000, indicating the extent of the "bust" cycle all airlines have faced since then. Likewise, daily flights at 440, are running about 20 percent below the 2005 peak rate. And the Atlanta-based airline, now the world's largest, has announced it plans to reduce worldwide service by a further 3-6 percent in 2009, or 27 flights if the formula is applied to MSP activity.
Even before the latest service cuts, MAC's revenues for January 2009 fell $11 million short of its budget, resulting in a $2.6 million shortfall in net profit for the month. The primary cause was a $9-million shortfall in concession revenues. A MAC executive told Southside Pride that nonetheless "there are no plans to cut MAC staff in 2009."
Delta To Add Some New Jobs
For its part, Delta has agreed to create a "Delta North" management unit on the MSP campus in the office/support building at 34th Ave. S. and I-494 once occupied by Republic Airlines. After renovation, it will house several corporate functions previously located in Eagan, as well as a new regional airline headquarters. Delta also will transfer here its Compass Airlines regional airline headquarters from Chantilly, VA.
Delta also agreed to maintain its phone reservations centers in Chisholm and Minneapolis, its pilot training center and its Mesaba Airlines regional airline headquarters in two other Eagan locations, plus large flight crews and ground crews servicing Northwest/Delta's gates at MSP.for the duration of the loan agreement.
The fate of NWA's flight systems operations center (SOC) on the MSP campus, however, remains unclear. It employs a reported 300 skilled controllers who maintain contact with air crews during NWA flights and ground crews at NWA gates. NWA must keep a separate SOC for the next 12-18 months until its FAA operating license is merged with that of Delta's.
A Delta spokeswoman said "we may not know until the end of the year" how many employees would remain at the Eagan and Delta North offices.NWA had announced plans to reduce headquarters employment by1,000 when the proposed merger was made public. Peak employment was said to be 2,000 in the mid-1990s.
As state legislators and the South Metro Airport Action Council (SMAAC) have pointed out, Delta can reduce its Minnesota employment below 10,000, provided the percentage does not exceed that of jobs cut elsewhere on its system. And they both doubt that the payrolls of any incoming regional airline employees will match those of outgoing corporate managers.
While MAC and Delta officials maintain hope of a general economic recovery beginning about mid-year, others say the depth and breadth of the present recession may force Delta to make service cuts beyond the 3-6 percent target announced in November.
(Under the revised loan agreement, Delta would be prevented from invoking an old force majeure clause as it did after 9/11.
Plus, NWA faces a competitive threat from Southwest Airlines, which begins service to Chicago Midway in March.
Certainly, there is nothing in either airline's recent history to provide encouragement on the jobs scene. Passenger traffic usually lags an upturn by 3-6 months. Last year Delta cut 6,000 employees, Northwest 2,000 to reduce operating expenses. In November, Delta offered buyouts to another 2,000 Delta employees by Feb. 13. That would further reduce the combined company's worldwide employment to 73,000.
But Wall Street isn't impressed with the outlook for the merged entity.Both companies were foced into bankruptcy in 2006-2007 after years of heavy operating losses -- $29 billion in Delta's case since 2000. The stock has dropped rom 20 to about 6, a 65 percent decline since the merger was announced in 2007. Delta management has forecast a return to profitability during the last three quarters of 2009.
Two House Bills Introduced
Rep. Frank Hornstein, DFL-Minneapolis, and Rep. Joe Adkins, DFL-___________, chair of the House ________________have introduced bills to tighten MAC oversight of its airline tenants. Hornstein observed Jan. 22 that the now-stricken force majeure clause "is big enough to drive an airplane through." Adkins seeks stronger oversight practices for the legislature.
For Minnesota-based passengers, Southwest's low-fare service, not the merger, may become the biggest benefit in 2009. Some passengers, long-time critics of NWA's service, may find Delta's even worse, according to some bloggers. Meanwhile, if Delta-Northwest's 80 percent control of both long-distance and regional seat supply continues well below historical demand, MAC could enforce its use-or-lose gate lease policy to invite more low-cost airlines or legacy carriers like United to add competing service.
(Awaiting an upturn in business, Northwest is retaining rights and paying monthly rental fees on three vacant gates at the Lindbergh Terminal. Seven other vacant gates scattered elsewhere around Lindbergh could be made ready for newcomers "within 90 days," a MAC executive said.)
The downside to all of this speculation is that Delta's implicit control of rush-hour takeoff and landing times squeezes new competitors into off-hour operations, and Northwest is already aggressively marketing low fares on a few routes to fight competitors.
3 Long-Term Possibilities
Long term, we foresee three possible scenarios for MSP:
1) a bigger but less safe hub because of higher peak-hour rates once the economy recovers;
2) a prolonged recession, resulting in a 50-60 percent reduction in revenues and a consequent reduction in MAC's debt service capabilities, or,
3) a multi-line hub with more competition, better service and more airport revenue.
The last scenario, while the best one, is also the least likely. The only good news at the moment is that MAC is freer to move in that direction if the present Republican governor and his 13 MAC appointees have the courage to step back from Delta as much as Delta has stepped back from Minnesota. The next gubernatorial election is only 22 months away.
By Jim Spensley and Dick Saunders
Metropolitan Airports Commission (MAC) members, citing numerous ambiguities in their first look, voted Jan. 6 to delay a decision on a revised loan agreement with Delta Airlines for two weeks.
After three hours of intense questioning of General Counsel Thomas Anderson, commissioners voted unanimously to seek staff clarification on a wide variety of issues seen as impacting the future of Minnesota airline jobs.
Commissioners accepted a working draft as a "framework," but sought to tighten contract enforcement provisions, clarify breach definitions, extend job guarantees, and seek future sources of potential job growth from the recently merged Delta and Northwest businesses.
Notably, MAC Chairman Jack Lanners, Vice Chairman Bert McKasy and Executive Director Jeff Hamiel, all of whom favored the sense of the preliminary draft, supported the delay to Jan. 26 to clear up remaining questions.
The unexpected stiffening of commissioner concerns came in the face of a warning from Delta General Counsel Ben Hirst that any modifications to the pending agreement's terms "could jeopardize the entire package." "Both sides have negotiated every word," he said, adding that the new company had made major concessions to maintain existing flight and job levels.
Observers had expected the working draft to have been approved with little discussion, as Delta had pressed for a decision by Dec. 31 in order to advise employees facing job transfers or further layoffs of their job status.
In probably the most significant action, McKasy proposed that Delta's present job commitment of 10,000 Minnesota employees be extended from 2013 to 2016, when the company's $270-million loan from MAC is to be paid in full. Others asked for a clearer definition of job descriptions to be retained at the new "Delta North" subsidiary headquarters on the MSP campus through 2012;
Also sought was assurance that NWA's pilot training center in Eagan could be modified to train for Boeing 787 jets(scheduled to begin service in late 2010-2011) as NWA grounds aging DC-9s and B-747s, and whether the Eagan property could house some Delta pilot training now being conducted elsewhere in the Delta system.
The MAC staff also agreed to research further any requirement to seek specific legislative action on the new pact. Anderson noted that NWA is presently required to only report yearly on its existing job and flight commitments. After the meeting, a MAC legislative liaison said key Senate and House leaders had not objected to language changes under way.
Two SMAAC members recommended that commissioners seek answers to six questions:
1) Will the hub be run at a safer, lower rate during peak-hour periods as a result of ongoing flight reductions?
2) Are there adequate time slots in the day's schedule to accommodate forthcoming service from Southwest Airlines and any other low-cost airlines?
3) Will Delta seek to retain options on unused gates (and a competitive head-start) when the economy recovers?
4) What, if any, is the upside for the Minnesota economy if there are both fewer flights and less airline competition?
5) What, in the interim, will be the comparative indirect benefits to the state between the old and new loan agreements (e. g. taxable revenues of airline suppliers, increased commerce and lower (or higher) air fares?
6) What negative impacts face MSP if Delta is forced to take further corrective actions toreduce expenses if the deepening world economic crisis continues for an extended period?
SMAAC believes the sole remedy available to the public for a breach of theloan contract was inadequate protection -- paying off the loan balance over 18 months. Several times since the 1992 loan was made, MAC agreed to changes and made keeping loan covenants part of other arrangements with Northwest, such as lease and landing fee reductions and concessions revenue sharing.
Overall, SMAAC believes any new loan agreement, even after Delta's concession to establish a subsidiary headquarters at MSP, will fail to obtain benefits comparable to the loss of many high-paying jobs at NWA corporate headquarters in Eagan. For example, MAC will give about $8 million more in revenue sharing for $500,000 more per year in Delta loan paybacks by 2016.
MAC asserts its supposed authority to make such changes exists under current law. "It will take new legislation to stop us," Anderson had said in November.
Analysis of Impact
1) The MAC's negotiating position remains unchanged: some (high-fare) service is retained with less but guaranteed airport revenue. The alternative, taking the remaining $245 million owed and making room for more (lower-fare) airlines, still has not been raised by the staff or any commissioner.
2)The new Delta promise of 400 flights per day "unless business conditions change" raises the bar from the current contract minimum of 187 but lowers the bar from the current actual rate of 500 (and the 2005 peak of about 550.)
3) The effect of such a reduction ducks how the hub, runway usage rates, delays and congestion would be affected. Off-peak operations could be dropped, making the hub-peaks less safe without making useful gates and slots available to competing airlines.
4) Existing Delta jobs can still be outsourced or transferred to non-union states down to the 10,000 floor without penalty if business conditions warrant.
5) The present value of loan collateral (pledged airliners and pilot-training facilities) hasn't been updated. Why not?
6) MAC is very wrong to separate the financial renegotiation from post-merger airline staffing and operations issues.
In summary, while the MAC board's back-stiffening Jan.6 is encouraging for the moment, the final loan terms will go far beyond the generous help to Northwest intended by the Legislature in the landmark 1996 bill authorizing expansion of the cramped Minneapolis-Richfield campus rather than a new airport in Dakota County.